Can someone please explain the carbon tax logic to me. As I...

  1. 302 Posts.
    Can someone please explain the carbon tax logic to me. As I understand it polluters, say coal fired power plants, will be taxed according to the amount of carbon dioxide they emit into the atmosphere so in order to reduce the volume they will have to spend money to develop/install equipment to reduce their pollution output, which means they will up the cost of their electricity to the consumers. To offset the price increase the government will make payments to the consumers. Now if the power stations do not attempt to reduce pollution output the government will increase the pollution tax thereby the power plants will increase the cost of power to the consumer and the government will increase the payments to the consumer. So where is the incentive for the polluter to spend money on pollution reduction??
 
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