## Too Much At Stake: Moving Ahead with Energy Price Reforms _IMF Blog, July 31, 2014_ ## Source details **Canonical URL:** [Too Much At Stake: Moving Ahead with Energy Price Reforms](https://www.imf.org/en/blogs/articles/2014/07/31/too-much-at-stake-moving-ahead-with-energy-price-reforms) ## Other formats - [Markdown version](/en/blogs/articles/2014/07/31/too-much-at-stake-moving-ahead-with-energy-price-reforms/index.md) - [Structured JSON version](/en/blogs/articles/2014/07/31/too-much-at-stake-moving-ahead-with-energy-price-reforms/index.json) - [Bundle manifest](/en/blogs/articles/2014/07/31/too-much-at-stake-moving-ahead-with-energy-price-reforms/bundle-manifest.json) ## Bibliographic details - Authors: Ian Parry - Published: July 31, 2014 --- ### Energy, environment, and macroeconomic implications - Energy use delivers substantial economic benefits but drives major environmental harms, including: - Predicted global warming of "around 3–4 degrees Celsius by the end of the century". - Outdoor air pollution "causing over three million premature deaths a year". - These environmental impacts have macroeconomic implications that justify price-based policy responses. - The IMF applies its expertise in tax design and administration to advise how energy tax systems can ensure prices reflect adverse environmental impacts. ### Methodology and scope - The IMF-developed approach: - Quantifies environmental damages in a "sensible and reasonably simple" way. - Is applied "in over 150 countries" to derive implications for efficient taxes on coal, natural gas, gasoline, and road diesel. - Calculates human health damages from air pollution by estimating population exposure to power plant and vehicle emissions and the associated increased risk of diseases (e.g., heart and lung diseases). - The methodology is flexible to accommodate alternative valuations (e.g., global warming damages, differing valuations of health risk) and is presented as a starting point for debate. ### Policy instruments and tax design recommendations - General recommendations: - Focus on "smarter taxes, not higher taxes." - Use environmental taxes or similar pricing instruments to "get prices right" by reflecting environmental side effects in energy prices. - Recycle revenues to lower other distortionary taxes or meet fiscal objectives, improving environmental and health outcomes while limiting macroeconomic costs. - Finance ministers have a central role in administration and in restructuring tax systems away from taxes "likely to be most harmful for efficiency and growth, such as income taxes," toward carefully designed energy taxes. - Tax base recommendations: - Carbon emissions: price through levies on fossil fuel suppliers in proportion to a fuel’s carbon content, building off existing motor fuel taxes. - Local air pollution: levy similar charges on fuel supply, but provide credits/refunds for emissions capture (e.g., sulfur dioxide "scrubbing" at power plants) because net emissions determine damages. - Motor vehicles: charges on kilometers driven (varying with urban road class and time of day) are the most effective long-term solution for congestion; interim step is to reflect carbon, pollution, congestion, and accident risks in fuel taxes. - Tax rate recommendation: - Set rates "in line with environmental damages" so pricing ensures only environmental improvements with net benefits are induced. ### Key quantitative findings from the assessment - Coal: - Carbon charges shown in Chart 1 amount to "$3.3 per gigajoule of energy (about two-thirds of the average world price)". - Air pollution damages exceed "$10 per gigajoule" in countries like China and Poland. - Air pollution damages are "less than $1 per gigajoule" in Australia and Chile. - Gasoline and road fuels: - Corrective taxes on gasoline are "substantial across advanced, emerging, and developing countries", driven more by congestion and accident costs than by air pollution and carbon emissions. - Aggregate global impacts of implementing corrective fossil fuel taxes (relative to the current situation): - Estimated reduction in global carbon emissions of "23 percent". - Save "63 percent" of fossil fuel pollution deaths. - Provide fiscal benefits averaging "2.6 percent of countries’ gross domestic product". ### Framing and caveats - Some controversies are acknowledged, including valuation of global warming damages and cross-country differences in valuing health risks. - The approach is described as a flexible starting point, not a definitive final settlement. *Ian Parry, July 31, 2014 — Too Much At Stake: Moving Ahead with Energy Price Reforms* --- ## Content in this bundle - **事关重大：推进能源价格改革; 作者：Ian Parry; iMFdirect博客； 2014年7月31日** - [事关重大：推进能源价格改革; 作者：Ian Parry; iMFdirect博客； 2014年7月31日 (Markdown version)](/external/chinese/np/blog/2014/073114c.pdf.md){rel="alternate" type="text/markdown"} - [事关重大：推进能源价格改革; 作者：Ian Parry; iMFdirect博客； 2014年7月31日 (PDF)](/external/chinese/np/blog/2014/073114c.pdf){rel="external" type="application/pdf"} - **多くの効果がここに: 燃料改革を前進させる; イアン・パリー iMFdirect ブログ ２０１４年７月３１日掲載** - [多くの効果がここに: 燃料改革を前進させる; イアン・パリー iMFdirect ブログ ２０１４年７月３１日掲載 (Markdown version)](/external/japanese/np/blog/2014/073114j.pdf.md){rel="alternate" type="text/markdown"} - [多くの効果がここに: 燃料改革を前進させる; イアン・パリー iMFdirect ブログ ２０１４年７月３１日掲載 (PDF)](/external/japanese/np/blog/2014/073114j.pdf){rel="external" type="application/pdf"} - **Ставки слишком высоки: проведение реформ цен на энергоносители; Иэн Перри; Блог iMFdirect** - [Ставки слишком высоки: проведение реформ цен на энергоносители; Иэн Перри; Блог iMFdirect (Markdown version)](/external/russian/np/blog/2014/073114r.pdf.md){rel="alternate" type="text/markdown"} - [Ставки слишком высоки: проведение реформ цен на энергоносители; Иэн Перри; Блог iMFdirect (PDF)](/external/russian/np/blog/2014/073114r.pdf){rel="external" type="application/pdf"} --- ## References - [new IMF book](http://www.elibrary.imf.org/view/IMF071/21171-9781484388570/21171-9781484388570/21171-9781484388570.xml?highlight=true+&result=1&rskey=kHyJS5) - [https://www.imf.org/wp-content/uploads/2014/07/energy-pricing-blog.jpg](https://www.imf.org/wp-content/uploads/2014/07/energy-pricing-blog.jpg) _Source: https://www.imf.org/en/blogs/articles/2014/07/31/too-much-at-stake-moving-ahead-with-energy-price-reforms_