## clnea2024006 — Introduction and Key Findings ## Source details **Canonical URL:** [clnea2024006 — Introduction and Key Findings](https://www.imf.org/-/media/files/publications/staff-climate-notes/2024/english/clnea2024006.pdf) ## Other formats - [Markdown version](/-/media/files/publications/staff-climate-notes/2024/english/clnea2024006.pdf.md) - [Structured JSON version](/-/media/files/publications/staff-climate-notes/2024/english/clnea2024006.pdf.json) --- ### Two major global gaps: ambition and implementation - Limiting global warming to 1.5°C to 2°C requires cutting greenhouse gas (GHG) emissions by 25 to 50 percent by 2030 versus 2019. - If 2030 NDCs were achieved, global GHGs would fall by just 12 percent from 2019 levels versus a needed 25 to 50 percent cut. - Business-as-usual (BAU) scenario projects emissions to increase by 5 percent. - A global carbon price of $85 per tonne by 2030 would get emissions on track to 2°C; much more would be needed for 1.5°C. - Current global carbon price: $5 per tonne. - Explicit messages: - Mitigation ambition for 2030 needs to be doubled to quadrupled. - The world is approaching an “emissions cliff edge.” If 2030 targets are not enhanced, subsequent cuts needed are implausible, putting 1.5°C out of reach. - Current mitigation policies vary considerably and fall well short of what is needed for 2°C and 1.5°C. - Estimated abatement costs of aligning global emissions in 2030 with 2°C are around 0.4 percent of GDP. - Stronger international coordination (for example, plurilateral agreements, minimum carbon prices) can help close ambition and implementation gaps. - Modeling capacity and data are often lacking in governments; modeling is critical for setting targets and assessing policy impacts. ### Purpose and methodology of the Note - Aims to provide: - IMF staff’s annual assessment of global climate mitigation policy; - Options for equitably aligning 2030 and 2035 emissions targets with global temperature goals; - Guidance for policymakers on modeling to set and achieve emissions targets. - Updates earlier assessments and provides illustrative scenarios. - Uses the IMF-World Bank Climate Policy Assessment Tool (CPAT) to assess climate mitigation for around 200 countries. ### Global emission reductions needed and timing risks - As of December 2024, 147 countries, accounting for about 70 percent of 2020 GHG emissions, have committed to net zero by 2050 or 2060; some have earlier or later commitments (for example, India in 2070). - Only 11 percent of these net zero targets are enshrined in law; most are in policy documents or political pledges. - Delaying reductions increases atmospheric GHG accumulations and transition costs and slows innovation and learning-by-doing. - Three trends risking missed 2030 targets: 1. Geoeconomic fragmentation, such as rising tariffs on low-carbon technologies; 2. Continued investment in fossil fuels leading to “carbon lock-in”; 3. Growing climate-induced physical hazards reducing resources for mitigation. - COP28 collective goals versus IMF staff-adjusted needs: - COP28 goals: cut global GHG emissions by 43 percent (48 percent in CO2) by 2030 and 60 percent (65 percent in CO2) by 2035 versus 2019. - IMF staff calculations (accounting for emissions growth since 2019) suggest needs of 49-percent reduction in GHGs (53 percent in CO2) for 2030 and 66-percent reduction in GHGs (72 percent in CO2) for 2035 to align with 1.5°C. - Emissions-cliff scenario if current 2030 targets remain and are achieved on linear trajectories: - Cut 2035 emissions by 75 percent; - Achieve net zero emissions in 2040; - Net removals of CO2 from the atmosphere after 2040 (widespread use of costly technologies like direct air capture). - Global CO2 emissions would need to decline over 7 percent each year from 2030 to 2040. - For comparison: annual fall in global CO2 emissions in 2020 was 5.8 percent due to the coronavirus pandemic (after which emissions rose). - If emissions continue at current levels, the remaining carbon budget to 1.5°C would be fully exhausted by 2035; thereafter global emissions would need to go immediately and permanently to zero. ### Current emissions and mitigation targets by income group - NDC ambition varies substantially (CPAT analysis, over 150 countries). - HICs as a group increased ambition from 10 to 32 percentage points [ppts] versus 2030 BAU since 2015. - UMICs increased ambition from 9 to 14 ppts. - LMICs and LICs largely unchanged at 7 to 8 ppts. - Of 220 countries analyzed, 63 had nonquantifiable NDCs. - Of 157 countries with quantifiable NDCs, 36 were nonbinding (target met in BAU); these account for 20 percent of global GHGs. - Developing countries now account for two-thirds of annual CO2 emissions (compared with a majority of annual emissions and nearly half of historical emissions when the Kyoto Protocol entered into force in 2012). - Comparing targets relative to BAU is emphasized as a fairer measure of ambition. ### Climate finance, technology transfer, and equity - COP29 will set a new collective quantified goal to replace the $100-billion target (previously set for 2020 and achieved late in 2022). - Private share of climate finance in developing countries needs to rise from current about 50 percent to 80 to 90 percent. - Suggestions for the new collective goal: - Set based on needs (total and mitigation versus adaptation separately); - Frame as a joint goal for all countries rather than a target “for” developed countries. - Alternative: make developed-country climate finance conditional on developing-country policies. - Accelerate technology transfer and R&D through private FDI and trade policy; one suggested measure is a new global agreement on lowering tariffs on low-carbon technologies. ### Approaches to equitable global mitigation - Six allocation approaches described: - Acquired rights (“grandfathering”): cuts proportionate to historical annual emissions (for example, 2010). - Cost optimality: cuts where least-cost to minimize global costs. - Gradual convergence: per capita emissions converge linearly over time. - Ability to pay: cuts based on annual per capita GDP, with adjustments for poverty and rising marginal costs. - Immediate convergence: per capita emissions converge immediately. - Greenhouse development rights (GDR): mixed measure of historical responsibility and capability (GDP per capita and carbon intensity). - Comparative implications: - Acquired rights and cost-optimal paths lead to fewer reductions in HICs; HICs’ historical per capita emissions and marginal abatement costs are relatively high. - Gradual convergence and ability to pay are intermediate, with larger absolute cuts in HICs than middle-income and LICs. - Immediate convergence and GDR lead to large cuts in HICs (e.g., more than 100 percent for Japan under GDR, requiring annual carbon removals) and much smaller reductions in developing countries (e.g., India grows emissions above BAU in 2030 under GDR). - Equity metric note: within