Question

Q7. The use of petroleum products is thought to be one of the lead causes of pollution and climate

change. One main use of petroleum products is as fuel for cars and other forms of transport.

Discuss the pros and cons of taxing petrol to reduce pollution.

（answer should be around ¾ to 1 page）

Answer 1

Petroleum as a product has been debatable on its impact on the society as a whole. Even though, it has become a necessity in today's life, the net effect is that it produces a lot of negative impact for the society as it causes pollution and leads to depletion of natural resources for the coming generation. Thus, most governments advocate for higher taxes on petroleum products so as to reduce demand and ensure that the market can develop other resources.

The pros and cons of applying heavy taxation on petroleum products is as follows: -

1) As taxation is increased by the government, those that hold cars or vehicles which run on petroleum products would have to pay extra money, which increases the government revenue. This increased revenue can be spent on various other activities of the government

2) The demand for fuel would gradually decline as some people may not be able to afford petroleum products at all which is good for the government which is trying to reduce the overall demand.

3) It would lead to innovation in other sectors which could then become alternatives to the current automobile industry. For example, companies such as Tesla which offer electric vehicles would gain big from this, because on one hand the government already provides them with subsidies for using renewable energy and not polluting the environment, and on the other hand the cost of conventional fuel technology would go up significantly.

4) Last but not the least, as demand for conventional vehicles goes down, the overall impact on environmental pollution would be much lesser.

Cons: -

The basic con of establishing a tax on petrol which is higher is that petroleum is used for supplying goods and services of all kind in the economy. All transport usually takes place through petroleum and producers pass on this added cost to the consumers who may or may not be directly impacted from the price rise of petrol, but would surely have a great impact from the rising costs of goods such as food, milk etc which would increase inflation.

Further, in addition to the increase in inflation, it is important to know that substitute technology of electric vehicles is not as efficient or well developed in the society to be able to reduce the carbon foot print all together. People would still purchase petrol-based fuel irrespective of its price leading to inflation on one hand, and the demand for other technology remaining low until it becomes as competitive as conventional fuel.

Please feel free to ask your doubts in the comments section.