Implementing the United States' Domestic and International Climate Mitigation Goals: A Supportive Fiscal Policy Approach

40 Pages Posted: 23 Mar 2021

See all articles by Ian Parry

Ian Parry

International Monetary Fund (IMF)

Date Written: March 1, 2021

Abstract

The United States has pledged to become carbon neutral by 2050, meet sectoral objectives (e.g., for carbon free power, electric vehicles) and encourage greater mitigation among large emitting countries and of international transportation emissions. Fiscal policies at the national, sectoral, and international level could play a critical role in implementing these objectives, along with investment, regulatory, and technology policies. Fiscal instruments are cost-effective, can enhance political acceptability, and do not worsen, or could help alleviate, budgetary pressures. Domestically, a fiscal policy package could contain a mix of economy-wide carbon pricing and revenue-neutral feebates (i.e., tax-subsidy schemes) with the latter reinforcing mitigation in the transport, power, industrial, building, forestry, and agricultural sectors. Internationally, a carbon price floor among large emitters (with flexibility to implement equivalent measures) could effectively scale up global mitigation, while levies/feebates offer a practical approach for reducing maritime and aviation emissions.

JEL Classification: Q48, Q54, Q58, H23, Q30, Q35, Q41

Suggested Citation

Parry, Ian, Implementing the United States' Domestic and International Climate Mitigation Goals: A Supportive Fiscal Policy Approach (March 1, 2021). IMF Working Paper No. 2021/057, Available at SSRN: https://ssrn.com/abstract=3810568

Ian Parry (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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