The Case:

Poisonous smog has become a 5th season in Pakistan. The quality of air turned so bad that Government of Punjab decided to close the schools in three big cities (Lahore, Faisalabad, Gujranwala). A major factor behind the hazardous air quality is the combustion of fossil fuel. The unregulated use of fossil fuel (vehicles, industrial use), emits lethal particles such as PM2.5 that penetrate our lungs and bloodstream; and responsible for many diseases like asthma, pulmonary diseases, and heart attacks. The use of fossil fuel is required for economic growth but unregulated combustion extracts an enormous social cost in the shape of society’s poor health. Carbon taxes have been efficient in bringing down CO2 emissions. In Sweden, the implementation of carbon tax showed 25% reduction in the level of emission with 60% increase in their GDP.

Requirement:

Keeping in view the above scenario, logically discuss the impact of the implementation of carbon tax on the consumers and producers.