Impose carbon tax to mobilise climate finance: IMF

Bangladesh should apply carbon taxes at gradually increasing levels to mobilize climate finance and mitigate the macro-economic challenges, said a report recently published by the International Monetary Fund (IMF).

According to the IMF Country Report 2022, a carbon charge of $3 per tonne of CO2 emitted should be levied on companies that burn coal, oil, or gas in FY22, rising to $25 per tonne of CO2 by FY30.

In the study, the IMF provided six papers on various topics, with the first addressing Bangladesh’s climate challenges.

Climate change, according to the research, will pose significant macroeconomic challenges for Bangladesh in the coming decades, which will demand a combination of economic, financial, and structural policy responses. As part of this, the country can implement a carbon fee and gradually increase it.

The fee will be simple to implement because it will be focused on the energy sector and will gradually increase from $3 per ton of CO2 in FY22 to $25 per ton of CO2 in FY30, assisting businesses in planning ahead for decarbonizing their production processes and improving energy efficiency, reducing stranded assets, competitiveness risks, and job losses in the future, the report mentioned.

The carbon fee will also help with revenue mobilization that could be effectively recycled to protect the economically vulnerable, support firms in their decarbonization process, and create jobs through investment in climate projects, the report continued.