## EXECUTIVE SUMMARY

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### Context and overall message
- The December 2015 Paris Agreement provides a foundation for meaningful progress on addressing climate change; practical policy implementation is now the focus.
- 186 countries submitted emission reduction pledges, covering 96 percent of global emissions.
- Key policy priorities: mitigation (reducing emissions), climate finance, adaptation, and ensuring financial markets support the transition.

### Core economic diagnosis
- Climate change reflects a pervasive externality: firms and households are not charged for environmental consequences of their greenhouse gases, so establishing a proper charge on emissions is central.
- Pricing emissions aligns private and social costs, promotes cleaner behavior, and redirects technological change toward low-emission investments.

### Mitigation — role of fiscal policy and carbon pricing
- Carbon pricing (taxes or trading systems designed to behave like taxes) should be front and center for mitigation:
  - Potentially the most effective mitigation instruments.
  - Straightforward to administer (can build on existing fuel excises).
  - Raise timely revenues that can be used for lowering debt or other taxes.
  - Provide price signals to redirect technological change toward low-emission investments.
- Challenges: selecting appropriate price paths; addressing adverse distributional effects on vulnerable households and firms; managing political sensitivities.
- Moving ahead unilaterally with carbon pricing can be in many countries’ self-interest due to domestic (non-climate) benefits, notably fewer deaths from local air pollution.
- International carbon price floor arrangements could help address competitiveness concerns across national schemes.

### Climate finance
- Paris Agreement finance target: $100 billion a year in finance to support adaptation and mitigation in developing countries by 2020.
- By 2025, Parties are expected to set a new collective, quantified goal from a floor of $100 billion per year.
- 2014 estimated climate finance: $62 billion.
  - About a third from multilateral sources.
  - Bilateral contributions were slightly larger.
  - The rest largely private flows co-financing bilateral and multilateral sources.
- Green Climate Fund (GCF) status: raised $10 billion in pledges from 35 countries in 2014.
- Potential revenue sources:
  - A charge of $30 per ton of CO2 in advanced economies would have raised about $25 billion for climate finance in 2014 with 7 percent of revenues apportioned.
  - A global $30 per ton CO2 charge on international aviation and maritime fuels could have raised about $25 billion for climate finance in 2014 (these fuels account for about 4 percent of global CO2 emissions).
- Carbon pricing in developing countries would establish price signals needed to attract private mitigation flows.
- Substantial additional finance could be raised from charges on international aviation and maritime fuels.

### Adaptation
- Adaptation reduces severity of climate impacts and is primarily in countries’ own interests; it does not raise the same collective action issues as mitigation.
- Appropriate adaptation measures are country-specific and should be robust across different climate scenarios.
- Estimated public adaptation costs:
  - Conservatively estimated at $80–100 billion annually out to 2050 (estimates exclude some sectors).
  - These costs average about 0.1–0.2 percent of GDP for most regions.
  - Higher burdens: 0.6 percent of GDP in sub-Saharan Africa; more than 5 percent of GDP for some small Pacific islands.
  - East Asia and the Pacific and South Asia currently face the highest costs owing to population size and density.
  - Sub-Saharan Africa expected increase over time (from $1.1 billion to $6.1 billion for 2040–50 under the “wettest scenario”).
- Fiscal strategy: flexible frameworks, multi-pillar risk management (identify risks; self-insure via buffers; risk reduction investments; risk transfer through insurance and multilateral mechanisms).

### Financial sector roles and policies
- Key measures to support transition and stability:
  - Increased disclosure of firms’ carbon footprints.
  - Prudential requirements for the insurance sector.
  - Climate-related stress testing to assess impacts on asset values during de-carbonization.
  - Strengthened regulatory oversight to ensure resilient institutions and markets.
- Promote green financial instruments and hedging instruments (catastrophe bonds, etc.) to transfer climate-damage risks.
- Catastrophe bond market facts:
  - More than $40 billion issued in the past decade.
  - New issuance in 2014 reached $8.8 billion.
  - Outstanding amount in 2014 about $25 billion.
  - Pension funds and large institutional investors bought about four-fifths of issued catastrophe bonds in 2014.
- Prudential regulation should focus on resilience; altering capital risk weights or liquidity standards to favor low-carbon investment is not favored.

### Macroeconomic impacts, vulnerabilities, and distributional effects
- Without mitigation, global temperatures projected to rise by about 3–4oC over pre-industrial levels by 2100, with risks of more catastrophic warming.
- Average impact from a 3°C increase in temperature projected at about 2 percent of global GDP (measured as percent deviation from potential output).
- Regional vulnerabilities:
  - Most vulnerable: Sub-Saharan Africa (SSA), South East Asia (SEA), Middle East and North Africa (MENA).
  - United States, Europe (EUR), and China face more moderate aggregate risks though sectoral effects differ.
- Developing countries’ greater risks reflect existing climate, larger agricultural sectors, higher rainfall variability, and proximity to the equator.
  - Nearly 80 percent of LICs (and 50 percent of small developing states) are assessed as highly or extremely vulnerable with limited “readiness”.
  - Small island states and coastal countries could lose 10 percent of GDP or more under high sea level scenarios.
- Natural disasters and growth:
  - Natural disasters reduce developing country GDP growth by an estimated 1–3 percentage points, depending on the type of disaster.
  - A 1°C rise in temperature from a country’s mean temperature reduces economic growth in LICs by 1.3 percentage points on average.
  - Over 1985–2015 (accounting for country size), LICs are hit about one and a half times as often by climate-related disasters.
- Scientific and historical factual points (preserved exactly):
  - Atmospheric CO2 concentrations: Pre-industrial: 280 parts per million (ppm). Current levels: about 400 ppm.
  - Fossil fuel CO2 emissions: Annual flow increased from 2 billion (metric) tons in 1900 to 32 billion in 2013.
  - Without mitigation, emissions are projected to approximately triple from current levels by 2100, raising atmospheric concentrations to about 700–900 ppm (forecasts highly uncertain).
  - Non-CO2 greenhouse gases increase current CO2-equivalent atmospheric concentrations to about 440 ppm.
  - Globally-averaged surface temperature has risen by about 0.8°C since 1900.
  - If CO2 equivalent concentrations were stabilized at:
    - 450 ppm → mean projected warming 2.0°C over pre-industrial levels.
    - 550 ppm → 2.9°C.
    - 650 ppm → 3.6°C.
  - Weitzman (2011): accumulations by 2100 without mitigation could increase global temperatures by more than 6°C with 22 percent probability and more than 10°C with 5 percent probability.

