Global carbon tax critical to tackle climate threat: Ex-IMF chief economist

By Aysu Bicer

LONDON (AA) – There can be no solution to the climate problem without a global carbon tax or an international emissions trading system, according to Kenneth Rogoff, a former chief economist at the International Monetary Fund (IMF).

In an exclusive interview with Anadolu, Rogoff spoke about degrowth policies, which advocate a move away from economic expansion because it requires constant use of energy and resources, causing harm to the environment.

He believes the whole degrowth movement is not a solution and the idea of economies developing a little less faster is not going to do “any good.”

“That’s just nothing on the margin. And if you want to tell India and China and Africa never to grow again, that would make a big difference, but that’s not honest,” said the American economist, who is currently a professor of economics and public policy at Harvard University.

Arguing that countries should apply a carbon tax instead of pursuing degrowth policies, Rogoff said: “You need a carbon tax, and I don’t think the kind of industrial policy that the Biden administration (in the US) is doing is a solution either. It does some good, but it’s just not nearly enough.”

Last year, the US introduced a landmark legislation called the Inflation Reduction Act, which lays out ambitious targets such as cutting the deficit to curb inflation, investing in cleaner energy, and slashing carbon emissions by roughly 40% by 2030.

However, despite being one of the world’s biggest carbon emitters, the US has so far refrained from introducing a carbon tax at a national level.

As part of his objections to the degrowth theory, Rogoff mentioned the difficulty in measuring the effects of carbon emissions.

“If you look at how much emissions are going up, you’re just not even able to see the effects of that. I think just saying that we have a recession there … and we’re not having as much pollution is missing the main point. So it means it takes a year longer or a month longer for the temperature to rise. It’s not really solving the problem,” he explained.

Some mainstream economists purport the idea that nations can cut their emissions and grow their economies at the same time by relying on more nature-friendly technologies such as renewable energy.

Rogoff, though, contends that a carbon tax is the only way to encourage businesses to cut emissions and can actually be an effective solution to the problem of climate change.

- UK economic crisis ‘a long time coming’

On the deepening cost of living crisis in the UK, Rogoff said the situation is similar to what is happening in France, Germany, and other countries.

“So this crisis has been a long time coming. And that’s it. They (the British government) are in a very difficult situation that has been caused by many successive decisions (of previous governments),” he said.

The country is also “suffering” the effects of Brexit, he added.

“It’s hard for either party to acknowledge that Brexit has costs. Maybe in the long run it will prove to be a good thing,” said Rogoff.

“Frankly, the big question is if the European Union in 50 years turns out to be the best thing ever, will the UK regret it? If it turns out it’s devolved into a regulatory nightmare, they’ll be very happy they left it. But either way, divorce is always painful,” he said.

However, separation sometimes “works better for both parties in the long run,” he added.

On the growing wave of strikes and protests in the UK, he said: “This is the thing that everyone agrees on: the National Health Service (NHS) is a disaster. It’s just not working, and people are going on strike about it. Even the Labour Party believes that in addition to greater spending, reform in the healthcare system is needed.”