Posted on January 9, 2012 by iMFdirect
By Ian Parry
(Versions in عربي, 中文, Español and Français)
As we slide into another year of tough economic times, it’s easy to understand why policymakers are preoccupied with the next few weeks. But they also need to be thinking about the longer term issue of leaving the planet in reasonable shape for future generations.
Without serious efforts to reduce greenhouse gases, scientists predict that by the end of this century global temperatures could be 2.5 to 6.0OC higher than a couple of hundred years ago. That could mean more heatwaves, more droughts, higher sea levels, more violent storms—and so on. When you start to think about the potential impact of, say, droughts on the livelihood of farmers, especially in poorer countries… well, you get the point.
While some progress was made in the latest round of United Nations’ climate change negotiations in Durban, South Africa, we saw two major omissions. There was little progress on either carbon pricing or, related, financing for action against climate change. And there was not enough recognition of what economics has to offer to help tackle the problems.
Filed under: Advanced Economies, Emerging Markets, IMF, International Monetary Fund, Low-income countries, Multilateral Cooperation | Tagged: border tax adjustments, carbon pricing, Climate change, CO2 emissions, domestic tax revenues, Durban, energy taxes, financing for climate change, greenhouse gases, IMF, iMFdirect, International Monetary Fund | 4 Comments »
Posted on November 23, 2009 by iMFdirect
By Carlo Cottarelli
As world leaders gather in Copenhagen, climate change is again in the headlines. The science of the issue can get pretty incomprehensible pretty quickly. And the politics are clearly very ugly. Let’s not forget, however, that much of the economics is simple.
It’s an externality, stupid—so price it
Climate change is an “externality” problem. Individuals, firms, and, yes, governments, do not take full account of the harm that others suffer when they emit greenhouse gases. So they emit too much. And the best way to stop them doing this is to charge them a price for the carbon content of what they emit: a “carbon price.”
Admittedly, climate change is a particularly complicated externality. Since the damage will fall largely on future generations, the proper price depends very much on how we value their well-being relative to ours. The importance of such long-lived investments as power-stations, and the heavy sunk costs of investing in new technologies, mean that the carbon prices people expect in the future are even more important than the price now. And the fact that the world’s supply of fossil fuels is ultimately fixed means that the effect of carbon prices on total emissions is not as clear cut as it may seem.
Emission reductions solely by those countries historically responsible for the accumulated stock of emissions will not come close to solving the climate problem (photo: Newscom)
Filed under: Economic Crisis | Tagged: cap and trade, carbon, carbon price, Climate change, Copenhagen, greenhouse gases, oil | 6 Comments »