Which option describes a carbon tax?

• A. A fixed fee on carbon emissions to encourage lower emissions
• B. A system where emissions credits are traded
• C. Government subsidies for renewable energy
• D. Electric vehicle incentives

Answer: (A)

Charging a price on carbon emissions through a tax means setting a fixed fee per ton of CO2 emitted. This creates a predictable cost for emitting carbon, encouraging individuals and businesses to cut emissions, adopt cleaner energy, or innovate. The revenue from the tax can fund climate programs or rebates. This is different from cap-and-trade, where an overall cap on emissions is established and companies buy and sell emission allowances rather than paying a tax on the amount they emit. Subsidies for renewable energy and incentives for electric vehicles are tools to reduce emissions by lowering costs or encouraging adoption, but they are not taxes on emissions themselves.