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Mr. Simon Black, Jean Chateau, Ms. Florence Jaumotte, Ian W.H. Parry, Gregor Schwerhoff, Sneha D Thube, and Karlygash Zhunussova

costs and avoided investment in emissions intensive technologies; and (2) the costs to households and firms from reduced energy use. Pure abatement costs largely reflect integrals under marginal abatement cost schedules 20 and, at least for more moderate levels of emissions reduction, are measured with reasonable confidence. Marginal abatement costs may however overstate pure abatement costs in various regards (see Annex 4). Potential fiscal benefits. These reflect economic efficiency gains from productive use of carbon pricing revenues—that is, revenue raised

Mr. Simon Black, Jean Chateau, Ms. Florence Jaumotte, Ian W.H. Parry, Gregor Schwerhoff, Sneha D Thube, and Karlygash Zhunussova
To contain global warming to between 2°C and 1.5°C, global greenhouse gas emissions must be cut 25 to 50 percent below 2019 levels by 2030. Even if fully achieved, current country pledges would cut global emissions by just 11 percent. This Note presents illustrative options for closing this ambition gap equitably and discusses their economic impacts across countries. Options exist to accelerate a global just transition in this decade, involving greater emission reductions by high-income countries and climate finance, but further delays in climate action would put 1.5°C beyond reach. Global abatement costs remain low under 2°C-consistent scenarios, with burdens rising with income levels. With efficient policies of carbon pricing with productive revenue use, welfare costs become negative when including domestic environmental co-benefits, before even counting climate benefits. GDP effects from global decarbonization remain uncertain, but modeling suggests they exceed abatement costs especially for carbon-intensive and fossil-fuel-exporting countries. Ratcheting up climate finance can help make global decarbonization efforts more progressive.
Mr. Ved P. Gandhi and Mr. Javier Cuervo
The carbon tax is a major instrument for curbing greenhouse gas emissions that cause global warming. Yet its adoption has been limited because of concerns over its effects on economic growth, income distribution, and international competitiveness. The paper shows that policymakers can minimize the effects of the tax on economic growth through an efficient recycling of tax revenues and on equity through the adoption of appropriate mitigating or compensating measures. To eliminate the worry about the loss of competitiveness, the paper suggests an international agreement on a coordinated adoption of the tax.
Ian Parry and Karlygash Zhunussova

Achieving the Paris Agreement’s temperature goals requires cutting global CO2 emissions 25 to 50 percent this decade, followed by a rapid transition to net zero emissions. The world is currently not yet on track so there is an urgent need to narrow gaps in climate mitigation ambition and policy. Current mitigation pledges for 2030 would achieve just one to two thirds of the emissions reductions needed for limiting warming to 1.5 to 2oC. And additional measures equivalent to a global carbon price exceeding $75 per ton by 2030 are needed. This IMF Staff Climate Note presents extensive quantitative analyses to inform dialogue on closing mitigation ambition and policy gaps. It shows purely illustrative pathways to achieve the needed global emissions reductions while respecting international equity. The Note also presents country-level analyses of the emissions, fiscal, economic, and distributional impacts of carbon pricing and the trade-offs with other instruments—comprehensive mitigation strategies will be key.

Mr. Ved P. Gandhi and Mr. Javier Cuervo
Mr. Ved P. Gandhi and Mr. Javier Cuervo

The carbon tax is a major instrument for curbing greenhouse gas emissions that cause global warming. Yet its adoption has been limited because of concerns over its effects on economic growth, income distribution, and international competitiveness. The paper shows that policymakers can minimize the effects of the tax on economic growth through an efficient recycling of tax revenues and on equity through the adoption of appropriate mitigating or compensating measures. To eliminate the worry about the loss of competitiveness, the paper suggests an international agreement on a coordinated adoption of the tax.

International Monetary Fund. External Relations Dept.

Most scientists agree that the global temperature is rising as a result of man-made emissions of greenhouse gases and that the Earth’s climate is changing.