According to the Fiscal Monitor released by the International Monetary Fund (IMF), finance ministers worldwide could reshape the fiscal policies to discourage CO2 emissions from fossil fuels to curb climate change. Carbon taxes are presented as the most powerful and efficient tools, but only if they are implemented in a fair way, i.e. by cutting other kinds of taxes, supporting vulnerable households and communities, raising investments in renewable energies or returning the money to people as a dividend.
Large CO2 emitting countries should introduce a carbon tax set to increase rapidly to US$75/t by 2030. Such a measure could raise residential electric bills by an average of 43% cumulatively over the next ten years (and more in countries relying on coal-fired power generation), while gasoline prices would rise by 14% on average. However, the States could use the revenues from the tax - estimated between 0.5% and 4.5% of the GDP (depending on the country) to cut other taxes or to compensate the poorest 40% of households.
According to the IMF, introducing a carbon price floor of US$50/t for advanced G20 countries and a US$25/t price for developing G20 countries in 2030 would reduce CO2 emissions 100% more than countries’ current commitments in the 2015 Paris Agreement.
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