A carbon tax is a pigovian tax which works by disincentivising the undesired behaviour. It makes burning fossil fuels more expensive, thereby making everything

A carbon tax is a pigovian tax which works by disincentivising the undesired behaviour. It makes burning fossil fuels more expensive, thereby making everything else cheaper; in that sense you could also call it a "green subsidy". What you do with that money is irrelevant. Turn it into a big paper boat and float it down the Hudson. The effect is in the levying of the tax, not in what is done with it. See for example Canada, who directly deposits the revenue back to its residents. The "augmenting cars" bit comes from people who don't want to pay the (now high) price of fossil fuels anymore, and instead want to avoid that tax by going green. That's how pigovian taxes work. See the UK who introduced a carbon tax, and promptly saw a huge shift in energy production to green energy and lower CO₂ emitting fuels.