International Monetary Fund Managing Director Kristalina Georgieva speaks during the Singapore FinTech Festival in Singapore on Wednesday, November 15, 2023.

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DUBAI, UNITED ARAB EMIRATES – The head of the International Monetary Fund on Sunday underlined the case for carbon pricing at the COP28 climate summit, saying the oil and gas industry was seeing “the writing on the wall.”

Kristalina Georgieva, managing director of the IMF, is a long-time supporter of carbon pricing and said the approach creates an incentive for polluters to quickly reduce carbon emissions.

Carbon pricing determines the cost a company must pay for its climate-damaging emissions and is widely considered the most cost-effective and flexible way to reduce this pollution.

The IMF recently raised its average price forecast to $85 per tonne by the end of the decade, from a previous forecast of $75 per tonne. Underlining the scale of the challenge, Georgieva said the current average price was around $20 per tonne.

“How do we get those who have put a carbon price in place to get major emitters to accept that we need to accelerate decarbonization?” Georgieva told CNBC’s Dan Murphy at the COP28 conference.

“Well, two things. Firstly, without a carbon price, things won’t happen fast enough. So we need to move to this incentive,” she said.

“Secondly, Mother Nature is helping us, because rich and poor countries are already experiencing the devastating power of climate change.”

I want to tell anyone who is willing to listen that a carbon price is proven to work.

Kristalina Georgieva

Managing Director of the IMF

Her comments come as policymakers and business leaders gather in Dubai for the two-week UN climate summit, scheduled to end on December 12.

The conference is a critical opportunity to accelerate climate action at a time when the world is on track to experience its hottest year on record and as extreme weather events take their toll around the world.

For the IMF chief, COP28 represents an important opportunity for countries to rethink their policies that incentivize the use of fossil fuels. She highlighted that government subsidies for coal, oil and gas reached $1.3 trillion last year.

“Now we need to phase this in and replace it with the other part of the incentive, which is pricing. I want to tell anyone who is willing to listen that there is a price on carbon.” [been] “It has been shown to work,” Georgieva said, adding that existing systems – such as the EU’s emissions trading system – were seeing rapid reductions in emissions.

“Secondly, it generates revenue. The same European Union collected 175 billion euros ($191 billion).” [a] Carbon price,” she said.

“Third, it can be fair. First, it’s fair because the more you pollute, the more you pay, and the less you pollute, the less you pay. But also in many countries.” [can] Take some of that money and give it back, especially to those at risk.

When asked about the role of the oil and gas industry at COP28 and how to get oil majors on the side of carbon pricing, Georgieva said: “One of the good news from the research is that we are seeing the peak of oil and gas Gas will experience this decade. Consumption will then gradually decline.”

“One of the great news of the COP is the commitment to triple the share of renewable energy in the next few years. The power of the COP lies in mobilizing people’s voices, and that is already happening. “I can’t imagine an industry that would be willing to be the enemy of the people,” she continued.

“I think oil and gas are recognizing the signs of the times. We are seeing many of the oil producing countries diversifying quite quickly, and we are also seeing money from oil being invested into renewable energy.” [at] Scale.”

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