Carbon Tax Calculator Formula
Understand the math behind the carbon tax calculator. Each variable explained with a worked example.
Formulas Used
Current Annual Tax
annual_tax = current_liabilityCurrent Monthly Tax
monthly_tax = current_liability / 12Projected Annual Tax
future_annual = emissions_tons * future_rateProjected Tax Rate
future_rate_out = future_rateVariables
| Variable | Description | Default |
|---|---|---|
emissions_tons | Annual CO2 Emissions(metric tons) | 1000 |
tax_rate | Carbon Tax Rate(USD/ton) | 50 |
annual_increase | Annual Tax Rate Increase(%) | 5 |
projection_years | Projection Period(years) | 5 |
current_liability | Derived value= emissions_tons * tax_rate | calculated |
future_rate | Derived value= tax_rate * pow(1 + annual_increase / 100, projection_years) | calculated |
How It Works
How to Calculate Carbon Tax Liability
A carbon tax places a direct price on greenhouse gas emissions, charging emitters per ton of CO2.
Formula
Annual Tax = Emissions (tons) * Tax Rate ($/ton)
Future Rate = Current Rate * (1 + Annual Increase)^Years
Current Carbon Tax Rates
Worked Example
A company emitting 1,000 tons CO2/year faces a $50/ton tax increasing 5% annually over 5 years.
- 01Current annual tax: 1,000 * $50 = $50,000
- 02Monthly tax: $50,000 / 12 = $4,167
- 03Future rate: $50 * (1.05)^5 = $63.81/ton
- 04Projected annual: 1,000 * $63.81 = $63,814
Frequently Asked Questions
What is a carbon tax?
A carbon tax is a fee imposed on the burning of carbon-based fuels, designed to make emitters pay for the societal cost of their pollution and incentivize emission reductions.
How does a carbon tax differ from cap and trade?
A carbon tax sets a fixed price per ton of CO2. Cap and trade sets an overall emission limit and lets companies trade allowances, resulting in a market-determined price.
Do carbon taxes actually reduce emissions?
Yes. British Columbia saw a 5-15% emission reduction after its carbon tax. Sweden reduced emissions 25% while its economy grew 75% since implementing its tax in 1991.
Ready to run the numbers?
Open Carbon Tax Calculator