‘ACT SWIFTLY ON CLIMATE TO PROTECT ECONOMIC RECOVERY’

▶ IMF calls for carbon taxes and green stimulus to raise global output

The world must take swift action against climate change to avert future disasters, as well as push harder for a green economic future and increase efforts to help Covid-19 pandemic-battered economies recover, the International Monetary Fund said.

A policy mix of carbon taxes and green investment stimulus packages could raise global output over the next 15 years by about 0.7 per cent and create about 12 million jobs through to 2027, said IMF managing director Kristalina Georgieva on Thursday in Washington.

“If we are to achieve a more sustainable and inclusive recovery, we must turn this crisis into opportunity by building greener and more climate-resilient economies,” she said.

“To achieve the goal of reducing climate risks and averting future calamities, action during this decade will be critical.”

The Covid-19 pandemic has forced governments around the world to consider ways to build more sustainable economies and use the crisis as an opportunity to address climate change challenges in a better way.

The IMF chief stressed the need for governments to act now against climate change to avoid future disasters. For example, in poor countries, climate change is already a key driver of rising poverty, the rapid spread of disease and food insecurity, said Ms Georgieva.

The Asia-Pacific region is already experiencing fast-rising temperatures and more weather-related natural disasters than anywhere else – with coastal areas and small island countries affected the most, she said.

Ms Georgieva outlined important economic policy tools required to mitigate climate change. The fund’s research showed how policy tools can pave a path towards net zero emissions by 2050, in a way that supports economic growth, employment and income equality.

The first of these tools is carbon pricing. Ms Georgieva pointed to growing consensus that carbon pricing is the most efficient and cost-effective approach to curbing emissions. However, she said there was no one-size-fits-all policy.

“By raising energy prices overall, carbon pricing creates incentives for households and firms to shift towards greener options, promoting energy efficiency,” she said. “It also boosts green investment and spurs innovation by levelling the playing field between renewables and fossil fuels.”

The fund is advocating carbon price floors in the world’s largest emitters to ensure substantial action to mitigate climate change.

Carbon taxes can generate substantial revenue for governments while coal taxes can be used to curb carbon dioxide emissions and “feebate” schemes that reward efficient practices and discourage high-carbon activities can also help to lower carbon emissions in some sectors, the fund said.

Tighter emission regulations and improved energy efficiency will be needed, along with better policies on green technology, according to the fund.

The second tool is green investment worth trillions of dollars.

“There is room to foster more private-sector green financing by efficiently steering capital from ‘brown’ to green investment, for example, through price signals and regulatory incentives,” she said.

To spur private sector investment, countries must set up environmental information disclosures, green finance standard systems and other support policies, she said.

Investors need more environmental, social and governance data to make informed decisions.

In a survey of 425 investors with about $25 trillion in assets under management, 53 per cent cited the poor quality or unavailability of ESG data and analytics as the biggest barrier to a deeper and broader approach to sustainable investing, said Ms Georgieva.

Risk management also needs to be improved to assess climate-related risks and protect financial stability as companies and their banks face higher risks from extreme weather and the transition to a low-carbon economy, she said.

Poorer nations will need more international support to boost green finance as climate resilience can be a “question of life and death” for them and comes with a much higher price tag, said Ms Georgieva.

The third IMF recommendation is stronger international co-operation to limit global warming to well below 2°C above pre-industrial levels.

IMF chief Kristalina Georgieva said climate change is a key driver of poverty and food insecurity in poor nations