### Fiscal policy design and revenue use
- Fiscal policies (carbon taxes or ETSs with allowance auctions) advantages:
  - Environmentally effective by pricing carbon across fuels and sectors.
  - Can raise significant revenues to reduce distortionary taxes.
- Revenue potential and use:
  - Pricing to reflect domestic environmental co-benefits alone would, averaged across the top 20 emitters, have raised revenues of almost 2 percent of GDP in 2010, and more than 5 percent in China.
  - Productive use of revenues (cutting taxes on labor and capital) can substantially lower macroeconomic costs of carbon pricing.
  - Quantified cost scenarios for a representative large emitter:
    - Cutting CO2 emissions by 25 percent might cost about 1 percent of GDP when revenues finance transfer payments (or under an ETS with free allowance allocation).
    - The cost might be around 0.2 percent of GDP with revenues financing reductions in distortionary taxes.
- Price levels and design:
  - Stable emissions prices are needed to promote clean technology investments.
  - Examples:
    - U.S. IAWG (2013) value about $60 in 2030 (in $2015).
    - Models suggest global emissions prices of $60 in 2030 would be roughly consistent with containing long run warming to 2.5oC.
  - A rule of thumb: cutting emissions by 10 percent requires prices in the order of $30 per ton (Krupnick and others 2010).

### Distributional concerns and leakage
- Addressing burdens on vulnerable households:
  - Compensation targeted to low-income households is preferable to price exemptions.
  - Compensating low-income households may require only a fraction of carbon pricing revenues (about 10 percent for the United States, for example).
- Addressing burdens on vulnerable firms and leakage:
  - Leakage rates typically about 5–20 percent of the first-round emissions reduction if a sizeable coalition of countries price carbon.
  - Border tax adjustments (BTAs) could reduce leakage concerns but raise legal and practical concerns; the case for BTAs is weak absent strong evidence of significant benefits.

### Experience to date (as of mid-2015)
- About 40 national governments and more than 20 sub-national governments have implemented, or are implementing, some form of carbon pricing.
- Most schemes are ETSs; 15 national and sub-national governments have explicit carbon taxes.
- Only 12 percent of global GHGs are currently priced.
- Current prices are often below $10 per ton of CO2.
- British Columbia’s carbon tax (CAN $30/ton and covering all fossil fuels) is viewed as a poster child.

### Investor awareness, markets, and disclosure
- Few institutional investors incorporate the carbon content of eligible securities into asset allocation decisions.
- Green bond market:
  - Total green bond issuance reached $37 billion in 2014.
- Portfolio Decarbonization Coalition commitments exceeded $230 billion at end-2015.
- Disclosure gaps: about 400 different initiatives underway; lack of consistent standards hampers usefulness.
- Financial sector policy recommendations:
  - Firms regularly disclose carbon footprint size and transition strategies.
  - Financial institutions disclose carbon footprints and management of climate exposures, including stress tests.
  - Develop best practices for stress-testing climate risks and globally consistent prudential requirements for insurance.

### Debt sustainability, natural disasters, and IMF engagement
- Climate-related disasters can increase borrowing needs and erode public sector repayment capacity.
- Debt Sustainability Analysis (DSA) can incorporate climate impacts:
  - Examples: Kiribati 2015 DSA included a 3½ percent-per-annum fiscal cost of adapting to climate change; Samoa 2015 DSA included a disaster shock raising public external debt by 10 percent of GDP at peak; St. Kitts and Nevis 2015 DSA included a shock under which public debt in 2020 would be 13 percent of GDP higher than baseline.
- IMF role:
  - Analytical work, technical assistance, country-level tools for energy tax and carbon pricing analysis (for more than 150 countries).
  - Support for climate finance mobilization, adaptation frameworks, disaster risk management, and financial sector resilience measures.
  - Support designing disclosure rules, stress-testing practices, and globally consistent insurance prudential requirements.

*Source: EXECUTIVE SUMMARY, _sdn1601 - MACRO-FISCAL POLICIES FOR CLIMATE CHANGE (International Monetary Fund).*

### EXECUTIVE SUMMARY ......................................................................................................

### EXECUTIVE SUMMARY

### Context and overall message
- The December 2015 Paris Agreement provides a foundation for meaningful progress on addressing climate change; practical policy implementation is now the focus.
- 186 countries submitted emission reduction pledges, covering 96 percent of global emissions.
- Key policy priorities: mitigation (reducing emissions), climate finance, adaptation, and ensuring financial markets support the transition.

### Core economic diagnosis
- Climate change reflects a pervasive externality: firms and households are not charged for environmental consequences of their greenhouse gases, so establishing a proper charge on emissions is central.
- Pricing emissions aligns private and social costs, promotes cleaner behavior, and redirects technological change toward low-emission investments.

### Mitigation: role of fiscal policy and carbon pricing
- Carbon pricing (taxes or trading systems designed to behave like taxes) should be front and center for mitigation:
  - Potentially the most effective mitigation instruments.
  - Straightforward to administer (can build on existing fuel excises).
  - Raise timely revenues that can be used for lowering debt or other taxes.
  - Provide price signals to redirect technological change toward low-emission investments.
- Challenges for carbon pricing: selecting appropriate price paths; addressing adverse distributional effects on vulnerable households and firms; managing political sensitivities.
- Moving ahead unilaterally with carbon pricing can be in many countries’ self-interest due to domestic (non-climate) benefits, notably fewer deaths from local air pollution.
- International carbon price floor arrangements could help address competitiveness concerns across national schemes.

### Climate finance
- The Paris Agreement urges advanced economies to scale up efforts with a concrete roadmap to provide $100 billion a year in finance to support adaptation and mitigation in developing countries by 2020.
- By 2025, Parties are expected to set a new collective, quantified goal from a floor of $100 billion per year.
- Carbon pricing in developing countries would establish price signals needed to attract private mitigation flows.
- Substantial additional finance could be raised from charges on international aviation and maritime fuels, which are growing sources of emissions and are underpriced.

### Adaptation
- Adaptation reduces the severity of climate impacts and is primarily in countries’ own interests; it does not raise the same collective action issues as mitigation.
- Appropriate adaptation measures are country-specific and should be robust across different climate scenarios.
- Adaptation is especially important for low-income countries (LICs) and small states prone to climate-related natural disasters.

### Financial sector roles and policies
- Financial sector measures to support transition and stability include:
  - Increased disclosure of firms’ carbon footprints.
  - Prudential requirements for the insurance sector.
  - Climate-related stress testing to assess impacts on asset values during de-carbonization.
  - Strengthened regulatory oversight to ensure resilient institutions and markets that can provide instruments to manage climate risks.
- Promoting green financial instruments and hedging instruments (catastrophe bonds, etc.) can transfer climate-damage risks to better-placed risk bearers.