this narrow definition, approaches requiring more cuts in developed countries are considered more “equitable.” ### Illustrative averaging approach and 2030 targets - Method: - Average across the six approaches to infer illustrative emissions-reduction targets versus BAU in 2030. - Infer a linear relationship between emissions cuts and (log) per capita income; scale the line to hit 2°C, 1.8°C, or 1.5°C outcomes. - Outcomes: - 2°C-aligned illustrative 2030 target: cut global emissions by 25 percent versus 2019. - 1.5°C-aligned illustrative 2030 target: cut global emissions by 50 percent versus 2019. - Distributional examples: - Under illustrative 2°C scenario: India’s emissions could grow 21 percent from 2019 to 2030; United States and China reduce emissions by 47 and 19 percent respectively. - Under illustrative 1.5°C scenario: all countries would need absolute emissions cuts. - Gaps between current NDCs and illustrative targets (by income group): - For 2°C: - HICs: about 8 ppts away. - UMICs: 16 ppts away. - LIC/LMICs: 4 ppts away. - For 1.5°C: - HICs: 29 ppts away. - UMICs: 37 ppts away. - LIC/LMICs: 25 ppts away. - Country alignment statistics: - Of 179 countries with economy-wide NDCs, about 40 percent aligned with 2°C; these account for 18 percent of global GHG emissions. - Just 12 countries aligned with 1.5°C, accounting for less than 2 percent of global GHGs. - No major emitting country is aligned with 1.5°C on this measure. ### Abatement costs, co-benefits, and distributional impacts - Mitigation costs under illustrative 2°C scenario (assumes least-cost implementation and policies achieve targets): - For the G20 as a whole: costs about 0.4 percent of GDP. - Abatement costs of achieving current NDC targets: about 0.25 percent of GDP globally. - Abatement cost breakdown for NDCs: - HICs: 0.4 percent of GDP. - UMICs: 0.03 percent of GDP. - LICs/LMICs: near zero (explained by several countries achieving NDCs in baseline). - Domestic environmental co-benefits: - Reduced local air pollution mortality; fewer road accidents and congestion from less vehicle use. - For some emerging economies, co-benefits can (up to a point) exceed mitigation costs, implying net welfare gains before counting global climate benefits. - Quantification note: - Climate benefits excluded from Figure 11. Rennert and others (2022) estimate discounted flow of climate benefits at $185 per tonne of CO2—under a global carbon price of $85 per tonne, climate benefits would be five times global abatement costs. ### Illustrative 2035 targets and scaling ambition over time - Required global reductions: - If GHGs are cut by 50 percent by 2030 versus 2019 (1.5°C pathway), emissions need to fall by 66 percent by 2035 versus 2019 to stay on track to 1.5°C. - If GHGs are cut by 25 percent by 2030 (2°C pathway), emissions need to be cut by 35 percent versus 2019 by 2035. - Characteristics of 2035 illustrative targets: - 2°C-aligned 2035: - Most developed countries cut by 40 to 45 percent versus BAU. - Most developing countries cut by at least 25 percent versus BAU. - 1.5°C-aligned 2035: - A 66-percent global cut in 2035 versus 2019 implies cuts of over 80 percent versus BAU for many developed countries (for example, US, UK, Korea, and the EU). - Most developing countries would need to cut emissions by over 50 percent versus BAU. - Feasibility caveats: - Technological, economic, and political constraints: slow turnover of long-lived capital goods; difficulty abating agriculture and land-use emissions; immaturity of green steel, green cement, direct air capture. - Political constraints on policies affecting employment and equity. ### International coordination, sectoral focus, and finance - Need for additional international mechanisms to: - Overcome obstacles under the Paris Agreement (large number of parties) and unilateral action concerns. - Complementary plurilateral agreements (for example, among large emitters or G20) could accelerate ambition and align policies. - Possible elements: - An international carbon price floor agreement; - Agreements on scaled-up, temperature-aligned, equitable emissions targets backed by credible mitigation strategies; - Robust, transparent finance to encourage participation of large-emitting, lower-income countries. - Sectors and gases needing intensified action: - Methane: from coal, oil, gas extraction and agriculture; requires targeted measures. - Forestry and agriculture: lack of global finance for slowing/reversing deforestation (often driven by agriculture) needs addressing. - International aviation and maritime: - Without action, under 1.5°C and 2°C scenarios by 2035 their shares of global CO2 could rise from under 4 percent currently to 10 and 19 percent, respectively. - A global carbon price on fuels for international aviation and maritime could raise revenues of over $100 billion a year by 2035, even after fully compensating affected developing countries; this could double current global climate finance and encourage more ambitious targets. ### Policy implementation capacity and next steps for countries - Governments need to increase technical capacity to: - Estimate future emissions; - Quantify potential targets; - Estimate impacts of policies to achieve new 2035 and revised 2030 targets. - A modeling framework (CPAT) is provided to inform development of new 2035 targets and revision of 2030 targets. ### Box 1 — Decarbonizing International Aviation and Maritime (key points) - Growing importance and policy gap: - Emissions from international aviation and maritime fall outside UNFCCC and Paris Agreement; without action, could account for over one-quarter of global CO2 by 2050 under 2°C and much more under 1.5°C. - ICAO and IMO have adopted aspirational/approximate net zero targets by midcentury; IMO has set intermediate targets for emissions and zero-emissions ships. - Carbon pricing: impacts, revenues, distribution: - Carbon pricing could contribute substantially and raise up to $200 billion in 2035 under net zero aligned pricing. - Given mobility of the tax base, carbon price needs to be global; implementation could be through ICAO and IMO. - Revenue uses: compensation for developing countries, technological development, general government budgets, climate finance (mitigation, adaptation, loss and damage), or other uses. - Distributional burden mostly on developed countries and the wealthy; after fully compensating developing countries, up to $100 billion could remain for climate finance, allowing a doubling of current global climate finance. - Average flight ticket prices would rise by 10 to 20 percent by 2035; maritime costs under 3 percent. - Equity impacts may disproportionately affect developing countries dependent on tourism or trade. - Alternatives if carbon pricing infeasible: - Feebates: sliding fees/rebates on operators relative to a pivot emissions rate provide price signals to reduce emissions intensity while limiting end-user price impacts; revenue potential lower than carbon