The International Monetary Fund has advocated for a “more equitable” carbon price floor to help limit carbon emissions based on an economy’s stage of development.

“We have proposed an international carbon price floor as a way to first ensure large emitters have compatible carbon pricing,” said Kristalina Georgieva, the fund’s head, on Tuesday.

“What we propose is that we make it more equitable. In other words, the price varies according to the level of development. It is lower in low-income countries, higher in middle-income countries, and slightly higher in rich economies.”

The proposal for more equitable pricing comes in response to calls from India, the world’s third-largest emitter, for rich countries to pay more for carbon emissions.

India’s Prime Minister Narendra Modi told heads of state gathered at Cop26 this week that rich countries must bear a greater share of the burden in terms of offsetting emissions.

“India expects the world’s developed nations to make $1 trillion available as climate finance as soon as possible,” he said at the Glasgow climate change summit.

“Justice would require that nations that have not kept their climate commitments be pressured,” Mr Modi said.

According to a World Economic Forum and PwC report, an international carbon price floor, as proposed by the IMF, could help reduce global carbon emissions by 12.3 percent by 2030.

The implementation of a carbon pricing mechanism is expected to have a negative impact on GDP of less than 1%. However, the cost is insignificant when compared to the massive losses that the global economy will face if global warming continues unabated.

The global economy is expected to shrink by 18% if temperatures rise by more than 3°C above pre-industrial levels.

“Our analysis’ findings are very encouraging,” said Bob Moritz, global chairman of PwC.

“The political and technical challenges remain significant,” he added. “However, we hope that this research will encourage countries to consider carbon pricing in such a way that it scales up the effort to reach net zero in time to limit the worst effects of climate change on people and our planet.”