### Macroeconomic impacts (evidence and vulnerabilities)
- Without mitigation, global temperatures are projected to rise by about 3–4oC over pre-industrial levels by 2100, with risks of more catastrophic warming.
- The average impact from a 3°C increase in temperature is projected at about 2 percent of global GDP (measured as percent deviation from potential output).
- Regional and sectoral impacts vary considerably:
  - Most vulnerable regions: Sub-Saharan Africa (SSA), South East Asia (SEA), and Middle East and North Africa (MENA).
  - United States, Europe (EUR), and China face generally more moderate risks in aggregate, though sectoral effects differ.
- Developing countries’ greater risks reflect existing climate, larger agricultural sectors, higher rainfall variability, and proximity to the equator:
  - Nearly 80 percent of LICs (and 50 percent of small developing states) are assessed as highly or extremely vulnerable to climate change, with limited “readiness” to leverage adaptation investments.
  - Small island states and coastal countries (examples cited) could lose 10 percent of GDP or more under high sea level scenarios.
- LICs and small states are often hardest hit by natural disasters:
  - Over 1985–2015 (accounting for country size), LICs are hit about one and a half times as often by climate-related disasters (floods, storms, droughts).
  - The proportion of domestic population affected by natural disasters is higher in LICs, particularly in small developing and low-lying coastal states.
  - Within LICs, the poorest 25th percentile of countries faces the highest natural disaster risks.

### Selected scientific and historical factual points (preserved exactly)
- Atmospheric CO2 concentrations:
  - Pre-industrial: 280 parts per million (ppm).
  - Current levels: about 400 ppm.
- Fossil fuel CO2 emissions:
  - Annual flow increased from 2 billion (metric) tons in 1900 to 32 billion in 2013.
  - Without mitigation, emissions are projected to approximately triple from current levels by 2100, raising atmospheric concentrations to about 700–900 ppm (forecasts highly uncertain).
- Non-CO2 greenhouse gases increase current CO2-equivalent atmospheric concentrations to about 440 ppm.
- Globally-averaged surface temperature has risen by about 0.8°C since 1900.
- If CO2 equivalent concentrations were stabilized at:
  - 450 ppm → mean projected warming 2.0°C over pre-industrial levels.
  - 550 ppm → 2.9°C.
  - 650 ppm → 3.6°C.
- Illustrative extreme-risk calculations: Weitzman (2011) suggests accumulations by 2100 without mitigation could increase global temperatures by more than 6°C with 22 percent probability and more than 10°C with 5 percent probability.
- Paris Agreement finance target:
  - $100 billion a year in finance to support adaptation and mitigation in developing countries by 2020.
  - By 2025, Parties expected to set a new collective, quantified goal from a floor of $100 billion per year.

### Implications for IMF engagement
- The IMF’s universal membership, global perspective, expertise, and close relations with finance ministries and financial market participants position it well to contribute to policy development and implementation across mitigation, finance, adaptation, and financial sector resilience.

*Source: EXECUTIVE SUMMARY, _sdn1601 - MACRO-FISCAL POLICIES FOR CLIMATE CHANGE (International Monetary Fund).*

### 11.      Climate-related natural disasters and higher temperatures harm growth and

### 11.      Climate-related natural disasters and higher temperatures harm growth and exacerbate poverty in developing countries.

### Climate and growth impacts
- Natural disasters reduce developing country GDP growth by an estimated 1–3 percentage points, depending on the type of disaster.
- A 1°C rise in temperature from a country’s mean temperature reduces economic growth in LICs by 1.3 percentage points on average, mainly by reducing agricultural output.
- Rising temperatures, greater rainfall volatility, and more frequent extreme weather events reduce agricultural productivity in LICs, important given agriculture’s large share in output.
- Climate change and natural disaster risks worsen poverty through:
  - loss of productive economic assets combined with limited savings (Hallegatte and others 2015),
  - food vulnerability (Adedeji and others forthcoming).

### Tourism, migration, and conflict risks
- Exposure to climate change and related extreme weather events affects tourists’ destination choices, creating different regional tourism flow patterns; losses are expected for most developing countries while high-latitude advanced economies would gain.
- Impacts on agriculture and on food, water, and energy security could translate into significant migration pressures and heightened conflict risks.
- The scale of internal and international migration is expected to rise with combined pressures of climate change and environmental degradation (Hallegatte, Lecocq, and de Perthuis 2015; Adger and others 2014; Wodon and others 2014).
- Physical impacts could increase fragility and conflict by creating or exacerbating food, water and energy scarcities, and triggering migration (Burke and others 2014).
- Potential GDP and growth impacts from these channels are not considered in standard models of the economic effects of climate change.

### Uncertainty in global economic effects
- Uncertainty about magnitudes stems from:
  - uncertainties in models projecting environmental impacts,
  - challenges mapping environmental changes into economic effects,
  - accounting for future adaptation strategies and technical innovation,
  - reliance on relatively conservative climate scenarios because modeling extreme events is significantly more challenging.
- A recent study (Burke, Hsiang, and Miguel 2015) suggests the unmitigated impact of climate change on world GDP per capita could be roughly 5–10 times larger than current estimates (that is, 20 percent lower by 2100), with wide uncertainty bands and significant negative effects for many economies.

### III. FISCAL POLICY FOR MITIGATION — Overview
- Key practical issues: choosing and designing policy instruments best suited for implementing countries’ Intended Nationally Determined Contributions (INDCs), which typically state quantitative emissions targets.
- Quantity-based instruments have natural appeal to meet targets with confidence, but predictable emissions prices are widely desirable.
- Explicit carbon pricing (with prices set to meet annual emissions targets on average) has the attraction of producing potential revenues useful on fiscal grounds.

