20220720-IMF-Carbon_Taxes_or_Emissions_Trading_Systems_Instrument_Choice_and_Design_24页_2mb

Carbon taxes and Emissions Trading Systems (ETSs) are two primary policy instruments for climate mitigation. The IMF Staff Climate Note 2022/006 examines their design and choice based on practical, environmental, and economic considerations. Overall, carbon taxes have several advantages due to their ease of administration, price certainty, potential for significant revenue generation, and broader applicability, especially in developing countries. They promote investment and simplify implementation by building on existing fuel tax systems. However, ETSs offer more certainty over emissions levels and may garner political support through free permits, though they often involve greater administrative complexity and price volatility.

Carbon pricing momentum is growing globally, with varying coverage and prices across countries. Many jurisdictions are exploring revenue recycling to offset economic costs and address distributional impacts, though poorly designed instruments risk inefficiencies or political opposition. Competitiveness concerns, particularly for energy-intensive industries, can be addressed through targeted revenue returns or border carbon adjustments. Political economy factors, such as constitutional constraints or legal barriers, also influence instrument choice.

For broader applications, such as agriculture or transportation, hybrid approaches like feebates or proxy taxes may be more suitable due to the difficulty of comprehensive carbon monitoring. Carbon pricing is essential for climate strategies, but effective implementation requires supplementary measures like public investment and stakeholder engagement. Despite pros and cons, there is no one-size-fits-all solution. Carbon Taxes may be favored for practicality, while ETSs appeal in contexts requiring precise emissions control.