To: Detroit Workers' Voice mailing list
April 26, 2016
RE: The IMF and the WOrld Bank push for the carbon tax

Earth Day 2016 revisited:
The IMF, the World Bank, and
  the neo-liberal carbon tax

By Joseph Green

Workers around the world are being devastated by the market fundamentalism of the so-called "Washington Consensus", which is identified with such institutions as the International Monetary Fund (IMF) and the World Bank. These institutions are helping submerge the world in wave after wave of privatization, wage-cutting, elimination of entitlements, and "structural readjustment". They promised that market measures would bring economic development and prosperity, but the result has been misery on a mass scale, with entire countries devastated one after another.

So it should cause people to think twice that the IMF and the World Bank are now pushing hard for "carbon pricing" as the solution to the threat of global warming. Can such harmful institutions be correct about the path forward for environmental reform? The IMF is especially dead set on the carbon tax, while the World Bank would also accept cap and trade programs.

I have discussed elsewhere what's wrong with carbon taxes and carbon pricing; some references are listed at the end of this article. Here let's examine how the IMF and World Bank see the issue. How they envision the carbon tax will be far more influential than the beautiful pictures drawn by some other advocates of the carbon tax.

The UN's global climate summit in Paris of November 2015 ended in a lot of promises, but not much in the way of binding commitments. Serious environmentalists like James Hansen denounced the results of the Paris summit, but 175 leaders of bourgeois governments made a great display of signing the resulting accords on Earth Day, April 22, 2016. The New York Times carried a number of articles on the occasion of these events; one of the most significant ones, by Coral Davenport, noted the increasing role played by the IMF and the World Bank: "Carbon Pricing Becomes a Cause for the World Bank and the I.M.F." (1). She reported that these institutions "are pressing governments to impose a price tag on planet-warming carbon dioxide emissions, using economic leverage and technical assistance that instistutions like the United Nations cannot muster."

Perhaps this will sound good to some people, as if these institutions were now on our side. But let's see. Christine Lagarde is the Managing Director of the IMF. In an article entitled "Ten myths about climate change policy", she talks about how the carbon tax is a replacement for direct government action on the environment, which she regards as impractical. She supports the carbon tax as part of seeking to slow down other actions. (2) She writes:

"Myth number two is that a plethora of complex and cumbersome government policy interventions is the best way to reduce emissions, carbon dioxide being the most important--subsidies for wind farms, solar panels, biofuels, public transport, electric vehicles; regulations on the energy efficiency of buildings, lighting, cars, planes, water heaters, refrigerators, industrial machinery, etc. I would push back somewhat on this approach as it is inefficient for climate policy and administratively complex."

It's notable that in Lagarde can barely conceive of government action beyond subsidies and minor regulations, but she doesn't even want to see those actions.

The World Bank, for its part, joined with its partners in "formally launching the Carbon Pricing Leadership Coalition." (3) It, too, wants carbon pricing to replace direct governmental measures to prevent greenhouse emissions. It says that "Instead of dictating who should reduce emissions where and how, a carbon price gives an economic signal and polluters decide for themselves whether to discontinue their polluting activity, reduce emissions, or continue polluting and pay for it." (4) So the governments aren't supposed to ban harmful fossil fuels, or dictate a path to their elimination. And environmental organizations aren't supposed to push companies to do things they don't want to do. Instead, the World Bank wants us to follow another path: Leave it to the market. Leave it to the polluters themselves to have a change of heart when they look at their pocketbook. Don't restrict and eliminate coal mining, fracking, etc. Just change the carbon pricing, and let the polluters take care of everything else.

The IMF and World Bank assure us that the carbon tax is supposed to fall on the polluters, and imagines that the pain it causes these polluters is supposed to cause them to abandon fossil fuels. The World Bank says "A price on carbon helps shift the burden for the damage back to those who are responsible for it, and who can reduce it." (4)

But this is a lie. Carbon pricing is *not* a tax on the profits of the fossil fuel companies, and it doesn't directly effect their profits; the tax is imposed on the consumers of energy, or it is passed on to the consumer by the energy companies. These consumers include large-scale manufacturing firms, which will in turn pass on the tax to their customers. Workers, however, can't pass on the tax. Small truckers, fisher people, and others generally can't pass on the tax either. But the energy companies and other large corporate polluters can and will make their customers pay.

Thus those who are mainly responsible for pollution won't be paying the tax. Those who have the most influence on energy production and how it is done, such as those who plan fossil fuel projects and profit from them, won't be affected. But working people, who have little influence on what the energy companies and big corporate polluters do, will pay through the nose; it's the people who have little influence who will be strongly affected by the carbon tax. Surprise, surprise. Another World Bank policy will end up benefiting the rich while harming the poor.