### A. Choice of mitigation instruments: rationale for fiscal policies
- Fiscal policies (carbon taxes or emissions trading systems (ETS) with allowance auctions) have two key advantages over regulatory approaches:
  - They are environmentally effective by pricing carbon across fossil fuels, electricity, etc., promoting efficient substitution (e.g., coal → natural gas → renewables/nuclear) and demand reduction via higher energy efficiency and less use of energy-consuming products.
  - They can raise significant revenues, creating space to reduce other taxes that create significant economic distortions.
- Regulations (for example, emission rate, energy efficiency, and renewables standards):
  - are less effective because they focus on a narrower range of mitigation opportunities; combinations are more effective but administratively complex and can create implicit CO2 price variation across sectors (an unintended distortion).
  - do not raise revenue.
- In principle the choice between carbon taxes and ETSs is less important than implementing either with good design: cover emissions comprehensively, establish stable prices in line with environmental objectives, and exploit fiscal opportunities.
- ETSs to date have often:
  - lacked full coverage (focused on large industrial sources, omitting small-scale sources such as vehicles and buildings),
  - required accompanying price stability provisions (price floors and ceilings) to encourage low-emission investments,
  - required auctioning of allowances (rather than free allocation) so revenue can be used for broader fiscal reform.
- The case for carbon taxes may be particularly strong in developing economies that may lack capacity to enforce regulations and trading, where potential markets may be thin, and where energy taxes can be an effective way of raising revenue from hard-to-tax enterprises.
- Carbon pricing provides opportunities to reform energy and environmental policies at national and sub-national levels; with efficient carbon pricing other policies rationalized on climate grounds (for example, some energy efficiency standards and renewables subsidies) might be scaled back, and national pricing may preempt proliferation of uncoordinated sub-national initiatives.
- Where regulations are used because of political acceptability, they should conform to carbon-pricing design principles:
  - promote a broad range of mitigation opportunities (for example, emissions standard for power generation promotes all fuel switching possibilities),
  - include price stability provisions (for example, convert standards into “feebates” imposing fees or rebates),
  - align implicit prices across programs and sectors with environmental objectives.

### Co‑benefits and national self-interest
- Domestic environmental co-benefits from carbon pricing (fewer premature deaths from local air pollution, reduced vehicle externalities) warrant substantial carbon pricing even aside from climate considerations.
- Co-benefits alone would have warranted estimated CO2 prices of $57 per ton in 2010, averaged across the top 20 emitters, which would have reduced their collective emissions by about 14 percent.
- Co-benefits vary substantially across countries depending on air pollution emission rates and local population exposure; national gains from mitigation can exist irrespective of others’ actions up to a point.

### Table 1 excerpt — Submitted INDCs, largest emitting countries/regions (share of global emissions, 2012, energy-related CO2)
- China: CO2 peaking around 2030, lower CO2 intensity of GDP 60-65%. 25.9
- US: Reduce GHGs to 26-28% below 2005 levels by 2025. 16.0
- EU: Reduce GHGs 40% below 1990 levels by 2030. 11.9
- India: Reduce GHG intensity of GDP 33-35% below 2005 level by 2030. 6.2
- Russia: Reduce GHGs 25-30% below 1990 levels by 2030. 5.2
- Japan: Reduce GHGs 25% below 2005 levels by 2030. 3.9
- Korea: Reduce GHGs 37% below BAU in 2030. 1.9
- Canada: Reduce GHGs 30% below 2005 levels by 2030. 1.7
- Brazil: Reduce GHGs 37% below 2005 levels by 2025. 1.4
- Mexico: Reduce GHGs 25% below BAU in 2030. 1.4
- Indonesia: Reduce GHGs 29% below BAU in 2030. 1.4
- Australia: Reduce GHGs 26-28% below 2005 levels by 2030. 1.2

### B. Design principles — a closer look
(i) Administration
- A comprehensive carbon tax is straightforward to administer by charging on fuel use in proportion to CO2 emissions rates, administered on domestic fuel supply at extraction or after processing (building on existing fuel taxes).
- Carbon taxes or ETSs implemented downstream on large industrial sources are less comprehensive and more administratively complex; the EU ETS excludes about 50 percent of EU-wide CO2 emissions and downstream systems require monitoring of far more entities.
- Pricing non-CO2 GHGs is more complex and likely needs gradual introduction. Current global GHG sources include methane (16 percent), nitrous oxide (6 percent), and hydrofluorocarbons/fluorinated gases (2 percent) of total GHGs (IPCC 2014, p. 7).
- Some non-CO2 sources are practical to tax on a CO2-equivalent basis as administrative capacity develops, while others (especially agricultural sources) might be better incorporated through offset credits, placing the onus on entities seeking credits to demonstrate valid reductions relative to a baseline.
- Forest carbon sequestration might be promoted through annual subsidies/taxes for increases/decreases in stored carbon relative to a baseline (where property rights are well-defined), avoiding paying for the entire carbon stored and the problem of attributing additionality; measuring stored carbon is tricky but feasible with satellite/aerial photography and on-the-ground sampling.

(ii) Carbon price level
- Stable emissions prices are needed to contain volatility in mitigation costs and, more importantly, to promote clean technology investments; price volatility undermines cost-effectiveness and may deter research and deployment of emissions-saving technologies with high upfront costs and long-lived benefits.
- Market-determined allowance prices have been quite volatile in the EU ETS, which has lacked explicit price stability mechanisms.
- Prices can be set to achieve INDC mitigation goals using fuel use projections, carbon emissions factors, estimates of changes in future fuel prices from carbon pricing, and fuel price elasticity assumptions; computational energy-system models provide more sophisticated estimates.
- INDCs might include minimum price targets to complement emissions targets. Examples:
  - A discounted global damage-based price: U.S. IAWG (2013) puts the value at about $60 in 2030 (in $2015).
  - Prices aligned with climate stabilization goals: models suggest global emissions prices of $60 in 2030 would be roughly consistent with containing long run warming to 2.5oC.
- Under either approach emissions prices should rise at several percent a year.
- Countries need not impose the same emissions price; some may set higher prices because of domestic co-benefits, fiscal needs, or political support, while equity concerns may favor low or zero emissions prices for low-income countries contributing negligibly to global emissions (for example, sub-Saharan countries where electricity prices are already high), though targeted measures to help the poor are preferable to blunt price exemptions.
- A rough rule of thumb for the United States from its Department of Energy’s National Energy Modelling System: cutting emissions by 10 percent requires prices in the order of $30 per ton (Krupnick and others 2010), suggesting the INDCs in Table 1 might require emissions prices above $50 per ton.

*Source: IMF, "Macro‑Fiscal Policies for Climate Change", chapter excerpt from _sdn1601.*

### 30.      Carbon pricing can raise significant revenue. Pricing to reflect domestic environmental

### Carbon pricing can raise significant revenue. Pricing to reflect domestic environmental co-benefits alone would, averaged across the top 20 emitters, have raised revenues of almost 2 percent of GDP in 2010, and more than 5 percent in China

### Revenue potential from CO2 pricing
- Pricing to reflect domestic environmental co-benefits alone would, averaged across the top 20 emitters, have raised revenues of almost 2 percent of GDP in 2010, and more than 5 percent in China (Figure 7).
- Figure references: Figure 7 (Revenue from CO2 Pricing for Domestic Environmental Benefits, 2010).

