, which is a contentious exercise, but is done for illustrative purposes using evidence on how people in different countries value the trade-off between money and risk from numerous studies analyzed in OECD (2012) . Finally, damage is expressed per unit of energy content or fuel use using country-level data on emission rates. The same approach is used to measure air pollution damage from natural gas plants. Damage from vehicle and other ground-level sources (which tend to remain locally concentrated) is extrapolated from a city-level database on pollution intake rates
in practice. 1 For example, the Intergovernmental Panel on Climate Change on climate impacts, and the Global Burden of Disease project, the International Institute for Applied Systems Analysis, and the Climate and Clean Air Coalition on air pollution damage.
than wealthier nations. This principle implies either their receiving compensation or their imposing lower emissions prices than others, or perhaps no price at all. Application of this principle need not hinder international mitigation efforts however, at least for the vast majority of low-income countries whose emissions constitute a tiny fraction of the global total ( Gillingham and Keen, 2012 ). Local Air Pollution Damage Although local air pollution causes a variety of other harmful environmental effects, the central issue is premature human mortality
least US$6.4 and US$3.4 per GJ for coal and gas, respectively. Local air pollution damage is relatively high for coal consumption in the power sector ($0.9 per GJ) and diesel ($0.3/liter). 21 Vehicles using gasoline and diesel also contribute to road accidents and road damages, and these externalities are a significant component of second-best efficient fuel taxes. See Figure 10 . Figure 10. Energy Externalities by Fuel in 2020 Source: IMF staff calculations. Note: Potential VAT assumes general rate. Climate damages are valued at a target
85 percent of total air pollution damage estimates in U.S. EPA (2011) , EC (1999) , World Bank and State Environmental Protection Agency of China (2007) , and Watkiss and others (2005) . 21 For example, that European countries should lower their road fuel taxes to U.S. levels ( Parry and Small 2005 , Parry and others 2014a , Chapter 5). In computing efficient road fuel taxes, mileage-related externalities are multiplied by the fraction of the fuel reduction that comes from reduced mileage (usually assumed to be about half) as opposed to the fraction
appropriate credit for the emissions mitigation. Figure 6.3 shows the breakdown of air pollution damage from coal plants with no controls by type of emissions. For most countries, SO 2 is the most damaging pollutant (its share in total pollution damage varies across countries from 27 percent to 71 percent), followed by primary fine particulate emissions (PM 2.5 ), though in some countries (Australia, Brazil, India, Japan, and Korea) primary particulates from uncontrolled plants would cause the most damage (their share in total pollution damage varies from 16 percent