The CO2 tax addresses misplaced incentives in industry. Unless external costs for
CO2 emissions are accounted for by industry (and ultimately the consumers), companies
have relatively weak incentives for improving energy efficiency. From a political
point of view it is difficult to unilaterally impose an effective CO2 tax due to
the fear of harming the competitiveness of the domestic industries, which compete
on a global market. One means of enabling the use of an effective CO2 tax on industry
is to combine it with a VA scheme.