The Fund notes that several countries are largely focusing their emissions reduction policy on public investments for the green transition and subsidies for Renewable Energy Sources.
The establishment of a minimum global tax on carbon dioxide emissions ( international carbon price floor ), is proposed by the International Monetary Fund in order to speed up the response to the climate crisis without derailing the public debt which for many countries has already increased to very high levels. In an analysis included in the new edition of the Fiscal Monitor , the Fund notes that several countries are largely focusing their emissions reduction policy on public investments for the green transition and renewable energy subsidies at high fiscal costs. It estimates that if climate change policy is based on such measures, then public debt would rise by 45-50 % of GDP by 2050 , making it unsustainable for many countries. To address the problem, the IMF considers that the establishment of a minimum tax on carbon emissions at the global level is a realistic and fair proposal as it foresees a different rate depending on the level of development of the countries, from 25 to 75 dollars per ton of pollutants. Furthermore, the revenue from this taxation could be partly shared between countries to facilitate their green transition. In order to make the transition in a socially fair way, support measures for vulnerable households, workers and communities should also be foreseen. The Fund stresses that polluter taxation is not sufficient on its own to sufficiently reduce emissions, but should be a key element in any package of measures that countries promote to achieve climate goals, which will include both measures expenditure as well as revenue measures. The Fund reffered to the positive experience of countries at different levels of development—such as Chile, Singapore, and Sweden—that have overcome political barriers to taxing emissions— , an experience that is useful for both the nearly 50 developed and emerging economies that use already relevant frameworks as well as more than 20 other countries, which are considering the establishment of such policies.
The Emissions Trading System operates in the European Union , through which the costs paid by industries that pollute the environment are determined. The price of pollutants formed by the relevant auctions was moving at low levels in the last decade, well below the levels suggested by the IMF as a minimum tax, but it started to rise from 2020 and this year it is above 70 euros per ton of pollutants . According to the IMF , fiscal costs and the impact on public debt will depend on the mix of revenue and expenditure policies that countries will follow. His analysis shows that if an appropriate mix of measures is implemented now, climate goals can be achieved at limited fiscal cost.
In particular, for developed economies public debt would increase by 10 % to 15 % of GDP by 2050 , although these calculations are subject to great uncertainty given the differences in countries' fiscal data, the level of investments and subsidies, of household support measures and dependence on fossil fuels. If implementation of the measures is delayed, the IMF estimates that debt would increase by an additional 0.8 % to 2 % of GDP per year for each year of delay.
source: businessdaily.gr
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