Price of carbon needs to average $75 a tonne globally by 2030, says IMF chief

Sharm el-Sheikh, Egypt — The price of carbon needs to average at least $75 a tonne globally by the end of the decade for global climate goals to succeed, the head of the IMF told Reuters.  

Speaking on the sidelines of the COP27 climate talks in the Egyptian coastal resort town of Sharm el-Sheikh, MD Kristalina Georgieva said the pace of change in the real economy is still “way too slow”.

Recent analysis by the World Bank-affiliated group suggests the sum total of global national commitments on reducing climate-damaging emissions would bring them down just 11% by midcentury.

“Unless we price carbon predictably on a trajectory that gets us at least to $75 average price per tonne of carbon in 2030, we simply don’t create the incentive for businesses and consumers to shift,” she said.

While some regions such as the EU already price carbon at above that level — the EU’s benchmark price is around €76 a tonne — in other regions such as the US state of California carbon allowances sell for just under $30 per tonne, while some have no price at all.

“The problem is that in many countries, not only in poor countries, across the world, the acceptance of pricing pollution is still low,” Georgieva said, a situation made worse by the current environment of high living costs.

But Georgieva said there are different routes for a country to take. The world’s second-biggest emitter, the US, for example, is unlikely to establish a national price on carbon given stiff political opposition to carbon taxes and “cap-and-trade” systems.

“Just focus on equivalency. Whether the US opts to impose a carbon cost through regulation and rebates rather than through tax or trade, that should not matter. What should matter is the price equivalent.”

Georgieva cited the IMF’s proposal for a carbon price floor and the proposal floated by Germany of a “carbon club” of the world’s biggest economies, which would co-ordinate how members measure and price carbon emissions and enable co-operation in slashing emissions in the largest industrial sectors.

“Whether there would be a breakthrough at this COP or after, it has to be soon because we are virtually running out of time to be successful in this transition.”

Reuters