Kristalina Georgieva, Managing Director, International Monetary Fund (IMF) says a robust price on carbon will provide a critical market signal to producers and consumers in all sectors of the economy.
She said this on Thursday in Washington D.C. at the Leaders Summit on Climate, a two-day virtual event convened by United States President, Joe Biden.
According to her, climate change presents huge risks to the functioning of economies and offers incredible opportunities for transformative investments and green jobs.
She said that the right policies on climate change could make a significant difference in accelerating the transition to the new climate economy.
Georgieva said carbon had proven to advance investments in renewable energy, electric mobility, energy efficient buildings, reforestation and other climate friendly activities with positive impact on growth and jobs, while reducing carbon emissions.
“Carbon revenues can also help secure a just transition, compensating households for price increases and helping businesses and workers move from high to low carbon intensity activities.
“Our analysis shows that without it, we will not reach our climate stabilisation goals.
“It also shows that a mix of steadily rising carbon prices and green infrastructure investment can increase global GDP by more than 0.7 per cent per year, over the next 15 years and create millions of new jobs.
“Carbon pricing is gaining momentum as many businesses now use a shadow carbon price in their models.”
She said that over 60 pricing schemes had been implemented, but the average global price was currently two dollars a ton, with the need to rise to 75 dollars a ton by 2030 to curb emissions in line with goals of the Paris Agreement.
According to her, because of the urgency to act, the IMF proposed an international carbon price floor among large emitters, such as the G20.
“Also, focus on a minimum carbon price among a small group of large emitters can facilitate an agreement, covering up to 80 per cent of global emissions.
“Such a price floor has to be pragmatic and equitable, with differentiated pricing for countries at different levels of economic development.
“It can be implemented through carbon taxes, carbon trading systems or equivalent measures that match local policy preferences.
“Crucially, a price floor can avoid less efficient and contentious border carbon adjustments if some countries move ahead with robust pricing while others do not,” she said.
As a policy, she said green taxonomy and standardised reporting of climate related financial risks were necessary to unlock trillions of dollars in private finance.
Georgieva said the financial industry was already stepping up, but in a recent survey of major investors, more than half cited the poor quality or availability of data as the biggest barrier to sustainable investing.
This, she said, was why the IMF was working with its members and partners on data quality and disclosure, as well as on financial sector stress testing for climate-related risks.
She also advocated for financial support to developing countries as they offered many of the lowest-cost opportunities.
The managing director said it was in everyone’s interest to fulfill the commitment of 100 billion dollars a year in climate finance for the developing world.
“Combined with technology transfer and policy support, it will make it possible to decouple growth and carbon emissions.
“We will play our part, integrating climate change into our annual economic ‘health checks’ of countries and financial systems and actively promoting low carbon and climate resilient growth paths,” she said.
The News Agency of Nigeria (NAN) reports that carbon pricing is an increasingly popular mechanism that makes use of market forces to address climate change by creating financial incentives for companies and countries to lower their emissions.
This is done either by switching to more efficient processes or cleaner fuels.
It can take the form of a carbon tax or fee, or a cap-and-trade system that depends on government allotments or permits.