### Productive use of revenues and macroeconomic costs
- Productive use of revenue is critical for containing the overall costs of carbon pricing for the economy.
- Revenues could be used for lowering taxes on labor and capital that distort economic incentives, producing a counteracting economic benefit to the costs of higher energy prices (see Figure 9 for illustrative calculations of this benefit for a typical large emitter).
- Carbon pricing itself causes economic costs by inducing households and firms to consume less energy and to pay more for cleaner (but more costly) energy. Higher energy costs tend to contract overall economic activity, leading to a slight reduction in aggregate employment and investment, which exacerbates distortions in factor markets created by taxes on labor and capital.
- Using carbon pricing revenues to cut taxes on labor and capital can ameliorate these harmful effects (see Bovenberg and Goulder (1996), Parry and Bento (2000)).
- The economic costs of carbon tax shifts (ignoring environmental benefits) might even be negative for modest emissions reductions if revenues cut an especially distorting tax.
- Revenues could alternatively be used for new spending or reducing debt, though the social benefits should be comparable to those from cutting harmful taxes.

### Quantified cost scenarios for a representative large emitter
- If revenues are not used efficiently the overall cost of carbon pricing for the economy is substantially higher.
- Cutting CO2 emissions by 25 percent might cost about 1 percent of GDP when revenues finance transfer payments (that do not improve economic incentives), or under an ETS with free allowance allocation.
- The cost might be around 0.2 percent of GDP with revenues financing reductions in distortionary taxes (Figure 8).
- Note: Costs can be moderately negative over some range when revenues are used to reduce an especially distorting tax.

### Accompanying measures — technology policies
- Establishing a predictable CO2 price is the single most important policy for providing across-the-board incentives for investments in emissions-saving technologies.
- Further incentives for technology development and deployment may be needed due to various market barriers; severity varies across technologies and targeted measures will be needed to supplement carbon pricing.
- Technology policies need careful design:
  - Tax credits for private R&D do little for innovative start-ups (with little taxable income) and do not differentiate between more and less socially valuable innovation.
  - Intellectual property protection ties patent value to commercial viability but can limit diffusion.
  - Technology prizes avoid the R&D/diffusion tension but require well-defined, measurable objectives stated in advance.
  - Instruments targeted at deploying new technologies need to accommodate uncertainty over future technology costs, suggesting a preference for adoption subsidies over regulations and incentives that phase out as technologies mature.
- Under-investment in low-emission technologies may be especially severe in LICs with capital shortages, partly rationalizing mobilization of climate finance.

### Addressing burdens on vulnerable households
- Energy price burdens on low income households have been a major obstacle to carbon pricing—but can be largely overcome.
- Carbon pricing is mostly passed forward in higher consumer prices for energy, but impacts may be less regressive than commonly supposed—for EU countries, carbon tax incidence can be moderately regressive, to proportional, to moderately progressive, when energy price burdens are compared with household consumption (Figure 9).
- Distributional concerns warrant targeted relief rather than undercharging for carbon damages—the latter is highly inefficient as typically about 90 percent or more of benefits leak away to higher income groups.
- Compensating low-income households may require only a fraction of carbon pricing revenues (about 10 percent for the United States, for example).
- Practical compensation mechanisms in advanced economies: adjustments to existing tax and benefit systems; trade-offs exist in targeting, economic efficiency, and administration (e.g., payroll tax rebates and earned income tax credits vs. transfer payments).
- For low-income countries, factoring environmental impacts into energy prices makes sense; energy taxes may be less regressive where the poor lack vehicles and power grid access.
- Where low-income households are not formally registered as taxpayers or benefit recipients, compensation might be delivered by spending on education, health, housing, job programs, clean fuel alternatives, and so on, though this can involve greater leakage of benefits to the non-poor.
- Caveat: Higher electricity prices from charging for polluting generation fuels may encourage household burning of (unpriced) biomass, with higher environmental costs; a possible interim response is feebates to promote cleaner generation fuels with limited effects on electricity prices.

### Addressing burdens on vulnerable firms and leakage
- Carbon charges on energy prices cause “emissions leakage”—partially offsetting increases in other country emissions—and harm competitiveness of energy-intensive, trade-exposed firms.
- Leakage rates are typically about 5–20 percent of the first-round emissions reduction from carbon pricing if a sizeable coalition of countries price carbon, and the problem is confined to a limited number of industries (e.g., chemicals, plastics, primary metals, petroleum refining).
- Efficient resource allocation implies industries unable to compete when energy is properly priced should ultimately cease operation (with programs to ease transitions); policy adjustment should be gradual.
- Using carbon pricing revenues for labor and capital tax reductions provides offsetting improvements in general competitiveness.
- Border tax adjustments (BTAs) could reduce leakage concerns and encourage participation in carbon pricing schemes but raise serious legal and practical concerns (measuring embodied carbon, WTO compatibility, risks of abuse). In the absence of strong evidence of significant benefits, the case for carbon BTAs is weak and lessened by broad commitments to implement INDCs.

### Experience to date (as of mid-2015)
- About 40 national governments and more than 20 sub-national governments have implemented, or are implementing, some form of carbon pricing.
- Most schemes are ETSs (e.g., EU scheme covering 31 countries, Korea introduced in 2015, California, and some provinces in China).
- 15 national and sub-national governments have explicit carbon taxes; recent examples include Chile, France, Mexico, and the United Kingdom.
- Only 12 percent of global GHGs are currently priced, reflecting lack of national schemes in many large emitters and limited sectoral coverage of existing schemes.
- Current prices are often below $10 per ton of CO2—below those consistent with environmental objectives.
- ETSs suffer price volatility and have generally not formed part of a broader fiscal reform, in contrast to carbon taxes which are often explicitly paired with reductions in broader taxes.
- British Columbia’s carbon tax (CAN $30/ton and covering all fossil fuels) is viewed as a poster child, though political economy factors were favorable.

### International coordination of fiscal policy
- International cooperation is challenging because of “free riding”; the Paris Agreement process (INDCs) addressed the prior lack of coverage to some extent.
- Underpricing from an international perspective is familiar from situations where countries compete for mobile tax bases; a coordinated CO2 price floor among a coalition of willing countries is a possible climate analog and could be pursued alongside the INDC process.
- A coordinated price floor would provide some protection against competitiveness concerns and cross-border fuel smuggling; individual countries could set prices exceeding the floor.
- Agreement on tax floors is historically easier than agreement on tax rates, and a single minima should be easier to negotiate than numerous country-level emissions targets.
- Monitoring a carbon price floor arrangement should be feasible by accounting for taxes or subsidies for road fuels, electricity consumption, natural gas, etc., and allowing for country-specific special needs when necessary.
- International coordination could also occur through linked ETSs; a difficulty is that countries lose control over their domestic emissions prices in a linked ETS unless they retain price floors, but if one cap applies to the trading bloc domestic floors may have no impact on aggregate emissions.

