Here is Christine Laguarde on The Path to Carbon Pricing.

The transition to a cleaner future will require both government action and the right incentives for the private sector. At the center should be a strong public policy that puts a price on carbon pollution. Placing a higher price on carbon-based fuels, electricity, and industrial activities will create incentives for the use of cleaner fuels, save energy, and promote a shift to greener investments. Measures such as carbon taxes and fees, emissions-trading programs and other pricing mechanisms, and removal of inefficient subsidies can give businesses and households the certainty and predictability they need to make long-term investments in climate-smart development.

At the International Monetary Fund, the focus is on reforming its member countries’ fiscal systems in order to raise more revenue from taxes on carbon-intensive fuels and less revenue from other taxes that are detrimental to economic performance, such as taxes on labor and capital. Pricing carbon can be about smarter, more efficient tax systems, rather than higher taxes.

Carbon taxes should be applied comprehensively to emissions from fossil fuels. The price must be high enough to achieve ambitious environmental goals, in alignment with national circumstances, and it must be stable, in order to encourage businesses and households to invest in clean technologies. Administering carbon taxes is straightforward and can build on existing road fuel taxes, which are well established in most countries.

This is one of the few policies that probably almost all economists would agree on – taxing externalities. Instead of allowing businesses individuals to profit while imposing a cost or harm on others, you make them pay that cost as a tax. This has dual benefits – first, it creates an incentive to reduce the negative behavior, second it raises revenue that can replace a tax on work or income. It’s good for the economy, the environment and people.

We do have politicians from one of the two major U.S. parties talking about climate change, and we have a big international summit coming up. So there are opportunities. We should get something done, and then build on it by finding other harmful materials and behaviors we can tax, like fuels that cause air pollution, building materials that cause water pollution, packaging that is not designed to be recycled, and dangerous consumer goods like motor vehicles that kill a million people a year. This is not unprecedented – we did it with cigarettes. By the way, to get this done, we need a constitutional amendment making it crystal clear that a person is a human and a human is a person, and a corporation is not a person for the purposes of political speech.