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IMF Proposes Carbon Tax to Address AI’s Environmental Impact

The IMF proposes taxing AI's energy use to curb carbon emissions from data centers. They also recommend taxing capital gains from AI.

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The International Monetary Fund (IMF) has put forward a suggestion to implement a carbon tax on energy emissions from AI systems. This idea is detailed in a discussion note titled “Broadening the Gains from : The Role of Fiscal Policies,” addressing AI's dual potential.

Economic and Labor Market Concerns

The IMF points out that while generative AI promises productivity enhancements, it also presents risks such as job displacement, notably in cognitive roles. This shift potentially decreases labor income's share of national revenue, heightening income inequality and reducing tax revenues.

To tackle these disruptions, the IMF advises rethinking how capital is taxed. With AI reducing the necessity for a human workforce, the organization suggests that capital, which historically has been less heavily taxed than labor, should now bear a greater tax burden. The IMF also raises concerns about the growing market power of tech giants and suggests increasing taxes on capital income, including corporate taxes and personal taxes on interest, dividends, and capital gains, as well as considering an excess profits tax.

Environmental Impact and Energy Consumption

The environmental impact of AI, especially its energy use, is another major consideration. Currently, data centers, servers, and data transmission networks are responsible for up to 1.5% of global emissions. AI is poised to become a significant draw on electricity in these centers. To address this, the IMF proposes a tax on associated with AI's energy consumption, cautioning that a direct tax on AI could stifle its adoption and technological progress.

The IMF also sees AI as a transformative force in tax administration, potentially overhauling systems to be more efficient and equitable. AI could lead to innovations like personalized progressive value-added taxes, income taxes based on lifetime earnings, or real-time market-value-based property taxes.

Job Displacement and Social Policies

The report highlights that AI will impact both white-collar professions such as law, finance, and medicine, and blue-collar roles in manufacturing and trade. Approximately 60% of jobs in advanced economies, including the US and UK, are vulnerable to AI, with a significant portion at risk of negative effects. The IMF suggests improving unemployment insurance for self-employed workers and directing social benefits towards those displaced by AI. Additionally, it recommends focused education and training to help workers adapt.

The IMF remains cautious about universal basic income (UBI), noting that providing unconditional benefits to all could lead to substantial costs and fiscal burdens. However, the IMF acknowledges that if AI causes severe disruption, UBI might be reconsidered. It suggests that governments could begin exploring designs and implementations for such systems.

SourceIMF
Luke Jones
Luke Jones
Luke has been writing about all things tech for more than five years. He is following Microsoft closely to bring you the latest news about Windows, Office, Azure, Skype, HoloLens and all the rest of their products.
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