IMF’s Lagarde calls for higher energy taxes

The International Monetary Fund (IMF) is calling on both developed and developing nations to implement higher energy taxes that reflect the harmful environmental and health impacts of fossil fuel use.

“The reason is simple: A degraded environment leads to a degraded economy,” IMF director Christine Lagarde, said on Thursday.

Speaking at a Washington event on Thursday, Lagarde marked the release of the IMF’s new book, which serves as a tool kit on how to tax coal, natural gas, gasoline and more in 156 countries to include carbon emissions, air pollution and other factors the group says contribute to climate change.

{mosads}Essentially, Lagarde said, fiscal policy that factors in threats to the environment and public health must “price it right” to “get it right.”

“I believe it’s really important the IMF comes out on those environmental issues simply because this is provably the greatest crisis facing our generation for the coming century,” Lagarde said.

The IMF has dived into the implications of climate change since Lagarde took over in 2011. Thursday’s book fulfills a commitment Lagarde made two years ago to provide practical guidance for IMF members on responsible energy pricing.

Lagarde stressed at the event that countries cannot wait for one another to act.

“Doing nothing is not an option. We don’t have to wait until international cooperation is in place. … We don’t have to wait until new goals are identified,” Lagarde said. “Domestically, we can act and it can produce results that will benefit the population at home.”

Global leaders are prepping for climate change talks in Paris next year. Nations are working to sign a global climate pact at the talks that would set targets for greenhouse gas reduction.

But Lagarde said leaders should not wait for the Paris talks. If nation’s do not act on their own, she added, then the poorest will “be the first to feel the pain.”

Incorporating climate expenses into energy prices doesn’t mean higher taxes necessarily.

“We are generally talking about smarter taxes,” Lagarde said. “This means recalibrating tax systems to achieve fiscal objectives more efficiently, most obviously by using the proceeds to lower other burdensome taxes. The revenue from energy taxes could of course also be used to pay down public debt.”

Lagarde said that the balance between taxing more but not too much is essential and that policymakers must have a sense for the magnitude of the environmental damage threatening their nation.

Restructuring energy taxes would reduce deaths from fossil fuels by 63 percent, cut carbon emissions by 23 percent and raise revenue by 2.6 percent of gross domestic product for the globe, the IMF estimates in the book.

In the U.S., however, most Republican lawmakers argue against the U.S. taking a lead on climate policy, arguing that countries like China and India are still building coal-fired power plants.

The U.S. is one of the largest greenhouse gas emitters in the world, second to China.