Washington D.C., 9 August 2022 (TDI): According to International Monetary Fund (IMF), carbon pricing coverage must be increased, and prices must increase from an average global price of $6 per ton of carbon dioxide to $75 by 2030 to prevent global warming.
To limit global warming, carbon pricing coverage must expand and prices rise from a global average of $6 per ton of carbon dioxide today to $75 by 2030. Read more on #IMFBlog. https://t.co/kMdLtpnFoN pic.twitter.com/0e4adrsTCa
— IMF (@IMFNews) August 9, 2022
As the globe prepares to keep global warming to 1.5 to 2 degrees Celsius, more nations are making carbon prices the centerpiece of their mitigation plans.
The IMF’s Weekly Chart depicts the development of carbon pricing plans. Currently, 46 nations have carbon taxes or emissions trading schemes (ETS) to charge for emissions, and others are looking at doing the same.
According to IMF, ETSs and carbon levies cover 30% of emissions globally, with costs rising to $90 per ton (in the European Union).
IMF staff explain in an IMF Staff Climate Note when choosing among and within policy instruments, policymakers considering establishing or ramping up carbon pricing confront numerous choices.
Further, these include the simplicity of execution, cost structures, issues with competitiveness, compatibility with other instruments for mitigating risks, and international cooperation.
Nations may opt for various strategies depending on their unique conditions and goals.
Carbon Pricing and Carbon Tax
Carbon pricing harnesses market forces to address climate change by providing companies and countries with economic incentives to reduce emissions by switching to more efficient processes or cleaner fuels. In addition, it is becoming an increasingly popular mechanism.
Further, Carbon pricing can take the form of carbon taxes or fees or cap-and-trade schemes that rely on government quotas or permits.
According to IMF, Carbon taxes and emissions trading programs are two important options. Carbon taxes are appealing from a practical standpoint because they predict future emissions prices, promoting energy efficiency and green investments.
Additionally, carbon taxes might expand to cover a wider range of emissions sources, such as methane emissions from agriculture and, in some situations, extractive sectors.
