1. Encourages alternatives. A higher price of carbon emissions will encourages firms and consumers to develop more efficient engines or alternatives to consuming carbon emissions. For example, with carbon taxes, it will be more efficient to develop hydrogen engines or solar power.
• Itmight encourage more people to cycle or walk to work. This would have health benefits such as lower risk of heart attack.
• This could make it more feasible to generate electricity from green sources (e.g. solar power). If we develop more green sources it will also make us less reliant on oil.
• It will help make the transition to a post oil economy easier.
2. Raises Revenue. The revenue raised from carbon tax could be used to subsidise alternatives such as green electricity or the revenue raised could be used to repair the damage caused by environmental pollution.
3. Leads to a socially efficient outcome. It makes people pay the social cost and overcomes the excess consumption.