GHG Daily
1/13/2016
Carbon pricing is the most direct and efficient way to meet the ambitious goals of the new global climate agreement struck in Paris late last year, the International Monetary Fund said Monday. The Paris Agreement sets a goal of limiting global temperature rise to well below 2 degrees Celsius. “At the heart of the climate change problem is an externality: firms and households are not charged for the environmental consequences of their greenhouse gases from fossil fuels and other sources,” according to the IMF.
To address this externality, a carbon price should be put in place, the organization concluded in a Jan. 11 paper. “For reducing carbon emissions (‘mitigation’), carbon pricing (through taxes or trading systems designed to behave like taxes) should be front and center. These are potentially the most effective mitigation instruments, are straightforward to administer (for example, building off fuel excises already commonplace in most countries), raise (especially timely) revenues for lowering debt or other taxes, and establish the price signals that are central for redirecting technological change towards low-emission investments,” the paper says.