Carbon price has only ‘modest’ impact on inflation – IMF paper

Countries could use drop in energy prices to deliver on climate goals, authors say


Setting a high carbon price in a bid to tackle climate change is likely to have only a “modest” impact on inflation, research by the International Monetary Fund (IMF) finds.

Climate policies are likely to have large macroeconomic effects, the paper notes. A carbon price needs to change the relative price of carbon to succeed – it does not need to generate inflation, but inflation could be the result if higher costs are passed on by producers to goods prices.

In Europe, where the 2021 price was

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