pricing. ### Conclusion: summary, policy packages, timing, and CPAT role - Summary finding: - To avoid an implausible “emissions cliff edge” and keep 1.5°C alive, mitigation ambition and implementation must be substantially raised. - New collective quantified finance goal can help raise developing-country ambition. - Getting climate ambition on track (2030 and equity): - Revise 2030 NDCs to be Paris-aligned and equitable. - Example: set targets depending on per capita income, with richer countries taking more ambitious reductions. - Getting policy implementation on track: - Adopt comprehensive policy packages including a robust and rising carbon price plus measures to address impediments to clean technology and investment. - Design reforms to be equitable (use carbon pricing revenues to reduce poverty), improve fiscal balances, and yield domestic welfare co-benefits before climate benefits. - Scale up international cooperation (for example, an international carbon price floor among major emitters). - Timing and urgency: - The next 12 months are critical. - Key question: Will countries align both their 2030 and 2035 targets with 1.5°C and avoid an implausible emissions cliff edge? If not, 1.5°C will be out of reach; if yes, and policies are implemented, the Paris Agreement’s temperature goals can be achieved. - CPAT (Annex 1) — role and key attributes: - Purpose: CPAT provides country-by-country projections of fuel use and CO2 emissions by major energy sector for around 200 countries. - Core modelling approach: - Starts from fossil fuel and other fuel use by power, industrial, transport, and residential sectors; projects forward using: - (1) GDP projections, - (2) assumptions about income elasticity of demand and own-price elasticity of demand for electricity and other fuels, - (3) assumptions about the rate of technological change for energy efficiency and energy-source productivity, - (4) future international energy prices. - Current fuel taxes/subsidies and carbon pricing held constant in real terms in baseline. - Impacts of carbon pricing depend on proportionate impacts on future fuel prices by sector, a dispatch/investment model for power, and own-price elasticities. - Fuel demand curves mainly constant elasticity specification. - Data and parameterization: - Uses IEA data on recent fuel use by country and sector. - GDP projections from latest IMF forecasts. - International energy prices projected using an average of World Bank and IMF projections for coal, oil, and natural gas prices. - Fuel price elasticities typically between about −0.5 and −0.8. - Carbon emissions factors by fuel from IEA. - Domestic environmental costs based on IMF methodologies. - Coverage and features: - Country coverage: Over 200 countries with full data. - Mitigation policies included: carbon taxes, ETSs, energy efficiency/emission rate regulations, feebates, clean technology subsidies/mandates, electricity/fuel taxes, fossil fuel subsidy reform, energy price liberalization, removal of preferential VAT for fuels, combinations of policies. - Sectors and gases: main module covers power, industry, transport, buildings; supplementary models cover agriculture, extractives, forestry, waste; all GHGs included. - Metrics: impacts on energy production/consumption, prices, trade; GHG and local emissions; GDP and welfare; revenue; incidence across households (income deciles, within deciles, urban/rural); incidence across industries; domestic environmental co-benefits (local air pollution mortality). - Power sector modelling: - Technology-based model alternative grounded in observed generation technologies, levelized costs, capital retirement, capacity factors, storage needs, and renewable expansion constraints. - Caveats: - Abstracts from mitigation actions beyond those implicit in recently observed fuel use and price data in baseline. - Assumed fuel price responses may not hold for dramatic price changes that drive major technological advances (e.g., CCS, direct air capture). - Does not explicitly account for full general equilibrium effects, international fuel price changes from simultaneous reforms in large countries, or cross-country trade linkages. - Outputs and usability: - Converts mitigation pledges into required emissions reductions against future BAU or historical baseline emissions. - Dashboard to select country, policy, stringency, sector/fuel coverage, complementary policies; revenues can be recycled; main results shown in charts. - CPAT is being made available exclusively to governments. *Source: IMF staff climate note: Introduction, clnea2024006.* ### Introduction ### Introduction ### Two major global gaps: ambition and implementation - Limiting global warming to 1.5°C to 2°C requires cutting greenhouse gas (GHG) emissions by 25 to 50 percent by 2030 versus 2019. - Even if 2030 emissions targets in nationally determined contributions (NDCs) were achieved, global GHGs would fall by just 12 percent from 2019 levels (panel 1) versus a needed 25 to 50 percent cut. - In a business-as-usual (BAU) scenario, emissions are projected to increase by 5 percent. - A global carbon price of $85 per tonne by 2030 would get emissions on track to 2°C; much more would be needed for 1.5°C (panel 2). - The current global carbon price is just $5 per tonne. - Key explicit messages: - Two major gaps persist: global mitigation ambition and implementation remain well below what is needed. - Mitigation ambition for 2030 needs to be doubled to quadrupled. - Collectively, the world is approaching an “emissions cliff edge.” If 2030 targets are not enhanced, emissions cuts needed thereafter are implausible, putting 1.5°C out of reach. - Current mitigation policies vary considerably across countries and sectors and fall well short of what is needed for 2°C and 1.5°C. - The current estimated abatement costs of aligning global emissions in 2030 with 2°C are around 0.4 percent of GDP. - Stronger international coordination (for example, plurilateral agreements, minimum carbon prices) can help close the global mitigation ambition and implementation gap. - Modeling is critical for setting emissions targets and assessing policy impacts; governments often lack modeling capacity and data. ### Purpose and methodology of the Note - The Note aims to provide: 1. IMF staff’s annual assessment of global climate mitigation policy; 2. Options for equitably aligning 2030 and 2035 emissions targets with global temperature goals; 3. Guidance for policymakers on modeling to set and achieve emissions targets. - The Note updates earlier assessments and provides illustrative scenarios for getting global emissions on track equitably. - Uses the IMF-World Bank Climate Policy Assessment Tool (CPAT) to allow comprehensive assessments of climate mitigation for around 200 countries. ### Global emission reductions needed and timing risks - As of December 2024, 147 countries, accounting for about 70 percent of 2020 GHG emissions, have committed to net zero emissions by 2050 