Staff at the International Monetary Fund (IMF) have suggested a carbon-price floor to reduce global warming over the next decade, claiming that climate change poses significant threats to the world’s economies.
A report was issued earlier in June and is being discussed by the IMF executive board and members. The reports recommended varying minimum carbon-price levels for nations based on their stage of development as one possibility.
By using a 3-tier price floor ($25, $50, $75 per tonne) among United States, China, the European Union, India, the United Kingdom, and Canada. This could help cut global emissions by 23 % from baseline levels by 2030.
According to IMF officials, this would substantially improve the efficiency of the Paris Agreement aim of limiting temperature increases below 2 degrees Celsius.
The concept is similar to the argument over a minimum worldwide corporation tax rate.
By focusing on a small number of large emitters, this would make negotiations easier and could still cover a large percentage of global emissions, thereby taking a major step towards the cuts in greenhouse gases.
While a tax is one possibility for establishing the price floor, the IMF believes it may also be accomplished through regulation or carbon trading.
With Carbon trading, the proceeds may be used to compensate consumers for price increases as well as to assist firms and people in transitioning from high- to low-carbon activities.
According to IMF officials, the proposal would be more successful and less controversial than border-adjustment carbon taxes, which are charges on the carbon content of imports.
And if it is expanded out to cover the whole G20 nations (which emit 85% of global carbon-dioxide emissions), the proposal may stimulate a slight additional decrease in emissions, according to the IMF experts in the paper.