Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

A carbon tax is 'single most powerful' way to combat climate change, IMF says

A carbon tax is 'single most powerful' way to combat climate change, IMF says

Increasing the price of carbon emissions has received widespread backlash from those who argue the tax would raise energy bills. But some economists say it's the best way to mitigate climate change.
The idea of carbon taxes on fossil fuel corporations is spreading, but the idea has received backlash from those who argue the tax would raise energy bills.

Some economists say raising the cost of burning fossil fuels is the best way to mitigate climate change.

The global average carbon price is $2 a ton — a small fraction of the estimated $75 a ton price that is estimated to be consistent with a 2 C warming target, according to an International Monetary Fund report.

Increasing the price of carbon is the most efficient and powerful method of combating global warming and reducing air pollution, according to a new report from the International Monetary Fund.

While the idea of carbon taxes on fossil fuel corporations has been spreading across the globe in the past couple decades, increasing prices on carbon emissions has received widespread backlash from those who argue the tax would raise energy bills.

But economists have long contended that raising the cost of burning fossil fuels like coal, oil and gas is the best way to mitigate climate change, and that revenue raised from the tax can be returned to consumers through rebates and dividends.

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

But economists have long contended that raising the cost of burning fossil fuels like coal, oil and gas is the best way to mitigate climate change, and that revenue raised from the tax can be returned to consumers through rebates and dividends.

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

Global temperatures are projected to rise by roughly 4 C above preindustrial levels by 2100. The 2015 Paris climate accord aims to limit warming to 2 C, with a long shot goal of 1.5 C. Most countries are not on track to achieve those targets, and the U.S. plans to formally withdraw from the Paris agreement in 2020.

More than 40 governments globally have implemented a form of carbon pricing, whether it be through direct taxation on fossil fuel producers or cap-and-trade programs. However, the global average carbon price is $2 a ton — a small fraction of the estimated $75 a ton price in 2030 consistent with a 2 C warming target, according to the report.

The IMF estimates a $75 a ton carbon tax will lead to the amount of emissions scientists estimate will correspond to 2 C of warming. At that level, coal prices would rise by more than 200% above baseline levels in 2030.

Under the same tax, the price of natural gas, which is used for power generation and for heating and cooking in households, would increase by 70% on average, with most of the impact in North and South America, where baseline prices are much lower. Gasoline prices would rise by 5% to 15% in most countries.

For electricity and gas, the price increases might seem substantial. However, those price rises are within the bounds of price fluctuations experienced during the past few decades, according to the IMF.

“If you think about it from a historical perspective, gasoline prices fluctuate ... much more than that,” Mauro said.

“Carbon taxes ... and similar arrangements to increase the price of carbon, are the single most powerful and efficient tool to reduce domestic fossil fuel CO2 emissions,” the report said.

Some countries have prices on carbon
In the U.S., a slew of presidential candidates have vowed to impose a carbon tax on corporations, proposals which have come under attack from President Donald Trump and Republicans, who are repealing environmental regulations.

Most carbon pricing efforts in the U.S. have occurred on the state level. Nine states in the Northeast participate in a cap-and-trade program that hands out carbon pollution permits to power plants, and other states like New Jersey might join that system.

Cap-and-trade programs work by taxing companies if they produce higher emissions than their permit allows. Companies that reduce emissions can sell unused permits to other firms. The government also narrows the number of permits every year, reducing overall emissions.

California has its own cap-and-trade program that includes other polluters in addition to power plants.

In Britain, coal use has gone down substantially after a carbon tax in 2013 prompted electric utilities to switch away from coal.

Canada has a carbon tax that started at $15 per ton of carbon dioxide this year and will rise to $38 per ton by 2022. And China plans to start a cap-and-trade program beginning in 2020.

“The cost of achieving emissions reductions through these approaches would be lower than the costs to people and the planet from climate change,” the report said.

“Finance ministers in all countries are central to designing and implementing policies to meet emissions reductions in the most efficient, equitable, and socially and politically acceptable way.”
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
House Republicans Move to Defund OECD Over Global Tax Dispute
France Opens Criminal Investigation into X Over Algorithm Manipulation Allegations
Trump Steamrolls EU in Landmark Trade Win: US–EU Trade Deal Imposes 15% Tariff on European Imports
ChatGPT CEO Sam Altman says people share personal info with ChatGPT but don’t know chats can be used as court evidence in legal cases.
Intel Reports Revenue Beats but Sees 81% Rise in Losses
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
UN's Top Court Declares Environmental Protection a Legal Obligation Under International Law
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
The Podcaster Who Accidentally Revealed He Earns Over $10 Million a Year
UK Government Considers Dropping Demand for Apple Encryption Backdoor
Japanese Man Discovers Family Connection Through DNA Testing After Decades of Separation
Russia Signals Openness to Ukraine Peace Talks Amid Escalating Drone Warfare
Switzerland Implements Ban on Mammography Screening
Pogacar Extends Dominance with Stage Fifteen Triumph at Tour de France
President Trump Diagnosed with Chronic Venous Insufficiency After Leg Swelling
CEO Resigns Amid Controversy Over Relationship with HR Executive
NVIDIA Achieves $4 Trillion Valuation Amid AI Demand
Tulsi Gabbard Unveils Evidence Alleging Political Manipulation of Intelligence During Trump Administration
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Trump Announces Coca-Cola to Shift to Cane Sugar in U.S. Production
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
Zelensky Reshuffles Cabinet to Win Support at Home and in Washington
"Can You Hit Moscow?" Trump Asked Zelensky To Make Putin "Feel The Pain"
Church of England Removes 1991 Sexuality Guidelines from Clergy Selection
Superman Franchise Achieves Success with Latest Release
Hungary's Viktor Orban Rejects Agreements on Illegal Migration
Air India Pilot’s Mental Health Records Under Scrutiny
Jamie Dimon Warns Europe Is Losing Global Competitiveness and Flags Market Complacency
Moonshot AI Unveils Kimi K2: A New Open-Source AI Model
Martha Wells Says Humanity Still Far from True Artificial Intelligence
Nvidia Becomes World’s First Four‑Trillion‑Dollar Company Amid AI Boom
EU Delays Retaliatory Tariffs Amid New U.S. Threats on Imports
Trump Proposes Supplying Arms to Ukraine Through NATO Allies
US Opens First Rare Earth Mine in Over 70 Years in Wyoming
Bitcoin Reaches New Milestone of $116,000
Severe Heatwave Claims 2,300 Lives Across Europe
Declining Beer Consumption Signals Cultural Shift in Germany
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
Western Europe Records Hottest June on Record
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
China’s Central Bank Consults European Peers on Low-Rate Strategies
France Requests Airlines to Cut Flights at Paris Airports Amid Planned Air Traffic Controller Strike
Poland Implements Border Checks Amid Growing Migration Tensions
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
×