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IMF: Carbon tax is the most effective way to combat climate change

2020-05-27

The International Monetary Fund (IMF) said today that the world's largest carbon polluters should agree to impose a carbon tax of $75 per tonne of carbon emissions over the next ten years to keep climate change at a safe level. AFP reported that the IMF called for immediate action to address climate change, but in recent years, major economies have disagreed on preventing catastrophic global warming, leading to policy clashes. An IMF researcher stated in a blog post, "A carbon tax is the most powerful and effective tool, but only if implemented in a fair and amicable manner." Following the "Yellow Vest" protests and numerous acts of violence last year, the French government temporarily suspended its plan to raise the carbon tax to over $50 per tonne. Meanwhile, US President Trump announced the withdrawal from the 2015 Paris Agreement. This report was released ahead of the annual meetings of the IMF and the World Bank next week, where the IMF's new Managing Director, Kristalina Georgieva, is expected to urge member countries to take action on climate change. According to a research report released today by the IMF, a carbon tax is the most effective way to prevent global temperatures from rising more than 2 degrees Celsius above pre-industrial levels, thus achieving the goals of the Paris Climate Agreement. Imposing a carbon tax would increase costs for carbon-intensive industries such as electricity, tourism, manufacturing, transportation, and food. Currently, the global average carbon price is $2 per tonne. To achieve the goals of the Paris Climate Agreement, the G20's major carbon emitters would need to collectively raise the carbon tax to $75 per tonne by 2030. The report states that imposing a carbon tax on all countries would prevent countries that do not pay taxes from "free-riding" on the reforms implemented by other countries, and would allow industries in countries that do implement reforms to compete with those in other countries. However, IMF researchers acknowledge that this would create deterrent and unequal costs. Raising the carbon tax to $75 per tonne would more than triple the current price of coal. Electricity prices in Canada would rise rapidly by more than 30%, and in Australia, electricity prices would surge by 70% to 90%. According to the report, gasoline prices in most countries will rise by 5% to 15%. Source: Economic Daily News (October 11, 2019)

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