or 2060; some have made earlier or later commitments (for example, India in 2070). - Only 11 percent of these net zero targets are enshrined in law; most are in policy documents or political pledges. - Delaying emissions reductions increases atmospheric GHG accumulations and global warming and raises transition costs through slower innovation and learning-by-doing. - Three trends that risk missing current 2030 targets: 1. Recent geoeconomic fragmentation, such as rising tariffs on low-carbon technologies; 2. Continued investment in fossil fuels which could lead to “carbon lock-in”; 3. Growing climate-induced physical hazards that could reduce resources available for mitigation. - COP28 collective goals (as set at COP28) were to cut global GHG emissions by 43 percent (48 percent in CO2) by 2030 and 60 percent (65 percent in CO2) by 2035 versus 2019 levels; IMF staff calculations, accounting for emissions growth since 2019, suggest these would need to be 49-percent reduction in GHGs (53 percent in CO2) for 2030 and 66-percent reduction in GHGs (72 percent in CO2) for 2035 to align with 1.5°C. - If current 2030 targets remain and are achieved on linear trajectories, keeping 1.5°C alive would require: - cutting 2035 emissions by 75 percent, - achieving net zero emissions in 2040, - net removals of CO2 from the atmosphere after 2040 (implying widescale use of costly technologies like direct air capture). - Under that “emissions cliff edge” scenario, global CO2 emissions would need to decline over 7 percent each year from 2030 to 2040. - For comparison, the annual fall in global CO2 emissions in 2020 because of the coronavirus pandemic was 5.8 percent (after which emissions rose). - If emissions continue at current levels, the remaining carbon budget to 1.5°C would be fully exhausted by 2035; thereafter global emissions would need to go immediately and permanently to zero. ### Current emissions and mitigation targets by income group - NDC ambition varies substantially across income groups (CPAT analysis, over 150 countries). - High-income countries (HICs) as a group have more than tripled their ambition since 2015 (from 10 to 32 percentage points [ppts] versus 2030 BAU). - Upper-middle-income countries (UMICs) increased ambition from 9 to 14 ppts. - Lower-middle-income (LMICs) and low-income countries (LICs) as a group are largely unchanged (at 7 to 8 ppts). - Of 220 countries analyzed, 63 had nonquantifiable NDCs (no targets or non–economy-wide targets). - Of the 157 countries with quantifiable NDCs, 36 were considered nonbinding (target met in BAU); these countries account for 20 percent of global GHGs. - Developing countries now account for two-thirds of annual CO2 emissions (compared with a majority of annual emissions and nearly half of historical emissions when the Kyoto Protocol entered into force in 2012). - Comparing targets relative to BAU is emphasized as a fairer measure of country ambition. ### Climate finance, technology transfer, and equity - COP29 will set a new collective quantified goal to replace the $100-billion target (previously set for 2020 and achieved late in 2022). - The private share of climate finance in developing countries needs to rise from current about 50 percent to 80 to 90 percent. - Suggestions for the new collective goal include setting it based on needs (total and mitigation versus adaptation separately) and framing it as a joint goal for all countries rather than a target “for” developed countries. - Alternative approaches include making developed-country climate finance conditional on developing-country policies. - Technology transfer and research and development need to be accelerated through private foreign direct investment and trade policy; a suggested measure is a new global agreement on lowering tariffs on low-carbon technologies. ### Equitable distribution of enhanced mitigation ambition (illustrative framing) - Economists have proposed various approaches to distribute the burden of global emissions cuts equitably. These approaches can be ordered roughly from least to most “equitable” in terms of emissions cuts versus BAU. *IMF staff climate note: Introduction, clnea2024006.* ### 1. Acquired rights (“grandfathering”): Under this approach, countries cut emissions proportionate to ### 1. Acquired rights (“grandfathering”): Under this approach, countries cut emissions proportionate to ### Approaches to equitable global mitigation - Six explicit allocation approaches described: - Acquired rights (“grandfathering”): countries cut emissions proportionate to their historical (for example, 2010) annual emissions. - Cost optimality: emissions are cut at their least-cost location to minimize global costs. - Gradual convergence: per capita emissions converge linearly over time. - Ability to pay: emissions cuts are based on annual per capita GDP, with lower reductions calculated based on the poverty of a country and considering that costs increase with larger emissions reductions. - Immediate convergence: per capita emissions converge immediately. - Greenhouse development rights (GDR): emissions cuts are based on a mixed measure of historical responsibility and capability, which includes GDP per capita and carbon intensity. - Comparative implications: - Acquired rights and cost-optimal paths lead to fewer emissions reductions in HICs compared with other methods, since HICs’ historical per capita emissions and marginal abatement costs are both relatively high compared with middle-income countries and LICs. - Gradual convergence and ability to pay lead to intermediate solutions, with all countries required to cut emissions compared with baseline and larger cuts (in absolute terms) in HICs than middle-income countries and LICs. - Immediate convergence and GDR lead to large cuts in HICs (for example, more than 100 percent for Japan under GDR, that is, requiring annual carbon removals) and much smaller reductions in developing countries (for example, India grows its emissions to be above even BAU in 2030 under the GDR approach). - Note on equity metric: - In this narrow definition, an approach leading to more emissions cuts in developed countries is considered more “equitable.” ### Illustrative averaging approach linked to per capita income - Method: - Average across the six approaches to infer illustrative emissions-reduction targets compared with BAU in 2030. - Plot illustrative targets relative to per capita incomes and infer a linear relationship between emissions cuts and (log) per capita income levels; the slope determines the relative level of effort across the income distribution. - Scale the line upward or downward (in percentage points) to achieve different temperature targets (for example, 2°C, 1.8°C, or 1.5°C). - Observed relationship: - Current NDCs show a small positive but weak relationship between current country ambition (defined in terms of emissions cuts versus BAU) and per capita income (Figure 6). ### Illustrative 2030 targets and global temperature