A Carbon Tax is a policy where emissions of carbon dioxide - one of the main causes of climate change - are taxed. This tax brings in money based on the amount of CO2 Emissions in the country. It's favored by the Environmentalists, since it encourages people and companies to reduce their carbon emissions, increasing the nation's Energy Efficiency while decreasing its CO2 Emissions. However, non-carbon emitting alternatives are typically more expensive, which can lead to a drop in the GDP.