IMF Says Carbon Tax Is Most Powerful Way to Fight Climate Crisis

Posted by on October 12, 2019 in Climate Change, Environment, Environmental Hazards with 0 Comments

Signs for the upcoming IMF / World Bank Annual Meetings hang outside International Monetary Fund Headquarters in DC on Oct. 7. SAUL LOEB / AFP / Getty Images

By Jordan Davidson | EcoWatch

The International Monetary Fund (IMF) released a report that says action is needed urgently to tackle the climate crisis. It said that countries around the world need to drastically reduce their carbon emissions immediately and the most effective way is through a carbon tax and with global cooperation, as Reuters reported.

The report did not mince words when it came to the threat the climate crisis poses. “Global warming causes major damage to the global economy and the natural world and engenders risks of catastrophic and irreversible outcomes,” the IMF said in its semi-annual fiscal monitor report released ahead of next week’s IMF and World Bank fall meetings of finance leaders and policymakers, according to Reuters.

The IMF’s report said a meaningful carbon tax is the “single most powerful way” to hand the climate crisis, since it allow businesses and households to find the lowest-cost ways of reducing energy use and transitioning towards cleaner alternatives.

“We view fiscal policy as a crucial way of combating climate change,” said Paolo Mauro, deputy director of Fiscal Affairs Department at the IMF, as CNBC reported. “You can reshape the tax system and you can reshape fiscal policy more generally in order to discourage carbon emissions.”

However, there is sure to be backlash to the IMF’s proposal since it calls for a drastic rise in energy bills.

“To limit global warming to 2C or less – the level deemed safe by science – large emitting countries need to take ambitious action,” IMF economists said, as The Guardian reported. “For example, they should introduce a carbon tax set to rise quickly to $75 a ton in 2030. This would mean household electric bills would go up by 43 percent cumulatively over the next decade on average – more in countries that still rely heavily on coal in electricity generation, less elsewhere. Gasoline would cost 14 percent more on average.”

While more than 40 governments around the world have implemented some form of carbon pricing, the global average carbon price is $2 a ton — a small fraction of the $75 a ton price in 2030 that the IMF insists is necessary to keep a 2 degrees Celsius warming target, according to the report.

The idea is that a sharp spike in prices will force businesses and consumers to seek more affordable options provided by cleaner, renewable energy.

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