> Where would that money go though?

It doesn't really matter. Even if the tax revenue was piled up and set on fire, the planet would still be better off for it

I might be too cynical but what's most likely to happen is that corporations will find a way to avoid paying the tax and it will hurt people who struggle the most already.

For example, in EU car manufacturers have to keep average CO2 emissions of new car sales below 95 g/km. VW buys a large amount (I believe it was around 37%) of their ID.3 electric car to reduce the average emissions of their newly sold cars.

So what you suggest is we take money from poor people and burn it. I fail to see how that will help.

I suggest we take money from anyone who wants to pollute. At source. Yes, some poor people will be impacted (though not as many as continuing to ignore the problem).

By "at source", I mean that car makers should not be taxed.

Instead, fossil fuels should be taxed as close as possible to when they are pulled from the ground. Not when they are used (like a car does).

Then if car makers decide to build big diesel chugging vehicles, of course their market will be severely limited because not many people will want to pay the cost of running them.

Car makers are therefore still incentivized by market forces. to build efficient vehicles, but we don't need artificial and easily gamed regimes about what proportion of their production is fuel efficient.

Presumably, VW buying their own cars to offset their CO2 emissions redistributes some of their profit from more-CO2-emitting cars into their supply chain, thus incentivizing them to sell fewer of those cars.