A carbon tax is a form of carbon pricing that places a fee on the carbon content of fossil fuels. The aim is to encourage businesses and individuals to reduce their greenhouse gas emissions by assigning a cost to the carbon dioxide (CO2) and other greenhouse gases they produce. It’s a market-based mechanism designed to incentivize a shift toward cleaner, low-carbon technologies and practices. Governments typically levy the tax on entities based on the amount of carbon dioxide they emit, creating a financial incentive for them to adopt more sustainable and environmentally friendly practices. The revenue generated from the carbon tax may be used for environmental initiatives or returned to the public through rebates.