2019 – Posted in: Daily News

IMF REPORT ON CARBON TAX

For: Preliminary & Mains
Topics covered: Carbon tax, IMF, Paris Agreement, Yellow Vest protest movement

News Flash

According to International Monetary Fund report, at USD 70 per ton of carbon dioxide, a carbon tax would be the most efficient means of cutting greenhouse gas emissions.

But for the moment, carbon taxes remain unpopular, particularly in France, where plans to increase it to 55 euros (or $61.60) from 44.60 euros recently ignited the Yellow Vest protest movement.
The French government was forced to suspend the plan in the face of popular revolt.

Background

The Paris Agreement, adopted in 2015 by more than 200 countries, aims to cap overall increases in global temperatures at two degrees centigrade above the pre-industrial era.
The 2C target would require cutting emissions by roughly a third by 2030 and a global carbon price of around $70 per ton.
There is a growing consensus that carbon pricing… is the single most effective mitigation instrument.
It allows for a reduction in energy consumption, favors cleaner energies and mobilizes private financing.
It also provides much needed revenues, that countries could use that income to finance sustainable and more inclusive growth.
IMF said that in China, the world’s largest emitter, and in India or South Africa, countries which rely heavily on coal, a carbon tax of just $35 per ton would cut emissions by 30 percent.
But in nine countries that use little coal, such as Ivory Coast, Costa Rica or France, the result would be a reduction of only 10 percent.

Paris Agreement

The Paris Agreement is an agreement within the United Nations Framework Convention on Climate Change (UNFCCC), dealing with greenhouse-gas-emissions mitigation, adaptation, and finance, signed in 2016.
As of March 2019, 195 UNFCCC members have signed the agreement, and 185 have become party to it.
The Paris Agreement’s long-term goal is to keep the increase in global average temperature to well below 2 °C above pre-industrial levels; and to limit the increase to 1.5 °C, since this would substantially reduce the risks and effects of climate change.
Under the Paris Agreement, each country must determine, plan, and regularly report on the contribution that it undertakes to mitigate global warming.

Carbon Tax

A carbon tax is a tax levied on the burning of carbon-based fuels (coal, oil, gas). A carbon tax is the core policy for reducing and eventually eliminating the use of fossil fuels whose combustion is destabilizing and destroying our climate.
A carbon tax is a way — the only way, really — to have users of carbon fuels pay for the climate damage caused by releasing carbon dioxide into the atmosphere.
It is a form of carbon pricing. Carbon is present in every hydrocarbon fuel and converted to carbon dioxide and other products when combusted.
The government sets a price per ton on carbon, then translates it into a tax on electricity, natural gas or oil.
Beginning January 1, 2019, the tax will be levied at the full rate for most liquid fuels, increasing annually by 10% to reach 100% by 2028. The carbon tax is estimated to cover about 20% of the country’s GHG emissions and is expected to raise approximately ARS11.5 billion (US$571 million) in revenue per year.

IMF

Created in 1945, the International Monetary Fund (IMF) is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

The IMF’s primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other.

Yellow Vest protest movement

The yellow vests movement is a populist, grassroots political movement for economic justice that began in France in October 2018.
The movement is motivated by rising fuel prices, a high cost of living.
Peoples’ claims that a disproportionate burden of the government’s tax reforms were falling on the working and middle classes, especially in rural and peri-urban areas.
The protesters have called for lower fuel taxes, a reintroduction of the solidarity tax on wealth, a minimum-wage increase, the implementation of Citizens’ initiative referendums.

Source: Economic Times

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