Last year the IMF called for a globally applied carbon price floor corresponding to a country’s wealth, with a suggested tariff in 2021 of $75 for the wealthiest countries and $25 for less developed countries. Today in the Times (paywall) Mehreen Khan, the economics editor, makes the case for an effective international carbon pricing system rather than occasional windfall taxes…. 

“One levy notably absent from the present debate is a global carbon tax to provide an incentive for the huge shifts required to hit the global net-zero target. Even in relatively benign times, politicians have taken fright at the idea of taxing carbon use, thinking that it will disadvantage their industry at the expense of foreign rivals…

Arguments against national carbon taxes wither away if all countries agree to impose a price. The International Monetary Fund has devised an international carbon floor where the price paid corresponds to a country’s wealth. It would mean America, Britain and Europe would use a minimum floor of $75 a tonne, falling to $25 for the poorest. This collective jump into carbon taxation would not disadvantage industries in richer countries, the fund says, and would dramatically reduce emissions.” 

Citizens Climate International supports a carbon price floor mechanism as a necessary step to the goal of Climate Income….

We support establishment of a global “price floor”, supported by national policies to impose a steadily intensifying price signal disfavoring climate pollution. As the IEA has reported, “There is no need for investment in new fossil fuel supply…” Pricing systems should effectively and efficiently eliminate climate pollution while building incomes for people and enhancing international cooperation for a zero-emissions future.

Recent studies such as the report in Nature and the Autonomy report have also suggested how Climate Income could be a game changer for the Global South….

While countries in South America, Sub-Saharan Africa, South-Asia and many other parts of the Global South would profit immensely, most developed economies would only see proportionally relatively small losses.

…..As a global policy, it could wipe out extreme poverty and easily dwarf the scope of any existing development aid and debt relief schemes, illustrating that, in this sense, it is the Global North that owes an immense debt to the populations in the Global South, not the other way round. It would also go a long way to alleviate the disastrous impacts the Covid pandemic has had on the world’s poorest and most vulnerable, with for instance an additional 100m children falling into poverty, and prevent global disparities from deepening as richer countries recover while poorer countries fall even further behind (UNICEF 2021b). Such a global carbon dividend scheme could end the bitter reality of mass hunger and destitution and be a key building stone of a fairer, more sustainable and more inclusive post-pandemic economy. (Toll gates and money pumps, Autonomy, p.51)

It is good to see growing support for a carbon pricing system which would remove the uncertainty and short termism thwarting the rapid decarbonisation which the world needs!