The left graph clearly states that the tax will increase the cost of production and decrease the quantity of fuel energy. The will also lead to higher labour cost and also it will lead to increase in fuel prices. The right graph on the contrary shows the benefit of using the renewable resource of energy and increase in production level. So it is seen that carbon tax will impact the business negatively, but at the same time encourage them to use the renewable resources of energy that will have the long term positive impact on environment and business.
Employment Effects: The carbon tax does not have the positive impact on the employment as due to the taxes the production cost will increase and the more number of employees will lead to additional burden on the company’s cost. It is researched that the trade sector can shift towards the non-trade sector due to carbon policy.
Effects on households: The house hold sector also suffers the negative impact as the cost of the commodities will be increased because of the increased production costs. The overall house old income will be affected due to this.
Considering all these factors, the government has given a due thought about the direct action with a view to replace the carbon taxes.
The direct action plan is meant for replacing the carbon tax. The direct action plan is considered better than carbon tax policy as it is comprised of incentive plan for the industries that shows the significant decrease in their carbon emission (McKibbin, 2002). The policy has the following key points:
Scrapping the carbon tax and associated taxes
Target of 55 reduction in carbon emission rate
Creation of green team that will conduct the environment conservation work.