Carbon tax could generate up to 1% of Armenia's GDP in revenues: IMF report

YEREVAN, September 4. /ARKA/. The gradual introduction of a direct carbon tax in Armenia could generate revenues of up to 1% of GDP, according to the International Monetary Fund's "Armenia: Climate Policy Diagnostic - July 2026" report, published on September 3, 2026.

The IMF believes that introducing a direct carbon tax based on Armenia's existing fuel taxes could be a cost-effective tool for strengthening energy security, reducing emissions, raising revenue, and promoting alignment with EU climate goals.

The IMF estimates that current fossil fuel taxes remain relatively low, leaving room for reform.

The IMF notes that a gradually increasing carbon tax could significantly reduce emissions, improve air quality, and generate revenues of up to 1% of GDP.

At the same time, the Fund believes that, given the current energy consumption structure, such a measure would be generally progressive.

The IMF emphasizes that any potential reform should be implemented gradually and with particular caution regarding natural gas. It recommends targeted use of revenues to protect vulnerable households and maintain public support.

The IMF cites clear communication, a predictable tax trajectory, and accompanying measures, including improved energy efficiency, incentives for electric vehicles, and strengthening monitoring, reporting, and verification (MRV) systems, as conditions for successful reform.

According to the IMF's June macroeconomic forecast, Armenia's nominal GDP in 2026 is expected to be approximately 12.3 trillion drams ($31.7 billion). Therefore, 1% of the projected GDP corresponds to approximately 123 billion drams, or approximately $317 million. This calculation is based on projected GDP and is not a forecast of actual tax revenues. The IMF projects real GDP growth for Armenia at 5.3% in 2026 and 5.5% in 2027.