The truth is that carbon pricing threatens to convert the slogan "let the polluters pay" into "make the people pay".  It's one thing to campaign against the profiteering of Big Energy; it's another to campaign to have the masses pull in their belts still further. The only realistic hope for the environment is that larger and larger masses of people put increasing pressure on the governments and the corporate polluters. But a steep carbon tax may well alienate millions of working people from the environmental movement.

Well, where will the revenue from the carbon tax go? Some activists want the carbon tax to be revenue-neutral. Others want to use some of the revenue from the carbon tax for environmental projects. The IMF and the World Bank, however, see the carbon tax as a piggy bank for the bankers and financiers; they see it as a way for countries to pay off their loans. Coral Davenport reports that the I.M.F., "often seen as the world's lender of last resort", sees the carbon tax "in part as a way for struggling nations to raise more revenue". She identifies Ian Parry as the "principal environmental fiscal policy expert at the I.M.F." and quotes him saying "...for a country facing a large deficit, we could recommend that they use carbon pricing as a way to simultaneously meet their pledges in Paris and close their deficit." (5)

And that's not all. The IMF also sees the carbon tax as a way to cut business taxes. They envision a tax shift which will serve "to cut other taxes..., such as taxes on labor and capital". (6) So the large corporations, which can pass on the carbon tax to their customers, may at the same time benefit from cuts in business taxes.

Meanwhile the IMF is demanding the removal of fuel and other subsidies from the mass of the population. Lagarde claims to be concerned about what this will do to the poor. She writes that "Targeted measures (e.g., adjustments to the tax system, stronger social safety nets) are generally a much better way to help the poor." (7) But in practice, these other measures just never seem to appear; indeed, the whole point of IMF structural adjustment is tear up the safety net. A real alternative to the present system of subsidies in various countries would have to include serious economic planning for mass welfare, and guarantees for the people's welfare, combined with government programs that ensure there are alternatives to environmentally harmful fuels and products; but the IMF and World Bank are opponents of such planning and of such a government role.

The arguments made by the IMF and World Bank for carbon pricing and the carbon tax are quite similar to their arguments for privatization of water and other services. It's all part of the same program in their view, and we hear the same promises, the same arguments. It's a fill-in-the-blank boilerplate economic argument. So why should the results be different? Is it conceivable that the neo-liberal program will fail in everything else but save the environment?

The IMF and the World Bank are advising governments about how to plan their systems of carbon pricing. So the working class and the militant environmental movement need to pay attention to the IMF and the World Bank, and decide their attitude to the market measures backed by the IMF and World Bank. Should we believe the sugared words of the IMF and World Bank, or look at the real results of the "Washington Consensus", privatization, and neo-liberalization?

Today part of the bourgeoisie still denies that human activity is causing global warming. Another part of the bourgeoisie talks about global warming and even claims to be taking measures against it. But it's not taking effective measures. It talks and talks, and signs one solemn pledge after another, and greenhouse emissions get higher and higher. Some measures the bourgeoisie has taken in the name of environmentalism has actually made things worse, such as the promotion of natural gas and fracking, or the World Bank financing the building of the huge Medupi coal power station in South Africa. (8) We need to consider whether the emphasis on carbon pricing is another fiasco of world neo-liberalism, which sabotages the environment for the sake of providing many profitable opportunities for large corporations and the rich. Do we really want to bet the fate of our planet on the supposed wisdom of the IMF and the World Bank?

 Reference articles on the carbon tax and on an alternative program:

The carbon tax -- another failed free-market measure to avoid environmental planning

Al Gore's Nobel Peace Prize and the fiascos of corporate environmentalism

The coming of the environmental crisis, the failure of the free market, and the fear of a carbon dictatorship

For a working-class environmental movement


(1) April 23, 2016. (Return to text)

(2) (Text)

(3) "Carbon Pricing: It's on the move", 30 November 2015, (Text)

(4) "Pricing Carbon" by the World Bank, (Text)

(5) See (1). (Text)

(6) See "Myth number seven" in Lagarde's "Ten Myths About Climate Change Policy".(Text)

(7) See "Myth number four" in Lagarde's "Ten Myths About Climate Change Policy".(Text)

(8) The World Bank claimed that the Medupi power station was helpful for the environment because it supposedly wouldn't be as dirty as previous coal-burning plants. (Text) <>

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Posted on April 29, 2016