The carbon tax serves as a fiscal instrument designed to address climate change by levying a financial charge based on the carbon content of fossil fuels. The primary objective is to internalize the external costs associated with carbon emissions, thereby fostering the transition toward cleaner energy alternatives and enhancing energy efficiency. By raising the costs of carbon-intensive fuels, the carbon tax creates incentives for the reduction of greenhouse gas emissions, catalyzes advancements in environmentally sustainable technologies, and generates public revenue that can be allocated to support initiatives aimed at climate mitigation. This chapter offers an extensive examination of the carbon tax and its significance in confronting the multifaceted challenges posed by climate risk.