Final answer:
A carbon tax is a system that charges a fee to entities for emitting carbon into the atmosphere, incentivizing them to reduce emissions to save costs.
Step-by-step explanation:
A system that charges a fee or tax to those who discharge carbon into the air is known as a carbon tax. This environmental policy places a price on the carbon emissions that a firm produces, thereby giving companies an incentive to reduce their emissions if the cost of doing so is less than the price of the tax. The aim is to decrease pollution by making it financially disadvantageous to pollute.
In comparison to other systems such as carbon offsetting, cap and trade, or carbon trading, a carbon tax is a direct financial charge, typically levied by governments, on the carbon content of fossil fuels. It is a straightforward approach that targets the reduction of carbon dioxide emissions by compelling firms and consumers to internalize the cost of the environmental damage that they cause.