IMF: Carbon pricing should be an integral part of any policy mix

Carbon pricing should be an integral part of any policy mix, Era Dabla-Norris, Deputy Director in the IMF's Fiscal Affairs Department, said in response to Trend's question during a briefing on the Fiscal Monitor held as part of the IMF Spring Meetings in Washington.

She recalled that in the October 2023 Fiscal Monitor, IMF talked about a fundamental trilemma that countries face when it comes to tackling climate change.

"If you were to rely on subsidies or just spending alone to tackle it, it's going to be fiscally very costly and could add to those pressures. Not doing anything is not an option, because that means global warming would really have deleterious effects on lives and livelihoods and economies. At the same time, if you were to use carbon pricing as a way to meet a climate commitments that could cross political red line," she said.

Era Dabla-Norris pointed out that somehow, a package of measures is needed to allow countries to get around this trilemma.

"And we feel that carbon pricing should be an integral part of any policy mix because this can allow countries to raise the revenues that are needed for green investments. But this should be complemented with a suite of other regulatory and other measures in order to incentivize firms and households to decarbonize," she concluded.

The Spring Meetings of the International Monetary Fund and the World Bank Group kicked off on April 15.

The main ministerial meetings and events will take place April 17-19 with other events and activities taking place during the week, April 15-20.

At the heart of the gathering are meetings of the joint Development Committee and the IMF's International Monetary and Financial Committee, which discuss progress on the work of the World Bank Group and the IMF.

The Spring Meetings bring together central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organizations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.

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