Carbon tax is a widely used instrument by governments to price carbon impact, that directly sets a price on carbon by defining a tax rate on carbon emissions.
It is intended to uncover the hidden social and environmental costs of carbon emissions. Carbon tax reduces demand for goods and services that are highly carbon intensive through stimulating businesses and practices that are more sustainable, while pushing currently high emitting products and services to evolve to lower carbon footprints, thus fostering innovation and greener economies.
It is believed to be the most efficient, fastest and lower-cost way to fight climate change and push towards more sustainable way of doing business.
Source: Earth.org