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carbon tax
a tax on fossil fuels that aims to encourage the use of clean energy alternative. Does not tax quantity, but taxes emissions.

Diagram
A carbon tax raises MPC to MSC, reducing output to the socially optimal level and correcting overproduction.
strengths of carbon tax
internalizes external costs, reduces emissions, encourages clean innovation, and raises government revenue.
limitations
difficult to set correctly, can be regressive, may hurt competitiveness, and may not reduce emissions much.