Countries all over the world should urgently quicken efforts to reduce greenhouse gas emissions (GHG). The best way to do so is by implementing carbon taxes and global cooperation, the International Monetary Fund (IMF) said on Thursday.
“Global warming causes major damage to the global economy and the natural world and engenders risks of catastrophic and irreversible outcomes”. With these words, the global lender summarizes one of the most pressing problems for current society in its monthly report.
The document was published ahead of the annual meetings between financial leaders and officials in charge of the IMF and World Bank policies.
In its report, the IMF underlines that the measures and commitments adopted so far to face climate change have been insufficient. The organization adds that the longer we wait the loss of life and the damage to the global economy will be greater.
Finance ministers can play a key role by undertaking carbon taxation policies aimed at tackling climate change. The taxing system and fiscal policies must be reformed to discourage carbon dioxide emissions from coal and other polluting fuels.
According to the document, governments must raise the price of carbon emissions to incentivize people and companies to reduce usage and choose clean energy sources. Taxes on carbon emissions are the most powerful and efficient instruments, but only when applied in an equitable manner that favors growth, the report notes.
In order for carbon taxes to be politically viable and economically efficient, governments must choose a way to use the new income.
Options include reducing other types of taxes, supporting vulnerable homes and communities, increasing investment in green energies, or just giving back the money in the form of dividends.
Implementing a carbon tax of $75 per ton would have the greatest impact in reducing emissions, with the price of coal rising more than 200% above baseline levels in 2030.
The cost of electricity and gasoline would also rise considerably and by varying degrees in countries. Gasoline prices would rise 5% to 15% in most countries, the IMF said, “well within the bounds of price fluctuations experienced during the past few decades,” the IMF adds.
A global price floor would be the most efficient way of doing this, but another option would be for advanced economies to have a higher floor price or for them to provide financial and technical support to emerging market countries in exchange for their commitment to more ambitious targets, the report said.
The Fund estimates that the $75-per-ton carbon tax would prevent 725,000 premature air pollution deaths overall in the Group of 20 industrialized nations by 2030.
The stark warning issued by the IMF comes in the midst of protests demanding immediate measures to reduce carbon emissions and prevent an environmental disaster. On Monday, thousands of protesters took the streets in cities around the world.
UN climate scientists warned last month that unless GHG emissions are drastically reduced, the world will face a reality of cities vanishing under the rising seas, rivers running dry, and marine life collapsing.
More aggressive policies
The IMF believes that policies should go beyond the rise of emissions from power generation or transport. It should also include the adoption a price system for other greenhouse gases, like the ones generated through forestry, agriculture, mining, cement production, and international transport.
Furthermore, governments should adopt measures to back investments in clean technology, including improvements to the grid to adapt it to renewable energies, research & development activities, and the incentives to overcome the obstacles posed by the adoption of new technologies, like the time that companies require to produce clean energies in an efficient manner.
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