How piecemeal carbon pricing affects cross-border lending

IN JUNE THE IMFG made the latest of many calls from economists for a market-oriented policy to tackle climate change. “Carbon pricing...is the least-cost option to deliver deep emission cuts,” it argued in a paper written ahead of a meeting of the leaders of the 20 group of large economies. Carbon taxes, as this newspaper has long argued, can be a powerful way to force polluters to pay for the harm they do to the environment by burning fossil fuels.With the political will for a global tax lacking, many places are going it alone. The World Bank reckons that 45 countries and 34 subnational jurisdictions have adopted some form of carbon pricing, ranging from taxes to emissions-trading systems. But these schemes cover only about a fifth of global greenhouse-gas emissions. New research shows that such piecemeal progress can have unintended consequences.