Industry

IMF Proposes Global Carbon Price Floors

Limiting global warming to 1.5 to 2 degrees will require a global carbon price of around US$75 per ton,  says IMF, compared to only US$3 per ton currently.

The International Monetary Fund (IMF) has proposed the creation of an international carbon price floor arrangement as a measure to scale up global carbon pricing markets and slow global warming.

In a new paper, the IMF says limiting global warming to 1.5 to 2 degrees Celsius will require emissions to be cut by a quarter to a half by 2030, and this is unlikely without measures equivalent to a global carbon price of around US$75 per ton by the end of this decade.

Despite over 60 national and subnational carbon pricing schemes around the world, four-fifths of global emissions still remain unpriced and the global average emissions price is only US$3 per ton.

An international carbon price floor would have to have three crucial elements, the IMF says, specifically:

  • It would focus on a small number of large emitters, thereby making negotiations easier and still covering a big percentage of global emissions
  • The agreement would be anchored on a minimum carbon price that would allow simultaneous action across different countries and help provide reassurance to large emitters that others are acting in coordination
  • A carbon price floor agreement would be flexible, pragmatic, and equitable and account for different responsibilities across countries with different pricing based on different development levels and historical emissions

The paper outlines the option to introduce different minimum carbon-price levels for countries based on their stage of development, with prices of US$75, US$50 and US$25 a ton for advanced, high- and low-income emerging markets, respectively.

“This scheme could help achieve a 23% reduction in global emissions below baseline by 2030, enough to bring emissions in 2030 in line with keeping global warming below 2°C,” the paper says.

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