outcomes - Outcomes of illustrative scaling: - A 2°C-aligned illustrative 2030 target would cut global emissions by the required 25 percent versus the 2019 levels. - A 1.5°C-aligned illustrative 2030 target would cut global emissions by 50 percent versus the 2019 levels. - Distributional implications (examples): - Under the illustrative 2°C scenario, India’s emissions could grow by 21 percent from 2019 to 2030 while the United States and China reduce their emissions 47 and 19 percent respectively. - Under the illustrative 1.5°C scenario, all countries would need to cut emissions in absolute terms. - Gaps between current NDCs and illustrative targets (by income group): - For 2°C alignment: - HICs as a group are about 8 ppts away. - UMICs are 16 ppts away. - LIC/LMICs are 4 ppts away. - For 1.5°C alignment: - HICs are 29 ppts away. - UMICs are 37 ppts away. - LIC/LMICs are 25 ppts away. - Country alignment statistics: - Of the 179 countries with economy-wide NDCs, about 40 percent have NDCs that are aligned with 2°C; these countries account for just 18 percent of global GHG emissions. - Just 12 countries have targets aligned with 1.5°C, and they account for less than 2 percent of global GHGs. - No major emitting country is aligned with 1.5°C on this measure. ### Abatement costs, co-benefits, and distributional impacts - Mitigation costs under illustrative 2°C scenario (assumes least-cost implementation and policy implementation that achieves targets): - Mitigation costs are described as manageable and broadly equitable. - For the G20 as a whole, costs are about 0.4 percent of GDP under the 2°C scenario. - Abatement costs of achieving current NDC targets are about 0.25 percent of GDP globally. - Abatement cost breakdown for NDCs: - HICs: 0.4 percent of GDP. - UMICs: 0.03 percent of GDP. - LICs/LMICs: near zero. - Near zero estimates are explained by several countries achieving NDCs in the baseline. - Domestic environmental co-benefits: - Include reductions in local air pollution mortality and fewer road accidents and congestion from less vehicle use. - For some emerging economies, co-benefits can (up to a point) exceed mitigation costs, implying these countries are better off on net from climate mitigation before counting global climate benefits. - Quantification note: - Climate benefits are excluded from Figure 11. Rennert and others (2022) estimate the discounted flow of climate benefits at $185 per tonne of CO2—under a global carbon price of $85 per tonne, this would imply climate benefits five times the global abatement costs. ### Illustrative 2035 targets and scaling ambition over time - Required global reductions to stay on track: - If GHGs are cut by 50 percent by 2030 compared with 2019 (1.5°C pathway), emissions need to continue to fall by 66 percent by 2035 versus 2019 to stay on track to 1.5°C. - If GHGs are cut by 25 percent by 2030 (2°C pathway), emissions would need to be cut by 35 percent compared with 2019 levels by 2035. - Characteristics of 2035 illustrative targets: - For 2°C-aligned 2035 targets: - Most developed countries cut by 40 to 45 percent versus BAU. - Most developing countries cut by at least 25 percent versus BAU. - For 1.5°C-aligned 2035 targets: - A 66-percent global cut in 2035 versus 2019 implies cuts of over 80 percent versus BAU for many developed countries (e.g., US, UK, Korea, and the EU). - Most developing countries would need to cut emissions by over 50 percent versus BAU. - Feasibility caveats: - The rate of decarbonization required for 1.5°C may be questionable technologically, economically, and politically. - Constraints include slow turnover of long-lived capital goods (vehicles, buildings), difficulty of abating agriculture and land-use emissions, and immaturity of some low-carbon technologies (green steel, green cement, direct air capture). - Political constraints can limit mitigation policies, especially those affecting employment and equity. ### International coordination, sectoral focus, and finance - Need for additional international mechanisms: - Overcome obstacles under the Paris Agreement (large number of parties) and unilateral action concerns (competitiveness, policy uncertainty). - Complementary plurilateral agreements (for example, among large emitters or G20) could accelerate ambition and align policies with reinforced targets. - Possible elements: an international carbon price floor agreement and agreements on scaled-up, temperature-aligned, equitable emissions targets backed by credible mitigation strategies. - Additional agreements could include robust and transparent finance to encourage participation of large-emitting, lower-income countries. - Sectors and gases needing intensified action: - Methane: predominately from coal, oil, and gas extraction and agriculture; requires specific measures to curb it due to outsized impact on slowing warming. - Forestry and agriculture: lack of global finance for slowing and reversing deforestation (often driven by agriculture) needs addressing. - International aviation and maritime: - Without action, under 1.5°C and 2°C scenarios by 2035 their shares of global CO2 could rise from under 4 percent currently to 10 and 19 percent, respectively. - A global carbon price on fuels used in international aviation and maritime could raise revenues of over $100 billion a year by 2035, even after fully compensating affected developing countries; this could double current global climate finance and encourage more ambitious targets among developing countries. ### Policy implementation capacity and next steps for countries - Governments need to increase technical capacity to: - Estimate future emissions. - Quantify potential targets. - Estimate the impacts of policies to achieve new 2035 and revised 2030 targets. - A modeling framework is provided in the following section (not reproduced here) to inform development of new 2035 targets and revision of 2030 targets. *Source: IMF staff calculations using CPAT, IMF | Staff Climate Note (excerpt).