IMF: Carbon Pricing "Quickest Solution" to Climate Change Crisis

The head of the International Monetary Fund (IMF) stressed on Sunday the importance of carbon pricing at the COP28 climate summit, saying that the oil and gas industry realizes that “carbon pricing is a harbinger of doom,” or “the writing on the wall,” as she put it.

This approach creates an incentive for polluters to remove carbon quickly, said Kristalina Georgieva, executive director of the International Monetary Fund, a proponent of carbon pricing.

Carbon pricing captures the cost a company has to pay for its global warming emissions, and is widely considered the most cost-effective and flexible way to reduce this pollution.

The International Monetary Fund recently raised its average price forecast to $85 per ton by the end of the decade, compared to its previous forecast of $75. Emphasizing the scale of the challenge, Georgieva said that the current average price is about $20 per ton.

Gurojieva believes that there are two ways to accept the need to accelerate the decarbonization process. “First, without a carbon price, it won't happen fast enough.” “Secondly, Mother Nature is helping us because rich and poor countries are already suffering from the devastating power of climate change,” she told CNBC, and Al Arabiya Business reviewed it.

Her comments come as policymakers and business leaders gather in Dubai for the two-week UN climate summit, which is scheduled to end on December 12.

The conference represents a pivotal opportunity to accelerate climate action, at a time when the world is on track to record the hottest year on record, and at a time when extreme weather phenomena are affecting all parts of the world.

For the head of the IMF, COP28 represents an important opportunity for countries to re-evaluate policies that incentivize the use of fossil fuels. She stressed that government support for coal, oil and gas amounted to $1.3 trillion last year.

“We now have to gradually withdraw this and replace it with the other part of the incentive, which is pricing.” “I want to tell everyone who wants to listen that the carbon price has proven to work,” Georgieva said, adding that existing schemes - such as the EU Emissions Trading System - have recorded a rapid decline in emissions.

“Secondly, it generates revenue,” she added. The European Union itself received 175 billion euros ($191 billion) raised from the carbon price, she said.

“Thirdly, it can be fair. Firstly, it is fair, because the more you pollute, the more you pay, and the less you pollute, the less you pay. But also, many countries can take some of this money and give it back, especially to vulnerable people.”