## MD Remarks to EU Pavilion Discussion on Carbon Pricing and Carbon Markets

_IMF News, December 1, 2023_

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## Bibliographic details
- Published: December 1, 2023

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### Main message
- Accelerating decarbonization requires pricing carbon; borrowing to fund decarbonization is unaffordable while pricing carbon is pragmatic, raises revenues, creates incentives for behavior change, and is equitable.
- These remarks have been lightly edited for clarity. (December 1, 2023)

### Three core points from the Managing Director
- Point One: Necessity of carbon pricing
  - It is not possible to decarbonize fast enough without pricing carbon; IMF research is conclusive that pricing carbon is necessary for the speed of transformation required.
- Point Two: At what level should carbon be priced?
  - Current coverage and prices:
    - "close to 25% of emissions covered."
    - Carbon average price for these covered emissions is "$20 per ton."
    - Price needed "somewhere around $85 per ton by 2030 to keep ‘1.5 degrees alive’?"
    - "75 percent of emissions yet to be covered."
    - Overall average price today: "$5 a ton."
  - Conclusion: "We have a way to go, and we need to go faster."
- Point Three: Role of the IMF in supporting members
  - Advocate for a broad approach that allows pricing carbon in different ways and builds the "biggest possible tent" for all pricing approaches.
  - Preferential order of approaches cited:
    - Best/most efficient: taxing carbon — "Taxes are easy to execute: countries that have chosen to tax have shown that they continue to enjoy growth while their emissions go down."
    - Alternative: emissions trading (example: European Union) — "We can see how impactful it is. It also raises revenues."
    - Acceptable under time constraints: regulatory approaches — "indirectly pricing carbon by gradually increasing standards. Industries (and ultimately consumers) can pay the price for carbon emissions in that way."
  - Political viability constraint: "But taxing carbon is not politically viable in some countries, and we have no time to build political viability."

### IMF policy recommendations and equivalency framework
- Build equivalency across approaches to facilitate broad adoption:
  - First: equivalence covering "tax, trade and regulatory compliance."
  - Second: equivalency "of carbon price vis-à-vis level of economic development: rich countries pay more, middle-income countries pay less."
  - Acknowledge differential readiness: "Some low-income countries are ready to establish a price of carbon, but others that maybe are fragile states – we must accept they are not part of this equation yet."
- Strategic approach:
  - "If we go the way of carbon price equivalency, and then work hard to build the different approaches in a compatible fashion – we would take away the argument of political difficulty."
  - Collaborate with partners: "work with our partners: the World Bank, or OECD, the World Trade Organization -- to create two types of equivalency."
  - Praise for WTO action: "The WTO deserves praise for putting pressure on institutions to work together on a task force to work on equivalency and make sure that carbon pricing is something that is not just talked about, but that exists everywhere."

### Key statistics and figures (verbatim)
- "close to 25% of emissions covered."
- Carbon average price for covered emissions: "$20 per ton."
- Price needed by 2030 to keep ‘1.5 degrees alive’?: "$85 per ton by 2030 to keep ‘1.5 degrees alive’?"
- Share of emissions not yet covered: "75 percent of emissions yet to be covered."
- Overall average price today: "$5 a ton."

### Closing
- Urgent call to action: broaden acceptance of multiple carbon-pricing mechanisms, build equivalency across mechanisms and countries, and move quickly to scale coverage and raise prices to meet climate goals.
- "Thank you."

*IMF Managing Director speech, December 1, 2023.*

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## References

- [https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva](https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva)
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_Source: https://www.imf.org/en/news/articles/2023/12/02/sp-md-remarks-to-eu-pavilion-on-carbon-pricing-cop28_