* ### Box 1. Decarbonizing International Aviation and Maritime ### Box 1. Decarbonizing International Aviation and Maritime ### Growing importance and policy gap - Emissions from international aviation and maritime are growing in importance for the climate and fall outside the purview of the United Nations Framework Convention on Climate Change and Paris Agreement. - If nothing is done to decarbonize them, they will grow as a share of global CO2 emissions, under a 2°C scenario accounting for over one-quarter of global CO2 by 2050 and much more under a 1.5°C scenario. - The United Nations supervisory agencies responsible for the sectors are the International Civil Aviation Organization and International Maritime Organization; both agencies have adopted (aspirational or approximate) net zero emissions targets by midcentury and the IMO has set intermediate targets for emissions and zero-emissions ships. ### Carbon pricing: impacts, revenues, and distributional issues - Carbon pricing could make a major contribution to decarbonizing both sectors while raising substantial revenues: up to $200 billion in 2035 under net zero aligned pricing. - Given the highly mobile tax base, especially for maritime, a carbon price would need to be global; implementation could be through the UN agencies responsible for the sectors (ICAO and IMO). - Revenue uses cited: compensation for developing countries, technological development, general government budgets, climate finance (mitigation, adaptation, or loss and damage), or other uses. - Distributional burden: - The burden would mostly be borne by developed countries and the wealthy within the countries, although some compensation for developing countries would be needed. - Even after fully compensating developing countries for abatement costs and losses in tourism and trade, up to $100 billion would be left for climate finance, allowing for a doubling of current total global current climate finance. - Price and equity impacts: - Average flight ticket prices would rise by 10 to 20 percent by 2035. - Maritime costs would be more moderate at under 3 percent. - Equity impacts may disproportionately affect developing countries dependent on tourism or trade. ### Alternatives if carbon pricing is infeasible - Feebates as an alternative: - Feebates are a sliding scale of fees/rebates on operators with emission rates above/below a pivot point. - They provide a strong price signal to reduce the emissions intensity of the sector (but not demand) while limiting impacts on end user prices. - They can be designed to raise revenues but these are likely much lower than under a carbon price. *Italic: Source: clnea2024006 - Box 1. Decarbonizing International Aviation and Maritime* ### Conclusion ### Conclusion ### Summary finding: risk to 1.5°C and need for substantially raised ambition - To avoid an implausible “emissions cliff edge” and keep 1.5°C alive, global climate mitigation ambition and implementation must be substantially raised. - The new collective quantified goal on climate finance can help, including by helping raise developing country ambition. - The key challenge is aligning emissions targets with the Paris Agreement’s temperature goals. ### Getting climate ambition on track (2030 and equity) - Revise 2030 targets in NDCs to be Paris-aligned and equitable. - Example approach: set targets depending on countries’ per capita income levels, with more ambitious emissions reduction targets for richer countries. - Critical objective: narrow the gap between countries’ aggregated ambition and what is needed for 1.5°C and 2°C. ### Getting policy implementation on track (policy packages and cooperation) - Adopt comprehensive policy packages needed for Paris-aligned NDCs: - Packages should ideally include a robust and rising carbon price alongside further measures to address impediments to clean technology and investment. - These reforms can be made equitable (notably using carbon pricing revenues for reducing poverty), improve fiscal balances, and yield substantial domestic welfare co-benefits, even before considering climate benefits. - Scale-up and reinforce international cooperation and coordination: - Could include new instruments such as an international carbon price floor among major emitters. ### Timing and urgency - The next 12 months are critical. - Key question: Will countries align both their 2030 and 2035 targets with 1.5°C and avoid an implausible global emissions’ cliff edge? - If they do not, then 1.5°C will be out of reach. - If countries align their 2030 and 2035 targets with 1.5°C and critically implement policies to achieve them, the world can get on track to achieving the Paris Agreement’s temperature goals. ### CPAT (Annex 1) — role and key attributes for policy design - Purpose: The IMF-World Bank Climate Policy Assessment Tool (CPAT) provides, on a country-by-country basis for around 200 countries, projections of fuel use and carbon dioxide emissions by major energy sector. - Core modelling approach: - Starts from use of fossil fuels and other fuels by power, industrial, transport, and residential sectors and projects fuel use forward in a baseline case using: - (1) GDP projections, - (2) assumptions about the income elasticity of demand and own-price elasticity of demand for electricity and other fuel product, - (3) assumptions about the rate of technological change that affects energy efficiency and the productivity of different energy sources, and - (4) future international energy prices. - Current fuel taxes/subsidies and carbon pricing are held constant in real terms in baseline projections. - Impacts of carbon pricing depend on: (1) proportionate impact on future fuel prices in different sectors, (2) a model of dispatch and investment in the power generation sector, and (3) various own-price elasticities for electricity and other fuel use. - Fuel demand curves are, for the most part, based on a constant elasticity specification. - Data and parameterization: - Basic model parameterized using International Energy Agency data on recent fuel use by country and sector. - GDP projections are from the latest IMF forecasts. - International energy prices projected using an average of World Bank and IMF projections for coal, oil, and natural gas prices. - Fuel price elasticities are typically between about −0.5 and −0.8. - Carbon emissions factors by fuel product are from the International Energy Agency. - Domestic environmental costs of fuel use are based on IMF methodologies. - Coverage and features (Annex Table 1.1 highlights): - Country coverage: Over 200 countries with full set of data. - Baseline projections and NDCs: Projections based on most recent observed emissions and projected forward by fuel/sector; NDC pledges are mapped to emissions reductions below baseline/historical levels. - How mitigation policies work: Behavioral responses approximately mid-range of broader energy modelling literature and empirical evidence. - Mitigation policies included: carbon taxes, ETSs, energy efficiency/emission rate regulations, feebates, clean technology subsidies/mandates, electricity/fuel taxes, fossil fuel subsidies, energy price liberalization, removals of preferential VAT for fuels, combinations of policies. - Sectors and gases: Main module covers power, industry, transport, and buildings; supplementary models cover agriculture, extractives, forestry, and waste; all GHGs included. - Metrics for policy evaluation: impacts on energy production/consumption, prices, trade; GHG and local emissions; GDP and economic welfare; revenue; incidence across households (income deciles, within deciles, urban/rural); incidence across industries; domestic environmental co-benefits (e.g., local air pollution mortality). - Transparency, sensitivity, accessibility: Key parameters and inputs are easily adjusted in the dashboard; results presented rapidly via a chart-driven interface; spreadsheet model has user-friendly dashboard. - Power sector modelling: - Includes a technology-based model alternative to the fuel-price-elasticity model. - Technology-based model grounded in observed generation technologies and forward-looking investments, levelized technology costs, capital retirement rates, capacity factors, storage needs, and possible constraints on expansion rates for renewables. - Technology-based model provides more accurate baseline projections of power mix but tends to be less responsive to mitigation policies than implied by empirical evidence on price responsiveness. - Caveats and limitations: - Model abstracts from the possibility of mitigation actions beyond those implicit in recently observed fuel use and price data in the baseline. - Assumed fuel price responses may not hold for dramatic price changes that might drive major technological advances or rapid adoption of technologies like carbon capture and storage or direct air capture. - Does not explicitly account for full general equilibrium effects, changes in international fuel prices resulting from simultaneous reforms in large countries, or cross-country linkages through trade. - Parameter values chosen so results are broadly consistent with far more detailed energy models. - Outputs and usability: - Converts mitigation pledges into required emissions reductions against future business-as-usual or historical baseline emissions. - Accommodates diverse mitigation policies and has full coverage of sectors and gases, as well as local air pollutants. - User interacts with a “Dashboard” to select country, policy, stringency, sectoral/fuel coverage, and complementary policies; revenues can be recycled; main results shown in charts (impacts on emissions, revenue, GDP, households by income group, local air pollution mortality, economic welfare). - CPAT is being made available exclusively to governments. *IMF Staff Climate Note: Conclusion and Annexes (clnea2024006).* ### Annex Table 3.1 Illustrative Emissions Targets Aligned with 1.5°C and 2°C in 2030 ### Annex Table 3.1 Illustrative Emissions Targets Aligned with 1.5°C and 2°C in 2030 ### Table structure - Country - Baseline GHG Emissions in 2030, MtCO2e - Illustrative 2°C-Aligned Target in 2030, MtCO2e - Percent Cut versus Base Years (negative = increase) - Illustrative 1.5°C-Aligned Target in 2030, MtCO2e - Percent Cut versus Base Years (negative = increase) - Per Capita GHG Emissions in 2030, tCO2/Person - Base years: 1990, 2005, 2010 (columns listing percent cuts versus each base year) ### Key contents and definitions - The table reports country-level Baseline GHG Emissions in 2030 in MtCO2e and two illustrative target pathways: "Illustrative 2°C-Aligned Target in 2030, MtCO2e" and "Illustrative 1.5°C-Aligned Target in 2030, MtCO2e". - For each illustrative target, the table shows "Percent Cut versus Base Years (negative = increase)" relative to 1990, 2005, and 2010. - Per capita projections are provided as "Per Capita GHG Emissions in 2030, tCO2/Person." - Abbreviations in the table: GHG = greenhouse gas; MtCO2e = million tonnes of CO₂ equivalent; tCO2 = tonnes of CO₂. ### Selected country entries (examples drawn directly from the table) - China - Baseline GHG Emissions in 2030, MtCO2e: 15789.2 - Illustrative 2°C-Aligned Target in 2030, MtCO2e: 7012.5 - Percent Cut versus Base Years (1990 2005 2010): -202.9 -39.3 -0.5 - Illustrative 1.5°C-Aligned Target in 2030, MtCO2e: 7012.5 (listed under 2°C-aligned column); (per table layout) percent cuts associated: -88.1 13.5 37.6 - Per Capita GHG Emissions in 2030, tCO2/Person: Baseline 11.1, Illustrative 2°C 8.0, Illustrative 1.5°C 4.9 - India - Baseline GHG Emissions in 2030, MtCO2e: 5159.9 - Illustrative 2°C-Aligned Target in 2030, MtCO2e: 2983.8 - Percent Cut versus Base Years (1990 2005 2010): -266.5 -102.1 -56.6 - Illustrative 1.5°C-Aligned Target in 2030, MtCO2e: 2983.8 (percent cuts shown): -144.8 -35.0 -4.6 - Per Capita GHG Emissions in 2030, tCO2/Person: Baseline 3.4, Illustrative 2°C 3.0, Illustrative 1.5°C 2.0 - United States - Baseline GHG Emissions in 2030, MtCO2e: 5503.0 - Illustrative 2°C-Aligned Target in 2030, MtCO2e: 1671.1 - Percent Cut versus Base Years (1990 2005 2010): 44.5 53.5 50.6 - Illustrative 1.5°C-Aligned Target in 2030, MtCO2e: 1671.1 (percent cuts shown): 70.2 75.0 73.5 - Per Capita GHG Emissions in 2030, tCO2/Person: Baseline 15.7, Illustrative 2°C 8.9, Illustrative 1.5°C 4.8 ### How to read percent-cut entries - Percent Cut versus Base Years entries are given for 1990, 2005, and 2010 in that order and may be negative (indicating an increase relative to the base year). The table preserves values exactly as presented. *Source: IMF staff calculations using CPAT. Note: The terms "country" and “economy” do not in all cases refer to a territorial entity that is a state as understood by international law and practice. The terms also cover some territorial entities that are not states.* ### Annex Table 4.1 Illustrative Emissions Targets Aligned with 1.5°C and 2°C in 2035 ### Annex Table 4.1 Illustrative Emissions Targets Aligned with 1.5°C and 2°C in 2035 ### Table structure and interpretation - The table reports, for each country: - Baseline GHG Emissions in 2035, MtCO₂e - Illustrative 2°C-Aligned Target in 2035, MtCO₂e - Percent Cut versus baseline (negative = increase) for the 2°C target - Illustrative 1.5°C-Aligned Target in 2035, MtCO₂e - Percent Cut versus baseline (negative = increase) for the 1.5°C target - Per capita GHG Emissions in 2035, tCO₂/Person, reported for 1990, 2005, and 2010 baseline years - Units and acronyms preserved exactly: GHG = greenhouse gas; MtCO₂e = million tonnes of CO₂ equivalent; tCO₂ = tonnes of CO₂. - Source: IMF staff calculations using CPAT. ### Key illustrative entries (selected countries, exact values from the table) - China - Baseline GHG Emissions in 2035, MtCO₂e: 15421.0 - Illustrative 2°C-Aligned Target in 2035, MtCO₂e: 9469.9 - Percent Cut versus (negative = increase): -154.1 - Illustrative 1.5°C-Aligned Target in 2035, MtCO₂e: -16.9 - Percent Cut versus (negative = increase): 15.7 - Per capita GHG Emissions in 2035, tCO₂/Person (1990, 2005, 2010): 11.0, 6.8, 3.3 - India - Baseline GHG Emissions in 2035, MtCO₂e: 4170.0 - Illustrative 2°C-Aligned Target in 2035, MtCO₂e: 3842.3 - Percent Cut versus (negative = increase): -215.3 - Illustrative 1.5°C-Aligned Target in 2035, MtCO₂e: -73.9 - Percent Cut versus (negative = increase): -34.7 - Per capita GHG Emissions in 2035, tCO₂/Person (1990, 2005, 2010): 2.7, 2.5, 1.2 - United States - Baseline GHG Emissions in 2035, MtCO₂e: 5622.0 - Illustrative 2°C-Aligned Target in 2035, MtCO₂e: 2455.8 - Percent Cut versus (negative = increase): 56.2 - Illustrative 1.5°C-Aligned Target in 2035, MtCO₂e: 63.3 - Percent Cut versus (negative = increase): 61.0 - Per capita GHG Emissions in 2035, tCO₂/Person (1990, 2005, 2010): 15.6, 6.8, 2.3 - European examples - Germany - Baseline: 713.8; 2°C target: 305.2; Percent Cut: 76.3; 1.5°C target: 69.2; Percent Cut: 67.1; Per capita (1990, 2005, 