June 5, 2017
World Environment Day is an occasion to consider why it’s so important to get energy prices right. The IMF has long argued that energy prices that reflect environmental costs can help governments achieve their goals not only for improving public health but also for inclusive growth and sound public finances.
A number of countries such as Egypt, Indonesia, Mexico, and Saudi Arabia have recently taken important steps to increase energy prices towards market levels. Some others, such as India and China have made important strides in cost-effective renewable energy sources—and reduced their reliance on fossil fuels. Still, undercharging for fossil fuel energy remains pervasive and substantial and can cause severe health effects from pollution, particularly in densely populated countries. […]