Energy prices should reflect the harmful and environmental side effects of using fossil fuels, particularly damage such as climate change and air pollution, the International Monetary Fund said in a book published Thursday.
The IMF book “Getting Energy Prices Right: From Principle to Practice“argues energy prices in many countries are too low and are set at levels that don’t reflect environmental damage. The report also lay outs the IMF’s views on what appropriate taxes should be on coal, natural gas, gasoline and diesel in 156 countries. The taxes factor in the fuels’ overall costs, including emissions and air pollution as well as side effects of motor vehicle use such as traffic accidents and congestion.
The IMF stresses that energy tax reform shouldn’t be about raising new revenues. It says countries rely too much on general income, payroll and consumption taxes, which can stifle growth. Instead, countries should restructure the system away from taxes that will harm efficiency and growth and towards energy.
A number of countries rely too much on general income, payroll, and consumption taxes for their fiscal objectives, and too little from taxes on energy use, according to the IMF book. The IMF supports extending motor fuel taxes to other fossil fuel products such as coal and natural gas, or their emissions, and aligning the rates of these taxes with environmental damage.
Graphic from IMF