World Bank and IMF Team Up on Issue of Carbon Pricing

April 25, 2016Global Challengesby EW News Desk Team

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The World Bank and International Monetary Fund (IMF) have teamed up to address the issue of climate change. Their latest plan involves using economic leverage in harmony with the technical assistance of private organizations to effect changes that the United Nations simply cannot achieve on its own.

Nations around the world have begun to sign the Paris agreement on climate change. The Paris agreement was an initiative led by the United Nations by which the nations of the world are supposed to reduce their respective emissions of greenhouse gases.

Of course, as ground breaking as the agreement is, many fear it will not go far enough. The World Bank and the IMF, among other groups, believe that cutting the signature nations’ emissions enough to actually have the necessary effect on climate change will simply not be possible without a financial component. These groups believe the answer lies in forcing polluter nations to pay for the carbon dioxide they emit.

According to World Bank president, Jim Yong Kim, “There is now an overwhelmingly obvious scientific consensus that the more carbon pollution we put into the air the more impact it has on warming the massive melting of the Arctic, the cycles of droughts and flooding, the die-offs of coral reefs…And to our economists, who have been studying this for quite some time, there is an equally obvious consensus that putting a price on carbon pollution is by far the most powerful and efficient way to reduce emissions…We strongly urge people to prepare for the carbon pricing that is to come.”

The World Bank sees this objective as running in parallel with its primary mission of combating global poverty. According to a 2015 World Bank report, if left unchecked, climate change could push more than 100 million people below the poverty line by 2030. “We cannot poison the planet and thrive,” Kim said.

To that end, the World Bank has already created a “Carbon Finance Unit” to aid nations trying to find ways to put a price on carbon. The Bank has already enrolled 18 emerging economies – including China – into the program. It hopes to link the program to the nations that have agreed to sign the Paris agreement to create a global carbon trading market.

Similarly, the IMF is also providing information to nations about how best to set up carbon pricing systems, in part as a means to help financially strapped nations to improve their own revenues.

Ian Parry, Principal Environmental Fiscal Policy Expert at the IMF said, “We can’t make a loan conditional on carbon pricing, but for a country facing a large deficit, we could recommend that they use carbon pricing as a way to simultaneously meet their pledges in Paris and close their deficit.”