Global warming has created havoc among the nations. Melting of Arctic at an alarming speed, rising sea level, shrinking of cryosphere and death of polar bears are serious indications of global climatic change. Millions of questions are being raised on the sustainability of ozone which saves the earth from greenhouse effect. It is high time for all of us to think of alternatives to mitigate global warming. Climate change impact can be avoided, reduced, or delayed if an effective global climate change mitigation policy is agreed upon and implemented. Basically, there are two approaches to reduce Greenhouse Gas (GHG) emissions: command and control approach and incentivebased approach (i.e., cap-and-trade program and carbon tax program). This paper emphasizes on carbon tax program for mitigating CO2 and other gaseous emissions. It also considers carbon tax as the best approach over other approaches to combat global warming. The paper also highlights the scope for implementation of carbon tax in the Indian subcontinent and computes reduction of emissions for different scenarios based on the projected consumption pattern, with the assumed changes in carbon tax and the present tax rate. The proportion of reduction from the current tax scenario has been computed to provide an impression of the relative change with the change in taxation.

Global climate change has emerged as the biggest challenge for human beings in the 21st century. It is the most critical and controversial issue facing the world today. Climate change happens due to human activities which produce large quantities of CO2. Atmospheric concentrations of Greenhouse Gases (GHG) have risen from 280 parts per million in the pre-industrial age to about 380 parts per million today. It is estimated that if the emissions of CO2 and GHG and the disruption of tropical rain forests are to continue at the present pace, the global average temperature towards the end of the 21st century would be at least 2 oC to 6 oC (4 oF to 11 oF) higher than the level prevailing before the Industrial Revolution, resulting in drastic changes in the climatic conditions and the accompanying disruption of the biological and ecological environments.

In view of the significant impacts such climatic changes would exert upon human life, a large number of policy measures and institutional arrangements have been proposed to stabilize atmospheric concentration of GHG effectively.

The urgency of the climate change crisis calls for taking immediate action to mitigate the carbon emission. Policy makers are basically evaluating two strategies for reducing global warming: command and control approach and incentive-based approach. According to experts, an incentive-based approach to lowering CO2 emissions is substantially more economically efficient than command and control approach which may dictate specific technologies or set standards for particular products or producers. An incentive-based strategy can be implemented in two ways: firstly, cap-and-trade system which curbs emissions by limiting the quantity of a pollutant (e.g., CO2 and other GHG) that can be emitted and then allocating a corresponding number of tradable emissions permits to sources covered by the program; secondly, a carbon tax that curbs emissions by raising the price of fossil fuels based on their carbon content.

It is argued that among the different carbon mitigation programs, carbon tax provides the best way of reducing emissions by way of imposing tax on all coals, natural gases and oil produced.

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