IMF's Blunt Message to Nations: Raise Fossil-Fuel Taxes to Fight Climate Change

Countries all over the world, including the United States, should be collecting much higher pollution taxes on fossil fuels—stiff enough to reflect the long-term cost of global warming's damage, the International Monetary Fund said on Thursday in an important new study.

The IMF, one of the world's leading development institutions, has long favored putting a price on carbon as an essential defense against the mounting damages of climate change.
But its advice has never been so blunt, or so detailed.

"Many energy prices in many countries are wrong," said the report, entitled Getting Energy Prices Right.  "They are set at levels that do not reflect environmental damage, notably global warming."

Not only should countries collect taxes to take into account the future global costs of climate damage that carbon dioxide emissions are expected to cause, but they should also collect taxes to discourage burning fossil fuels because of the more localized smog and soot that make people sick.  In addition, they should collect taxes on motor vehicle fuels to help pay for roadway wear and tear, crashes and the like.

Mainstream economists have long held that taxing fossil fuels is the most efficient way to ward off environmental ills.  Higher taxes would discourage people from burning so much fuel, and also make alternative clean fuels more competitive in price and stimulate green innovation.

But in many countries raising taxes is political anathema, and politicians and policymakers have either let climate matters slide or resorted to other means of combating climate change, such as subsidies for green fuels, even though economists say that approach is less efficient.

IMF's Blunt Message to Nations:  Raise Fossil-Fuel Taxes to Fight Climate Change