Working in partnership, the IMF and World Bank have looked at different carbon pricing initiatives from around the world and carried out research of their own in order to help governments and businesses develop successful, cost-effective schemes of their own.
The two international financial organisations contend that well-designed carbon pricing initiatives offer a “flexible tool” for cutting green gas emissions.
The World Bank and IMF recommended that those looking to design and implement carbon pricing follow their six
core principles
“Carbon pricing is effective in reducing emissions that cause climate change, is straightforward to administer, can raise valuable revenues for broader fiscal reforms, and can help address local pollution as well as global climate change,” said Christine Lagarde, managing director of the IMF. “We welcome the opportunity to continue collaborating with the World Bank, OECD, and others on this critical policy tool.”
The World Bank and IMF recommended that those looking to design and implement carbon pricing follow their six core principles, called the FASTER principles:
They contend that all schemes be “fair; aligned with other policies to ensure a level playing field for low carbon alternatives; stable and predictable, transparent, efficient and cost-effective and reliable to achieve a measurable reduction in greenhouse gas emissions”.
“The world needs to find effective ways to reduce carbon pollution,” said World Bank Group President, Jim Yong Kim. “We must design the best ways to price carbon in order to help cut pollution, improve people’s health, and provide governments with a pool of funds to drive investment in a cleaner future and to protect poor people.”
The US and China are looking to implement carbon pricing initiatives, with both countries leading the way in terms of sheer volume of emissions. Currently, the scheme China is developing aims to cover roughly one billion tons CO2, while the US just 0.5 billion.
The international financial organisations argue that more cooperation in this area is required between countries, and that by applying a price on carbon emissions, it will encourage business leaders to make investment decisions that will help stabilise the planet’s climate.
According to the World Bank’s State and Trends of Carbon Pricing 2015 report, increased international cooperation on carbon pricing could raise $2.2tn by 2050 in net annual flows of financial resources. All of which can be used to develop better solutions for tackling climate change.
