This talk will discuss (based on a recent IMF study) how developed and developing countries alike might put into practice the principle of ‘getting prices right’ to address the major externalities from energy. The efficient set of taxes includes charges on fuel use for carbon and local pollution (with credits for emissions capture during combustion) and additional charges on motor fuels for road congestion and accidents (though the latter should transition to distance-based charges). Techniques and data sources for measuring the externalities and corrective taxes by country are discussed along with the uncertainties. In general, heavy taxes on coal and motor fuels seem to be warranted (though there is substantial cross-country variation in corrective tax rates). For most countries, tax reform yields potentially large fiscal, health, and carbon benefits.
Ian Parry is Principal Environmental Fiscal Policy Expert in the Fiscal Affairs Department of the IMF. Prior to joining the IMF in 2010, Parry was at Resources for the Future, where he was first appointee to the Allen V. Kneese Chair in Environmental Economics. He holds a PhD in economics from the University of Chicago.
Parry’s research focuses on the development of analytical models to quantify the economic impacts and efficient levels of a wide range of environmental, energy, and transportation policies. His work emphasizes the critical role of fiscal instruments to address externalities and raise revenue. Parry has published over 50 papers in professional journals and has written numerous other scholarly articles. His recent (co-authored or co-edited) books include Fiscal Policy to Mitigate Climate Change: A Guide for Policymakers; Issues of the Day: 100 Commentaries on Environmental, Energy, Transportation, and Public Health Policy; Getting Energy Prices Right: From Principle to Practice; and Implementing a US Carbon Tax: Challenges and Debates.