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
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
Alcohol Industry Faces Increased Scrutiny Amid Health Concerns
U.S. Goods Imports Plunge Nearly 20% Amid Tariff Disruptions
Italy Faces Population Decline Amid Youth Emigration
Trump Accuses China of Violating Trade Agreement
OpenAI Faces Competition from Cheaper AI Rivals
Foreign Tax Provision in U.S. Budget Bill Alarms Investors
Russia Accuses Serbia of Supplying Arms to Ukraine
Gerry Adams Wins Libel Case Against BBC
EU Central Bank Pushes to Replace US Dollar with Euro as World’s Main Currency
U.S. Health Secretary Ends Select COVID-19 Vaccine Recommendations
Trump Warns Putin Is 'Playing with Fire' Amid Escalating Ukraine Conflict
India and Pakistan Engage Trump-Linked Lobbyists to Influence U.S. Policy
U.S. Halts New Student Visa Interviews Amid Enhanced Security Measures
Trump Administration Cancels $100 Million in Federal Contracts with Harvard
SpaceX Starship Test Flight Ends in Failure, Mars Mission Timeline Uncertain
King Charles Affirms Canadian Sovereignty Amid U.S. Statehood Pressure
EU Majority Demands Hungary Reverse Anti-LGBTQ+ Laws
Top Hotel Picks for 2025 Stays in Budapest Revealed
Iron Maiden Unveils 2025 Tour Setlist in Budapest
Chinese Film Week Opens in Budapest to Promote Cultural Exchange
Budapest Airport Launches Direct Flights to Shymkent
Von der Leyen Denies Urging EU Officials to Skip Budapest Pride
Alcaraz and Sinner Advance with Convincing Wins at Roland Garros
EU Ministers Lack Consensus on Sanctioning Hungary Over Rule of Law
EU Nations Urge Action Against Hungary's Pride Parade Ban
Putin's Helicopter Reportedly Targeted by Ukrainian Drones
U.S. Considers Withdrawing Troops from Europe
Russia Deploys Motorbike Squads in Ukraine Conflict
Critics Accuse European Court of Human Rights of Overreach
Spain Proposes 100% Tax on Non-EU Holiday Home Purchases
German Intelligence Labels AfD as Far-Right Extremist
Geert Wilders Threatens Dutch Coalition Over Migration Policy
Hungary Faces Multiple Challenges Amid EU Tensions and Political Shifts
Denmark Increases Retirement Age to 70, Setting a European Precedent
Any trade deal with US must be based on respect not threats', says EU commissioner
UK Leads in Remote Work Adoption, Averaging 1.8 Days a Week
Thirteen Killed in Russian Attacks Across Ukraine
High-Profile Incidents and Political Developments Dominate Global News
Netanyahu Accuses Western Leaders of 'Emboldening Hamas'
Ukraine and Russia Conduct Largest Prisoner Exchange of the War
×