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The International Monetary Fund has warned that without pollution taxes, the fiscal costs of tackling climate change could put the public debt of large carbon emitters on an “unsustainable” path.
In a chapter on climate change published as part of the fund’s flagship Fiscal Monitor 2023, IMF economists said relying solely on spending measures to achieve net-zero carbon emissions by 2050 could “represent The increase in public debt in countries with large sexual emitters can reach up to 50% of gross domestic product.
The International Monetary Fund, which has long advocated a global carbon tax, said countries could reduce debt burdens and generate more revenue by implementing carbon pricing policies. The fund said these policies, which impose costs on companies based on their carbon emissions, should be “an integral part” of any climate policy package.
According to the International Monetary Fund, nearly 50 countries have developed carbon pricing plans.
The European Union, one of the world’s highest-emitting blocs, has just launched a trial phase of the world’s first carbon border tax, which is expected to spur its trading partners to put a price on their carbon emissions.
Yet despite governments implementing a mix of carbon pricing schemes and green subsidies, such as those included in the US’s $369 trillion inflation-cutting bill, rich countries are still falling short of their environmental goals.
The goals set out in the Paris Agreement, reached in 2015 and signed by 189 countries, commit to limiting global warming to around 1.5 degrees Celsius above pre-industrial levels.
But existing and planned climate policies will reduce emissions in the world’s largest economies, including the G20, by just 13% by 2030, according to a joint analysis by the International Monetary Fund and the World Bank in a separate report released on Monday. .
The International Monetary Fund warned on Monday that emissions reductions were “significantly” below the 25%-30% needed to meet the Paris Agreement’s global temperature goals.
A comprehensive inventory of global efforts released by the United Nations last month showed that the earth’s temperature will still rise by 2.6 degrees Celsius by the end of this century.
While nearly 200 countries have committed to net-zero emissions plans, with many setting targets by 2050, the United Nations says the world is “not yet on track”.
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