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Carbon pricing would raise trillions needed to tackle climate crisis, says IMF | Traditionally unpopular carbon taxes could be achieved with regulatory compliance, IMF head tells Cop 28

Carbon pricing would raise trillions needed to tackle climate crisis, says IMF

https://www.theguardian.com/environment/2023/dec/07/carbon-pricing-would-raise-trillions-needed-to-tackle-climate-crisis-says-imf

Traditionally unpopular carbon taxes could be achieved with regulatory compliance, IMF head tells Cop 28

18 comments

Spendrill

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I'm probably missing something here but doesn't putting a price on carbon just introduce a cost that will be passed onto the consumer and allow unscrupulous companies to avoid decarbonisation by just paying credits? And while we're on the subject won't credits just become another traded commodity that will become sought after and then people will demand more of them because their value would inflate another bubble?

silence7

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It's tough to avoid; you can tax at importation and extraction.

The usual design of a carbon tax is to refund much of what is collected on an equal-amount-per-capita basis. Because the rich consume vastly more than the rest of us, most people come out ahead financially

dgmib

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Yes the tax gets passed onto consumers, but it’s not applied equally to all products. Products that require high emissions to manufacture and deliver become a lot more expensive, products with low emissions do not.

This influences both consumer and business behaviour, often without you realizing it. Businesses buy from suppliers with lower carbon intensity to gain a competitive advantage, consumers pick low carbon products and shipping methods because they’re cheaper. Even the most stringent climate change deniers make better choices because it’s simply cheaper.

Carbon credits and offsets generally don’t give companies a way of bypassing the tax. As the cost of sequestering carbon is still well above any proposed tax amounts. In general, it remains cheaper to pay the tax, and reduce emissions rather than try to buy carbon credits or offset.

on a separate but related note. There’s a lot of issues with carbon credit and offset systems, most are low quality and don’t actually result in permanent reductions in global atmospheric carbon levels.

The unscrupulous business practice that government and regulatory bodies need to crack down on more. Is business selling things that don’t actually reduce global atmospheric carbon levels as an offset, or using creative accounting to resell the same offset more than once.

There is a lot of greenwashing related to offsets. Lots of companies claiming to be carbon neutral, or net zero, or whatever when they haven’t actually done anything to reduce their emissions, just some creative accounting. A properly implemented carbon tax actually helps the greenwashing problem, because it stops being about your “green” messaging and strictly about dollars and price.

Honestly, the simplest thing governments could do, apply a carbon tax to those extracting fossil fuels, and use the revenue to reduce personal taxes paid by individuals. The costs that get passed onto the consumer, get offset by the taxes that they no longer pay elsewhere, but it still creates all of the economic drivers for consumers and businesses to focus on lowering carbon emissions in products.

Spendrill

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apply a carbon tax to those extracting fossil fuels, and use the revenue to reduce personal taxes paid by individuals.

Oooh I like that. I like it very much. I think it would make a nice ensemble with Land Value Tax.

metarmask

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It is different from carbon credits. I don't think you get a rebate from not emitting. If the cost is passed onto the consumer when there are good alternatives with less carbon, they will be out-competed. One thing with few alternatives is transportation, which low-income households tend to spend more on.

MrMakabar

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The important part to add here is that a carbon tax is still a tax, which pays for stuff like streets, schools and all sorts of other government services. So it is not money wasted. It also hits rich people harder then poor ones.

Then about carbon credits, they are traded, but that is part of the idea. Basically the supply is supposed to limited. For badly designed schemes that might not be the case due to too easy offsets, but for example the EU scheme has no offsets. The problem a lot of green technologies have is that they are more expensive then fossil fuels, if you exclude damages caused by fossil fuels. So if a carbon credit costs more then that difference people will choose the green process. By having this trade freely and force a large part of an economy to have to buy them for emissions, the idea is the cheapest green alternatives are adopted first and emissions go down that way. Then the number of credits and permitted emissions go down and the next green alternative gets adopted and so forth until you do not have any fossil fuels left anymore. The problem is that a lot of green technologies are not cheap. So there is potential to really hurt the poor with it. However it is a good way of having a controlled phase out of fossil fuels and with subsidies you can support the poors green transition.

MuhammadJesusGaySex

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Yes, yes it does. The government makes your coal powered power plant pay more taxes. They in turn raise your power bill to pay said taxes. No lesson learned. No incentive for change. After all, what is in place to stop that from happening? Nothing.

PopOfAfrica

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Governments have unlimited power over companies in theory. Why stop at attacks? Why not just force them?

If you can't reach a certain emission goal, you lose your business license. That's simple.

silence7

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There's a bunch of economics literature around carbon taxes and cap-and-trade. Either one is more cost-effective at achieving emissions reduction than the kind of approach you describe.

PopOfAfrica

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Why on earth do I care what a bunch of economists say? Money is made up bullshit.

silence7

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Some of what they do represents effort, not just money. In this case, I'm pretty well convinced it's the case.

jol

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We need more than money to fix the problem. We need to consume less.

gravitas_deficiency

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Regulatory capture: chuckles sensibly

silence7

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Maybe...or maybe not, since the industry doesn't exist yet.

lntl

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isn't this bad for small businesses though?

silence7

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Small businesses usually have a straightforward path to decarbonization. It's the big industrial facilities with a large capital investment which are going to have a tough time

lntl

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i mean, suppose i run a pizza shop. Carbon pricing would make my sauce, cheese, flour, oil, topping prices higher.

also operating expenses like the pizza oven? these are expensive pieces of gas fired equipment that would have to be replaced.

carbon pricing is the only thing that can reduce consumption of fuel fuels, it just doesn't seem so simple to implement

silence7

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Sure, but it also means your customers have more money in their pocket. This means you can charge different prices for meat vs vegetarian toppings, and customers will have a choice between eating vegetarian toppings and having more money left over or paying the premium for meat. As the carbon tax rises, you'll want to add vegan cheese to your options and electrify your ovens.