MANAGING director of the International Monetary Fund (IMF), Kristalina Georgieva has called on regional governments to implement taxes on carbon emissions as part of measures to reduce discharge of the harmful gas in the atmosphere.
Georgieva made the call as she addressed students at The University of the West Indies, Cave Hill campus in Barbados, during a visit to the island last week.
“At the IMF we have a very important message — and if you add your voice as young people to this message, I would be very, very grateful — and it is: Tax pollution, don’t tax people. Tax CO2 emissions; make sure that there is a price assigned with meeting them. Whether it is a tax or a trade or a regulatory enforcement is less significant. What is significant is that we have to send a very clear signal to produces and to consumers that we simply cannot survive as humanity unless we change. We also have to be adapting to the change in the climate. It’s no more a problem of the future. It’s right here with us.”
Under a carbon tax the Government sets a price that emitters must pay for each ton of greenhouse gas emissions they emit. The aim is to get businesses and consumers to take steps, such as switching fuels or adopting new technologies, to reduce their emissions to avoid paying the tax.
A number of countries, regions, and local governments around the world have a carbon tax or something similar like an energy tax related to carbon content. According to the US-based Center for Climate and Energy Solutions, as of 2021, 35 carbon tax programmes have been implemented across the world. For example, British Columbia has had a carbon tax since 2008. South Africa became the first African country to implement a carbon tax in 2019. In 2006, Boulder, Colorado, became the first US city with a directly voter-approved carbon tax, and other cities are exploring the idea.
“Certainly, no one can sit down on the sidelines,” the IMF chief told the students. Why? Because we do face an existential threat, and here in Barbados you witness it and it is the threat of our changing climate. And we do need to act decisively, both to reduce the magnitude of this threat — and that applies to everybody although large emitters are those that will define how successful we are.”
Those large emitters she notes are China, India, Europe, and the United States. Combined, China, the US and India account for 50 per cent of global carbon emissions.
For smaller countries in the Caribbean, the call is for efforts to be made to build resilience to shocks.
“At the IMF we are working on three fronts. First, we created a new financial instrument called resilience and sustainability trust. The objective of this resilience and sustainability trust is to support policies in countries that would put them on a structural transformation path, specifically addressing the climate challenge, but also pandemic preparedness and food security will also fall within that category.
“The innovation is that we provide concessional finance on the basis of vulnerability, not income per capita. Traditionally — and still this is the case in development banks — the only criteria for concessional finance (in other words better terms of finance) is income per capita. A poor country will have access, and middle-income countries won’t.”
However, Georgieva says the innovation that has been put in place for this new financing instrument is twofold: (1) access to vulnerable countries to concessional finance, and (2) long-term provision of finance with twenty years’ maturity and ten years’ grace period. “This is twice as long as the longest we have at the IMF, and we are working with the other development banks to think about other ways [to finance climate action].
“We are going to come in about two weeks with a policy analysis on how to move more private sector finance to emerging markets and developing countries for climate action. And we are looking to reducing primarily, real and perceived risk. Why is this critical? Because if private finance only continues to go to where risks are lower — Germany, France, the United States — that’s good, but we are cooked. Why? Because emissions are growing in emerging markets, but money is going to advanced economies. We have to shift the direction of finance to go where it will make the biggest difference, and that particularly applies also to adaptation to climate risk.”