*Source: MACRO-FISCAL POLICIES FOR CLIMATE CHANGE, INTERNATIONAL MONETARY FUND (excerpts).*

### 48.      Enforcement remains a key concern in ensuring an effective international agreement,

### _sdn1601 - 48.      Enforcement remains a key concern in ensuring an effective international agreement,

### Enforcement, carbon pricing, and initial strategy
- Enforcement is a key concern for an effective international agreement, though countries acting in their own self-interest can make significant progress.
- Mitigation costs need not be large if recycling of carbon pricing revenues is done well.
- Accounting for domestic environmental benefits, many countries are better off, on net, from carbon pricing.
- Priority recommendation: start the process—implement carbon pricing domestically and work out coordination practicalities later as a coalition of the willing emerges.

### Climate finance: objectives, current flows, and potential sources
- Objective: mobilize—from public and private sources—$100 billion a year by 2020 for mitigation and adaptation in developing economies.
- Concerns: balance between mitigation and adaptation (currently most is on the former); allocating funding across countries and projects accounting for efficiency and equity; avoiding paying for projects that would have gone ahead without funding.
- 2014 estimated climate finance: $62 billion.
  - About a third from multilateral sources (likely to increase as multilateral development banks strengthen climate action plans).
  - Bilateral contributions were slightly larger.
  - The rest largely made up of private flows co-financing bilateral and multilateral sources (private flows are difficult to measure).
- Green Climate Fund (GCF) status:
  - Established in 2013 to help manage public contributions.
  - The GCF raised $10 billion in pledges from 35 countries in 2014, though it will take time to achieve more substantial funding levels.
- Role of carbon pricing in catalyzing private finance:
  - Carbon pricing promotes across-the-board incentives for clean energy projects and efficient ordering of these projects.
  - Top-down finance lacks automatic mechanisms to ensure most cost-effective projects are selected first; high transactions costs hinder funding for numerous small-scale opportunities.
- Potential revenue from carbon charges:
  - A charge of $30 per ton of CO2 in advanced economies would have raised about $25 billion for climate finance in 2014 with 7 percent of revenues apportioned.
  - A global $30 per ton CO2 charge on international aviation and maritime fuels could have raised about $25 billion for climate finance in 2014 (these fuels account for about 4 percent of global CO2 emissions).
- Offsets and markets:
  - Clean Development Mechanism cumulative flows to developing countries up to 2012: $28 billion.
  - Primary offset market transaction value fell sharply in 2009 and remained low thereafter.
  - Depending on ambition, offset market flows could range from $5–40 billion per year in 2020.
  - Offset flows so far have largely gone to a relatively small set of middle income countries; broadening access among developing countries is a priority.

### Adaptation: scope, costs, and fiscal implications
- Definition and types:
  - Adaptation refers to deliberate adjustments in ecological, social, and economic systems to moderate adverse impacts of climate change and harness any beneficial opportunities.
  - Includes “hard” measures (e.g., dyke construction, changing crop varieties, adapting infrastructure) and “soft” measures (e.g., early warning systems, building codes, insurance).
- Relationship with mitigation and development:
  - Adaptation may reduce urgency of mitigation—but only moderately.
  - Adaptation and development strategies are closely interlinked; many development aspects facilitate adaptation and some adaptation strategies facilitate development.
  - Maximizing synergies requires close policy integration and evaluation of climate impacts.
- Private vs public roles:
  - Some adaptation will occur privately; governments should support, not discourage, private adjustments.
  - Governments have key roles in overcoming market failures, providing public goods and services, and internalizing long-term investment consequences.
- Estimated public adaptation costs:
  - Conservatively estimated at $80–100 billion annually out to 2050 (estimates exclude some sectors such as ecosystem services, energy, manufacturing, retailing, and tourism).
  - These costs average about 0.1–0.2 percent of GDP for most regions.
  - Higher burdens: 0.6 percent of GDP in sub-Saharan Africa; more than 5 percent of GDP for some small Pacific islands.
  - Adaptation costs for advanced economies are more modest (for example, equivalent to about $17 billion in Europe).
  - East Asia and the Pacific and South Asia currently face the highest costs owing to population size and density.
  - Sub-Saharan Africa expected to see the largest increase over time (from $1.1 billion to $6.1 billion for 2040–50 under the “wettest scenario”).
- Sectoral composition:
  - Infrastructure spending accounts for the largest share of adaptation costs.
  - Main sectoral components: infrastructure, coastal zones, water supply, agriculture, human health, and extreme weather events.
- Fiscal strategy and risk management:
  - Fiscal responses need flexibility and should be warranted across a range of climate scenarios.
  - Governments would benefit from frameworks to reflect fiscal risks from climate change, account for climate change-related public expenditures, and support strategic resource allocation, efficiency, institutional capacity, and fiscal sustainability.
  - Enhancing resilience requires a multi-pillar risk management framework:
    1. Identifying and assessing climate-related risks and integrating them into budget planning.
    2. Self-insurance through fiscal and external buffers.
    3. Risk reduction through structural reforms and targeted infrastructure investments.
    4. Risk transfer through disaster risk insurance, multilateral risk-sharing mechanisms (e.g., Caribbean Catastrophe Risk Insurance Facility), and precautionary instruments.
  - Ex post disaster risk management entails resilient recovery through emergency response and reconstruction (such as resettlement away from coastlines) that also reduce future risks.
- Implementation status:
  - Many countries (e.g., Brazil, China, India, Mexico) have developed climate change strategies setting broad directions, but often these strategies address climate change in isolation from growth and poverty reduction objectives.
  - Some countries attempt to classify climate-related expenditures in budgets (examples: Nepal’s 2013/14 budget statement indicated that 10 percent of total government expenditures were climate related).
  - Tagging climate expenditure can reveal differences among sectors and gaps in performance indicators.

### Financial sector: risks and adjustments
- Categorization of climate-related financial risks:
  - Physical risks: increased costs and frequency of climate-related natural disasters affecting insurance and reinsurance sectors on liability (increasing property and casualty claims) and asset sides (losses on investments in real estate or equity of affected firms).
  - Transition risks: ‘stranded assets’ or potential financial losses from investments losing value (e.g., coal reserves) due to mitigation or shifting consumer/investor preferences.
- Implications for financial stability:
  - Increased physical risks could challenge insurance business models by altering the balance between premiums and claims, leaving insurers exposed to uncovered losses.
  - Adjusting premiums could reduce policyholder ability to obtain private insurance cover, potentially contracting mortgage lending and lowering property values.
- Policy implication:
  - Changing physical risks should be reflected in the financial sector’s risk modeling to minimize repercussions for financial stability.

