[Marxism] The IMF and World Bank as champions of the carbon tax

Joseph Green jgreen at communistvoice.org
Fri Apr 29 22:17:23 MDT 2016

Earth Day 2016 revisited:
The IMF, the World Bank, and the neo-liberal carbon tax
(from the DWV list for April 29, 2016) 

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 institutions 
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 

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 

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 

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 http://www.communistvoice.org/42cCarbonTax.html

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 http://www.communistvoice.org/39cKyoto.html

For a working-class environmental movement 


(1) April 23, 2016. 

(2) https://www.imf.org/external/np/fad/environ/pdf/011215.pdf

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

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

(5) See (1). 

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

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

 (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 
plants. <> 

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