A carbon tax is a tax on

the carbon content of fossil fuels that are burned. It is designed to reduce the amount of carbon dioxide and other greenhouse gases emitted into the atmosphere, in order to mitigate climate change and incentivize the development and use of cleaner, more sustainable energy sources. Governments generally collect the tax from entities that extract or import fossil fuels, and may use the revenue to fund renewable energy projects, provide rebates to consumers, or reduce other taxes. The idea behind a carbon tax is to internalize the environmental costs of carbon emissions, thereby encouraging businesses and individuals to make more environmentally-friendly choices.