*Source: _sdn1601 - 48.      Enforcement remains a key concern in ensuring an effective international agreement,*

### 68.      Few investors are aware of the carbon footprint of companies in their portfolios, while

### _sdn1601 - 68.      Few investors are aware of the carbon footprint of companies in their portfolios, while

### Investor awareness and stranded-asset risks
- Few institutional investors incorporate the carbon content of eligible securities into asset allocation decisions.
- Perceived long-term nature of stranded asset risks leads to hesitancy to include them in portfolio investment and risk management frameworks.
- Potential systemic amplification:
  - A cycle of fire sales and asset price declines could affect seemingly unrelated institutions and asset classes, causing sizeable market fluctuations and further portfolio losses.
- Modeling systemic risks from stranded assets remains underdeveloped.

### Green bonds and green stock indexes
- Green bond market growth and composition:
  - With AAA investment-grade issuances from the European Investment Bank and the World Bank, total green bond issuance reached $37 billion in 2014.
  - Figure 12 indicates green bond issuance by issuer type for 2011–14 (Development Bank, Municipal, ABS, Corporate, Bank).
- Market challenges:
  - Strict transparency requirements may increase financing costs.
  - Lack of strict standards for green bonds is a key challenge to sustained market development.
- Green stock indexes:
  - Facilitate environmentally-minded investor decisions but have seen relatively limited institutional use.
  - Performance of some green indexes (for example, S&P U.S. Carbon Efficient vs. S&P 500) has not been significantly different from major financial indexes in recent years.
  - Use hindered by limited climate mitigation policies, investor expectations of delays in emissions reduction, slow political progress, and sharp oil price declines affecting investor confidence in green technology profitability.

### Voluntary private-sector decarbonization and disclosure
- Portfolio Decarbonization Coalition:
  - A prominent initiative of long-term institutional investors seeking voluntary commitments to shift investments to low-carbon-exposure firms.
  - Commitments have exceeded $230 billion at end-2015.
- Disclosure needs and challenges:
  - Firms increasingly requested to provide better carbon footprint disclosure.
  - Key concern: lack of consistent standards for measuring footprints and effective disclosure schemes (about 400 different initiatives underway).
  - Carbon footprint measurement examples include emissions from electricity use, direct fuel combustion, transportation of inputs and products, and upstream extraction-related emissions.

### Other investor tools and insurance instruments
- Corporate pressure and stress-testing:
  - Investors use dividend policies to restrain capital spending of high-carbon companies or require publication of stress tests against climate policy scenarios (examples noted for BP, Shell, and Statoil shareholders in 2015).
- Disaster-risk insurance and weather hedging:
  - Catastrophe bonds history and scale:
    - First issued in the mid-1990s.
    - More than $40 billion of catastrophe bonds have been issued in the past decade.
    - New issuance in 2014 reached $8.8 billion.
    - Outstanding amount in 2014 about $25 billion.
    - Pension funds and other large institutional investors bought about four-fifths of issued catastrophe bonds in 2014.
  - Obstacles to wider private investor involvement:
    - Very long maturity.
    - Risk-return profile that may not satisfy private investor objectives and mandates.
    - Difficulties in estimating potential losses given market newness.

### Financial sector policies, supervision, and stress testing
- Role of regulators and central banks:
  - Financial Stability Board is considering climate change implications for the financial sector and financial stability.
  - Bank of England prepared a Climate Change Adaptation Report focused on the insurance sector; the People’s Bank of China has undertaken similar analysis.
  - Proper implementation of IAIS Insurance Core Principles (including Valuation, Enterprise Risk Management for Solvency Purpose, and Capital Adequacy) will encourage insurers to take actions such as proper pricing and ensuring sufficient reserves and capital in a forward-looking manner.
- Disclosure and supervisory recommendations:
  - Proposal envisages:
    1. Firms regularly disclose information on the size of their carbon footprint and strategies to manage transition to a lower-carbon business model.
    2. Higher-quality corporate information to help financial institutions better assess firms’ climate risk management and transition plans.
    3. Financial institutions encouraged to disclose their carbon footprints and management of exposures to climate risks, including running suitable stress tests.
- Stress-testing gaps:
  - Insurers conduct stress-tests of physical risks, but climate change scenarios are not typically considered.
  - Corporate and financial sector stress testing of transition risks is not common.
  - Enhanced risk management tools are needed to evaluate stranded asset risks.
  - Consideration of market-wide tests to assess systemic-level risk is underway.

### Prudential regulation considerations
- Altering prudential regulations (capital risk weights, liquidity standards) to incentivize low-carbon investment is not favored:
  - Such alterations are less suited to address climate-related externalities and could hamper prudential goals of maintaining resilience of financial firms.
  - Financial regulation focus should remain on building resilience to shocks, adopting a systemic approach that accounts for all material risks including climate events, ensuring adequate capitalization, risk management, and disclosure.

### IMF role on mitigation, climate finance, adaptation, and financial resilience
- Mitigation and analytical support:
  - IMF continues analytical work and offers technical assistance.
  - Developed spreadsheet tools to quantify, for more than 150 countries, the efficient level of energy taxes to address climate and other environmental costs, and the carbon, fiscal, economic, and broader environmental benefits of price reform.
  - Ongoing work quantifies carbon pricing consistent with country-level mitigation pledges and trade-offs across fiscal and regulatory instruments.
- Climate finance:
  - IMF emphasizes attractiveness of carbon pricing instruments to attract private flows in developing countries and to raise public sources when applied to fuels used in international aviation and maritime transport.
- Adaptation and natural disaster risk:
  - IMF will assist countries, particularly small states, to enhance disaster risk management frameworks, determine appropriate combinations of buffers and risk transfer (insurance/financial market instruments), and tailor investment and growth policies to build resilience.
  - Policy advice will integrate likely costs of natural disasters into medium-term macroeconomic projections and ensure fiscal and monetary strategies build and maintain adequate buffers.
  - IMF strengthened the financial safety net for developing countries facing balance of payments needs, including from natural disasters.
- Financial sector resilience:
  - IMF staff will support initiatives encouraging consistent climate-related disclosures, prudential requirements, and stress testing, focusing on macro-financially critical aspects:
    1. Enhancing understanding of transmission mechanisms between climate risks and macro-financial stability.
    2. Helping design disclosure rules for climate risk exposure.
    3. Developing best practices for stress-testing climate risks.
    4. Supporting work on globally consistent prudential requirements for the insurance sector, including on a Global Insurance Capital Standard allowing for catastrophe risk.
    5. Capacity building to promote markets and instruments for managing climate-related risks and strengthening regulatory oversight.

