Recent reports published by the International Monetary Fund have stated that if the price of carbon was increased, there would most likely be a decline in global warming and overall air pollution. Although talks of taxing fossil fuel corporations have been ongoing for decades, calling for an increase in carbon emissions has provoked a lot of negative responses from people who believe that this added tax would lead to an increase in energy bills. Despite some of the negative reactions to the tax, economists believe that increasing the price of coal, oil, and gas may be the best way to help mitigate the effects of climate change.
Paolo Mauro, deputy director of Fiscal Affairs Department at the IMF, explained that “We view fiscal policy as a crucial way of combating climate change,” He added, “You can reshape the tax system and you can reshape fiscal policy more generally in order to discourage carbon emissions.” 40 governments around the world have started the use of carbon pricing, either through a direct tax on fossil fuel producers or cap-and-trade programs, by which an upper limit is set on the amount of carbon regarding how much carbon a business or organization is allowed to produce.
CNBC recently reported that “Under the same tax, the price of natural gas, which is used for power generation and for heating and cooking in households, would increase by 70% on average, with most of the impact in North and South America, where baseline prices are much lower. Gasoline prices would rise by 5% to 15% in most countries.” These increases do seem high, but gas prices have seen fluctuations of similar percentages in the past few years. California has introduced its own cap-and-trade program, which taxes all polluters rather than just power plants. Meanwhile, Canada has begun its process for increasing carbon tax, as its current rate of $15 per ton of carbon is soon to increase to $38 in 2022. These increases are being done with confidence as Britain’s carbon tax has to lead to the usage of coal decreasing greatly, as companies are starting to transition over to electric utilities.
“The cost of achieving emissions reductions through these approaches would be lower than the costs to people and the planet from climate change,” stated the report. Policies are being created in ways that will be efficient and sociable, but will the positive effects of these changes be seen in time?