Putting a Price on Pollution (Parry 2019)

In this new article, Ian Parry from the IMF’s Fiscal Affairs Department argues for putting a price on carbon, for achieving Paris Agreement Commitment. His proposition rests on four crucial points.

1. Carbon pricing is an effective tool for meeting domestic emission mitigation commitments, as even a price of $35 per ton of carbon would by itself exceed the level needed to meet mitigation commitments in countries heavily dependent on coal, such as China, India, and South Africa.

2. Carbon taxes could raise a significant amount of revenue, typically 1-2 percent of GDP, which could be used to offset potentially harmful macroeconomic consequences of higher energy price.

3. Carbon taxes can generate significant domestic environmental benefits such as reductions in air-pollution-related premature deaths (from fossil fuel combustion).

4. They are easy to administer.

To read the full article, follow the link to IMF’s website.