### Box 2 — Climate change, natural disasters, and debt sustainability
- Channels of impact:
  - Extreme weather can severely reduce output and increase fiscal spending short term, generating borrowing needs and eroding public sector capacity for debt repayment.
  - Macroeconomic shocks from natural disasters (including balance of payments pressures and currency depreciations) can intensify external debt vulnerabilities.
  - Climate change may reduce long-term growth potential and the equilibrium exchange rate, and require increased fiscal spending for adaptation.
- Use of Debt Sustainability Analysis (DSA):
  - DSA can help assess short-term and long-term debt sustainability implications of natural disasters and climate change by:
    1. Incorporating growth implications and fiscal costs of climate change in the macroframework underlying the DSA.
    2. Including a customized scenario to evaluate the impact of natural disasters on debt.
- Country examples:
  - Kiribati 2015 DSA: incorporated conservative long-term growth assumptions and a 3½ percent-per-annum fiscal cost of adapting to climate change.
  - Samoa 2015 DSA: included a natural disaster shock scenario calibrated using historical disasters, which would increase public external debt by 10 percent of GDP at its peak.
  - St. Kitts and Nevis 2015 DSA (market access country): included a natural disaster shock under which public debt in 2020 would be 13 percent of GDP higher than baseline owing to lower growth and high fiscal deficits.
- Forward-looking considerations for DSF review:
  - Possible exploration areas include:
    - Empirical analysis of links between natural disaster vulnerability and higher probability of debt distress.
    - Application of a “severe natural disaster” scenario for vulnerable countries, designed using recent empirical work.
    - Consideration of long-term impacts of climate change on growth and fiscal/external balances when developing medium- and long-term projections, accounting for adaptation costs that raise public expenditure and debt short term but support long-term resilience.
    - Drawing on World Bank expertise in country-specific vulnerabilities, adaptation costs, and disaster damage/reconstruction costs.
- Framework note:
  - The IMF assesses public debt sustainability using two distinct frameworks: one for LICs (that generally rely on concessional financing), and another for countries that have market access.

*Source: Excerpt from IMF staff paper chapter on Macro-Fiscal Policies for Climate Change.*

### References

### _sdn1601 - References

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### Energy markets, technology policy, and subsidies
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- United Nations Environmental Programme (UNEP), 2014. Aligning the Financial System with Sustainable Development, Insights from Practice. Geneva.
- World Bank, 2011. Mobilizing Climate Finance. Paper prepared at the request of G20 Finance Ministers.
- Wodon, Q., A. Liverani, G. Joseph, and N. Bougnoux, 2014. Climate Change and Migration: Evidence from the Middle East and North Africa. Washington: World Bank.

### Agriculture, water, and food security links to climate
- Adedeji, Olumuyiwa, Gieck, Jana, and Kehayova, Vera, Forthcoming. “Food Shortages in Low-Income Countries: Macroeconomic Dimensions,” IMF Working Paper, International Monetary Fund, Washington.
- Burke, M., J. Dykema, D. Lobell, E. Miguel, and S. Satyanath, 2014. “Incorporating Climate Uncertainty into Estimates of Climate Change Impacts.” Review of Economics and Statistics 97(2): 461–71.
- Dellink, R., E. Lanzi, J. Château, F. Bosello, R. Parrado, and K. Bruin, 2014. “Consequences of Climate Change Damages for Economic Growth: A Dynamic Quantitative Assessment.” OECD Economics Department Working Papers, No. 1135, Organisation for Economic Co-operation and Development, Paris.
- Garcia Verdu, R., A. Meyer-Cirkel, A. Sasahara, and H. Weisfeld, Forthcoming. “The Impact of Climate Change on Agricultural Productivity.” IMF Working Paper, International Monetary Fund, Washington.
- Khan, S., M.A. Khan, B. Hanjra, and J. Mu, 2009. “Pathway to Reduce the Environmental Footprints of Water and Energy Inputs in Food Production.” Food Policy 34 (2): 141–49.
- Kochhar, K., C. Pattillo, Y. Sun, and others, 2015. “Is the Glass Half Empty or Half Full? Issues in Managing Water Challenges and Policy Instruments.” Staff Discussion Note 15/11, International Monetary Fund, Washington.
- Schlosser, C., K. Strzepek, X. Gao, and others, 2014. “The Future of Global Water Stress: An Integrated Assessment.” Report No. 254, MIT Joint Program on the Science and Policy of Global Change, Cambridge, Massachusetts.

### Cross-cutting and methodological contributions
- Agrawala, S., Bosello, F., Carrato, C,. de Cian, E., and Lanzi, E., 2011, “Adapting to Climate Change: Costs, Benefits, and Modelling Approaches,” International Review of Environmental Economics (5): 245–84.
- Dechezleprêtre, Antoine, and David Popp, 2014. “Fiscal and Regulatory Instruments for Clean Technology Development in the European Union.” Paper presented at a conference Energy Tax and Regulatory Policy in Europe: Reform Priorities and Research Needs, CESIfo, Munich, November.
- Dell, Melissa, Benjamin F. Jones, and Benjamin A. Olken, 2014. "What Do We Learn from the Weather? The New Climate-Economy Literature." Journal of Economic Literature 52(3): 740–98.
- Jorgenson, Dale W., Richard J. Goettle, Mun S. Ho, and Peter J. Wilcoxen, 2013. Double Dividend: Environmental Taxes and Fiscal Reform in the United States. Cambridge, Massachusetts: MIT Press.
- Krupnick, Alan J., Ian W.H. Parry, Margaret Walls, Tony Knowles and Kristin Hayes, 2010. Toward a New National Energy Policy: Assessing the Options. Resources for the Future and National Energy Policy Institute, Washington.
- Laframboise, N., and B. Loko, 2012. “Natural Disasters: Mitigating Impact, Managing Risks.” IMF Working Paper 12/245, International Monetary Fund, Washington.
- Margulis, S., Roger Sedjo, and Brent Sohngen, 2012. “Forest Carbon Sequestration,” In Fiscal Policy to Mitigate Climate Change: A Guide for Policymakers, edited by I. Parry, R. de Mooij, and M. Keen, Washington: International Monetary Fund.
- Parry, