For the IMF, the CO2 tax is key against emissions

A carbon tax is a fee imposed by the government on any company that burns fossil fuels.
The most discussed topics are coal, oil, gasoline and natural gas.

According to the International Monetary Fund (IMF), the CO2 tax, carbon, is a central element of any effective environmental policy. This tax taxes emissions of carbon dioxide and other greenhouse gases, causing companies and consumers to reduce their consumption of fossil fuels.

Imposing a carbon tax, mainly on companies that emit the most, is a central element of any effective environmental policy, combined with measures to prevent public debt from skyrocketing, explained the head of budget policies at the IMF, the Portuguese Vítor Gaspar.

What would the costs be?

CO2 tax

To implement a carbon tax, the government must determine the external cost of each ton of greenhouse gas emissions. This is difficult because scientists and economists must first agree on what assumptions to make.

One group, the U.S. Interagency Task Force on the Social Cost of Carbon, estimates the amount at $40 per ton. A tax that reflects these social costs would increase gasoline prices by 36 cents per gallon. This will add $0.02 to the price per kilowatt hour of electricity.

According to analysis in a 2018 United Nations report, prices will have to be much higher to prevent temperatures from exceeding 1,5°C by 2030.

The UN recommended a carbon tax of between $135 and $5,500 per ton.

A high tax

The IMF recommends that governments implement a carbon tax that is high enough to have a significant impact on emissions. The tax must also be progressive, so that companies and consumers that emit the most pay more.

The IMF points out that the carbon tax is compatible with sustainable economic growth. In fact, the tax can boost innovation and the development of new clean technologies.

In Argentina, the carbon tax has been in effect since 2018. The tax taxes carbon dioxide emissions from companies that generate more than 10.000 tons of CO2 per year. The tax is progressive, so companies that emit more pay more.

The IMF believes that the carbon tax In Argentina it is an important step in the right direction. The agency recommends that the government increase the tax so that it has a more significant impact on emissions.

Reasons to implement the CO2 tax

  • It is an efficient instrument to reduce greenhouse gas emissions.
  • It is transparent and equitable, since all economic agents pay for the damage they cause to the environment.
  • It can generate revenue that can be used to finance climate change mitigation and adaptation policies.

Benefits of the carbon tax

  • Reduces greenhouse gas emissions, helping to mitigate climate change.
  • Promotes innovation and the development of new clean technologies.
  • It generates income that can be used to finance climate change mitigation and adaptation policies.

The carbon tax is an effective tool to protect the environment and promote sustainable economic growth.

But for a carbon tax to be fully effective, “it must be accompanied by other tools,” such as specific subsidies to help companies with the energy transition and support vulnerable households.
The most vulnerable are those who will face rising prices, especially energy prices.

With information of: