IMF suggests taxing CO2 emissions caused by AI

Noting its potentially negative impacts on the labor force, the IMF is prepared to explore restrictions on AI, including taxation.

Jun 18, 2024 - 16:30

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IMF suggests taxing CO2 emissions caused by AI

In an effort to address the mounting environmental impacts of artificial intelligence, the International Monetary Fund (IMF) has suggested implementing a tax on the CO2 emissions produced by AI servers..

Data centers tasked with powering the latest AI tools have come under fire over the past two years over their high energy usage and dependence on natural resources, such as water for cooling.

The recommendation came as part of a broader discussion note entitled “Broadening the Gains from Generative AI: The Role of Fiscal Policies,” released by the IMF.

Should emissions caused by AI be taxed?

The overall theme of the discussion note was to explore how fiscal policies could be used to ensure that artificial intelligence both serves humanity appropriately while taming negative labor market implications.

Since the industrial revolution, automation has served to displace low and middle-skilled jobs, but with AI now threatening even the most skilled occupations, the IMF has tasked itself with minimizing the negative impacts associated with the emerging technology.

To counter these challenges, the IMF advocates for a multifaceted approach that includes revising fiscal policies, enhancing social protection systems and reforming labor market and education policies.

Key to the financial measures would be a taxation system on emissions associated with advanced AI technologies: “Given the large amount of energy consumed by AI servers, taxing the associated carbon emissions is a good way to reflect the external environmental costs in the price of the technology.”

However, the IMF also noted that a GenAI tax to prevent excessive labor displacement would be hard to design and could even hamper productivity growth.

Ultimately, the International Monetary Fund acknowledged the uncertainty surrounding AI’s future and its impacts on both the environment and the labor market, however discussions continue to be in their early stages and precisely how the world’s economies, companies and workers can balance a growing number of considerations remains unclear.