Countries are increasingly committing to midcentury ‘net-zero’ emissions targets under the Paris Agreement, but limiting global warming to 1.5 to 2°C requires cutting emissions by a quarter to a half in this decade. Making sufficient progress to stabilizing the climate therefore requires ratcheting up near-term mitigation action but doing so among 195 parties simultaneously is proving challenging. Reinforcing the Paris Agreement with an international carbon price floor (ICPF) could jump-start emissions reductions through substantive policy action, while circumventing emerging pressure for border carbon adjustments. The ICPF has two elements: (1) a small number of key large-emitting countries, and (2) the minimum carbon price each commits to implement. The arrangement can be pragmatically designed to accommodate equity considerations and emissions-equivalent alternatives to carbon pricing. The paper discusses the rationale for an ICPF, considers design issues, compares it with alternative global regimes, and quantifies its impacts.
International Monetary Fund. Strategy, Policy, & Review Department
While the IMF has been involved in the climate debate since at least 2008, a systematic account of how to integrate climate change into surveillance has been lacking to date. This paper seeks to fill the gap. It argues that domestic policy challenges related to climate change—such as adaptation efforts for climate vulnerable countries, or policies to deliver a country’s Nationally Determined Contribution under the Paris climate accord—are covered by the IMF’s bilateral surveillance mandate and therefore valid topics for Article IV consultations wherever these challenges cross the threshold of macro-criticality. Climate change mitigation is a global policy challenge and therefore falls under multilateral surveillance. The paper proposes a pragmatic approach that focusses especially on the mitigation efforts of the 20 largest emitters of greenhouse gases.