The Right Price for Preserving Our Climate
WASHINGTON, DC – When world leaders convene in Paris this week for the United Nations Climate Change Conference, their task will be to reach a global agreement on curbing greenhouse-gas emissions. A successful outcome, demonstrating that countries can work together for the good of the planet, would send a powerful message of hope to the world – and to the people of Paris, who remain unbowed after the recent terrorist attacks.
Climate pledges will be made on the basis of Intended Nationally Determined Contributions (INDCs), or commitments to the reduction of emissions worldwide. I believe that the price of emissions should be at the center of these pledges.
That is why the International Monetary Fund’s staff have recommended a three-part strategy on carbon fuel: “price it right, tax it smart, and do it now.” Each component is essential.
First, setting the right price for fossil fuels means taking into account their true environmental costs. Prices should pass on to end users the full cost not only of production and acquisition, but also of the damage – including air pollution and climate change – caused by intensive reliance on fossil fuels. A fairer carbon price will drive energy savings and boost demand for cleaner fuels and “greener” investments.
Second, the necessary change in prices would be achieved by taxing energy, using tools that are both practical and efficient. The best option is to build a carbon charge into existing fuel taxes and apply similar charges to coal, natural gas, and other petroleum products.
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