2010): 8.7, 3.7, 1.5 - France - Baseline: 383.6; 2°C target: 191.1; Percent Cut: 63.3; 1.5°C target: 61.9; Percent Cut: 59.2; Per capita (1990, 2005, 2010): 5.8, 2.9, 1.1 - United Kingdom - Baseline: 419.8; 2°C target: 211.2; Percent Cut: 74.1; 1.5°C target: 69.9; Percent Cut: 65.7; Per capita (1990, 2005, 2010): 6.0, 3.0, 1.1 - Large oil-and-gas producers (selected examples) - Saudi Arabia - Baseline: 840.5; 2°C target: 480.3; Percent Cut: -101.5; 1.5°C target: -3.0; Percent Cut: 22.5; Per capita (1990, 2005, 2010): 19.8, 11.3, 4.8 - Russia - Baseline: 1668.8; 2°C target: 959.5; Percent Cut: 68.8; 1.5°C target: 32.2; Percent Cut: 26.7; Per capita (1990, 2005, 2010): 12.0, 6.9, 3.7 - United Arab Emirates - Baseline: 305.5; 2°C target: 162.4; Percent Cut: -91.5; 1.5°C target: 4.3; Percent Cut: 27.8; Per capita (1990, 2005, 2010): 29.7, 15.8, 5.6 ### Patterns and notable observations embedded in the table - Baseline emissions and illustrative targets vary widely across countries, reflecting differing starting points and abatement challenges; baseline values are reported exactly as MtCO₂e per country. - Percent Cut values include both positive percentages (indicating required cuts) and negative values labeled in the table as increases (negative = increase). - Per capita GHG Emissions in 2035 are provided for three reference years (1990, 2005, 2010) and are presented exactly for each country. - Several small island and low‑emission economies show very low absolute baseline emissions but per capita values that vary (examples include Iceland, Guyana, Trinidad and Tobago, Qatar—exact values are in the table). - Some entries in the table show unusual percent values (e.g., very large negative numbers or values exceeding 100 percent) as reported in the source for specific countries; these are preserved verbatim in the table. ### How to use the table for policy and analysis - The table provides country-level baseline and illustrative targets consistent with 2°C and 1.5°C alignment in 2035 to inform: - National mitigation ambition benchmarking against illustrative pathways. - Cross-country comparison of required percent reductions and per capita outcomes. - Assessment of distributional implications given per capita emissions profiles. - Analysts should use the exact MtCO₂e and percent cut figures in the table when modeling fiscal, energy, or distributional impacts tied to these illustrative targets. *Source: IMF staff calculations using CPAT.* ### Annex Figure 7.2 illustrates the breakdown of the emissions reductions by fuel product and sector under ### Annex Figure 7.2 — Breakdown of CO2 Reductions under Pricing by Fuel and Sector, 2030 ### Emissions-pricing scenario and scope - Estimates are for a $75/$50/$25 carbon price for high/medium/low-income countries in 2030. - Increase in natural gas (replacing coal) is excluded. - Buildings sector includes residential sector, services, food, and forestry. - Abbreviations used: EU = European Union; G20 = Group of Twenty; HIC = high-income countries; LIC = low-income countries; LMIC = lower-middle-income countries; UMIC = upper-middle-income countries. ### Panel structure (as presented) - Panel 1: Fuel - Share in total reduction by fuel categories: Coal, Natural gas, Oil products. - Panel 2: Sector - Share in total reduction by sector categories: Power, Industry, Transport, Buildings and other. - Country and grouping labels shown (illustrative list in figure): Australia; Canada; EU-27; Japan; Korea; United Kingdom; United States; Saudi Arabia; Other HICs; HIC average; Argentina; Brazil; China; Mexico; Russia; Türkiye; Other UMICs; UMIC average; African Union; India; Indonesia; Other LMICs & LICs; LIC/LMIC average; G20; World. ### Key technical note - Source: Authors’ calculations using the Climate Policy Assessment Tool. --- ### Annex 8 & Annex Table 8.1 — Sectoral Mitigation Policies and Targets for G20 Countries (As of 2022) ### Purpose and coverage - Annex Table 8.1 lists key sectoral policies across sectors in G20 countries, as of 2022. - Source referenced: Black and others (2022a). - Note: ETS = emissions trading system; EU = European Union; EVs = electric vehicles; G20 = Group of Twenty; GHG = greenhouse gas. ### Instrumentation and price conventions - Where prices, or caps in ETSs, are not specified in legislation for 2030 they are based on 2022 prices or, as in Germany, the last available year where a price is specified. For the EU ETS, the 2030 price is an estimate based on CPAT. - Country-specific notes in table: - China's ETS takes the form of a tradable emission rate standard. - Mexico's carbon price on additional CO2 emission content compared to natural gas. - Argentina's target excludes large hydro, which is included in its generation share. - Brazil's latest NDC no longer includes a renewable target. - EU wide target; inferred from numeric targets in some entries. - Several footnotes clarify subnational targets, production or stock targets, and other country-specific instrument details. ### Representative sectoral targets and policy statements (verbatim excerpts) - "All new buildings net zero emissions by 2030." - "Reduce CO2 emissions 49–51 percent below 1990 levels by 2030" - "Reduce CO2 emissions 38% below 2013 levels by 2030" - "Reduce CO2 emisisons 67 percent below 2018 levels by 2035." - "Reduce building sector emissions 44% below 2020 emisisons by 2030" - "Reduce building sector emissions 43% below 2020 emisisons by 2030" - "Reduce building sector CO2 emissions 66% below 2013 levels by 2030. All new houses net zero emissions by 2030." - "Reduce energy use for new commercial buildings 50% by 2030." - "Reduce energy consumption of manufacturing 16 percent below 2015 levels by 2030." - "Reduce energy consumption for all buildings 3.7% a year 2031–2050." - "Reduce energy intensity by at least 10 percent in each sub-sector by 2023 (2011 baseline)" ### Representative instruments listed (verbatim style) - Carbon tax / ETS for power, industry, transport, buildings (examples of price/cap formatting preserved in table: e.g., (40, 140); (87,140); (2,2); (10, 10); (19, 19)) - Subnational ETS schemes and subnational carbon tax schemes are included for several countries. - EV targets and production/stock targets are reported in multiple country rows (numbers and years preserved in source table where specified). ### Data and reference context - Power generation shares, CO2/km % EVs in vehicle sales, and instrument/coverage columns are included in the table (presented with numeric values and future targets by year in the original table). - The annex references and draws on multiple IMF and external sources (Black and others 2021, 2022a; CPAT; IEA World Energy Balances; IPCC SR1.5; UNEP Emissions Gap Report 2023; UNFCCC NDC synthesis), as documented in the source annex. *Source: IMF Staff Climate Note 2024/006 (Annex Figure 7.2 and Annex Table 8.1).* --- _Source: https://www.imf.org/-/media/files/publications/staff-climate-notes/2024/english/clnea2024006.pdf_