Fiscal Policy to Mitigate Climate Change: A Guide for Policymakers

Without taking an institutional position, the IMF has performed a useful service in sponsoring this symposium on the use of fiscal instruments—specifically, a tax on emissions of greenhouse gases, especially carbon dioxide—to mitigate climate change. Such a tax would do so both by discouraging the use of fossil fuels, especially coal, and by encouraging the development of alternative, nonemitting sources of energy. Drawing on a large body of research on the subject, the contributors contend that such a charge on greenhouse gas emissions would be easily the most efficient measure to address climate change. It would have the additional advantage of generating revenue, which could be used for a variety of purposes: to reduce budget deficits, to lower other taxes, to finance research and development, to fund the development of nonemitting sources of energy, to cushion the impact of higher energy prices on poor people, and to help poor countries reduce their emissions and adapt to the climate change that is already under way. The book is a valuable primer on the merits of such new and socially constructive taxes.

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