Q. Consider the following statements regarding Carbon Tax:
1.A carbon tax is a type of Pigouvian tax aimed at reducing greenhouse gas emissions.
2.The cap-and-trade system is a form of carbon tax where the government sets a limit on emissions and allows trading of permits.
Which of the statements given above is/are correct?
Answer: A
Notes:
Explanation:
- A carbon tax is indeed a Pigouvian tax designed to discourage excessive greenhouse gas emissions by making them financially costly.
- The cap-and-trade system is a market-based mechanism for controlling emissions, but it is not considered a carbon tax. Instead, it’s an alternative approach to emission reduction.
Source: Environment (N.C.E.R.T)
