- Global economy faces $4 trillion tax gap if carbon taxes raised in line with IMF proposals to tackle climate crisis
- Up to 13% of revenues to be hit for companies with greatest exposure
- Refinitiv analysis of 3,000 publicly listed entities
The global economy faces a tax bill of $4 trillion if carbon taxes are raised to IMF suggested proposals to tackle the climate crisis according to Refinitiv analysis.
As the World Economic Forum meets in Davos this week, Refinitiv has calculated that increasing the level of carbon taxes to $75 a tonne of CO2 for all emissions globally, a level the IMF has said is needed to limit temperature increases to around two degrees, will add up to a tax take of almost $4 trillion, or around 4% of world GDP.
This could potentially translate to around 13% or revenues for companies in sectors including construction materials, utilities, metals and mining and airlines based on Refinitiv’ s analysis of around 3,000 publicly-listed entities.
Over the last week or two some of the world’s biggest companies, such as Blackrock and Microsoft, signalled that ‘business as usual’ must end.
David Craig, CEO at Refinitiv, comments: “Simply put, this is a cost that global businesses have not factored in. And they need to.
“The message from policymakers around the world is coming through loud and clear. The world needs to tax carbon at a realistic level and regulators are increasingly likely to do just that, given the urgency of the crisis.’”
Roughly 55 giga-tonnes of carbon dioxide or CO2 equivalent were emitted globally last year. Yet only 20% of those emissions were taxed, and at a level (around $28 a tonne) that most economists and climate scientists say is too low to have enough impact on emissions. If a levy were applied to every one of those 55 giga-tonnes, then the tax take would shoot up from around $220 billion today to around $1.5 trillion. With IMF proposals to raise tax on emissions to $75 a tonne, this would grow to nearly $4 trillion.
David concludes: “Climate change and sustainability seems to be genuinely top of the boardroom agenda as leaders are applying a rational, business-focused lens to this issue. Not only will consumers harshly judge companies on the wrong side of this debate, financial markets will inevitably punish the laggards.”