Carbon Pricing Crucial For Affordable Climate Policy: IMF Official

Charging companies for the carbon they produce will be a crucial part of the policy mix to deliver global climate goals while avoiding soaring public debt, the International Monetary Fund's (IMF) fiscal affairs chief has told AFP

Marrakesh, (APP - UrduPoint / Pakistan Point News - 11th Oct, 2023) Charging companies for the carbon they produce will be a crucial part of the policy mix to deliver global climate goals while avoiding soaring public debt, the International Monetary Fund's (IMF) fiscal affairs chief has told AFP.

The IMF warned in a recent report that relying solely on scaling existing spending measures to deliver climate objectives could raise debt by as much as 50 percent of gross domestic product (GDP) by the middle of this century.

Adopting a new policy mix which includes an emissions trading scheme or carbon tax would significantly ease the long-term impact of the climate transition on government debt levels, according to the IMF's Fiscal Monitor report.

"Carbon pricing is the single most efficient and effective instrument and so it's a very important component of a viable package," Vitor Gaspar told AFP ahead of the IMF and World Bank's annual meetings in Marrakesh.

Such a package would rely heavily on carbon pricing, "complemented by other instruments," like targeted subsidies, and financial support for vulnerable households, he said.

"If carbon emissions are appropriately priced, the ability to mobilize the financial creativity of the private sector improves quite substantially," he added.