Speech

Introductory Remarks DMD Zhang—Virtual High-Level Dialogue of the Carbon Pricing Leadership Coalition (CPLC)

June 22, 2020

I am delighted to be here to support the work of the Carbon Pricing Leadership Coalition.

The CPLC provides an excellent platform for discussing carbon-neutral transition strategies and for sharing perspectives and experiences across a broad range of countries, industries, and stakeholders.

The IMF has long advocated measures to support climate-change adaptation and mitigation. This includes the use of carbon pricing, and we have developed practical tools to help our member countries put it into practice.

Today’s economic crisis has only strengthened the urgency of carbon pricing. As economic recoveries get underway, a great deal of investment will be taking place across the world. Having the right energy prices—reflecting supply and environmental costs—will be critical to allocating new investment efficiently across green and brown sectors. Furthermore, revenues from carbon pricing can support sustainable fiscal positions and help fund social assistance and public investment for the recovery.

At the same time, we have to acknowledge that carbon pricing is often difficult politically, not least because of higher energy prices. In this respect, today’s low oil prices may provide an opportunity to enhance public support.

Close consultations with stakeholders and effective communications will continue to be needed, and pricing can be phased in gradually and predictably as economies recover. Moreover, assistance packages can be tailored to vulnerable groups, like coal-mining communities and rural households.

Finally, pricing can be complemented with other instruments to improve overall environmental effectiveness while limiting impacts on energy prices. For example, “feebates” apply a sliding scale of fees to products or activities with above-average emissions rates and rebates to products or activities with below-average emissions rates.

Still, we need to be candid about the enormous challenges ahead. From the 2017 CPLC report, we know that measures equivalent to a global carbon price of at least $75 per ton in 2030 are needed to meet climate stabilization goals, and right now the world is at $2 per ton, on average. Clearly, more needs to be done. One possibility, as we proposed in our Fiscal Monitor published last October, is to complement the Paris commitments with a carbon price floor arrangement among major stakeholders.

Let me close by emphasizing that acting now is imperative. There are some who will argue that policymakers are just too busy, with the pandemic and the recovery from it, to think about climate change. But in our view, this is precisely the moment to integrate climate issues into policymaking. If there’s one lesson this pandemic has taught us, it’s “Don’t mess with Mother Nature.”

Thank you.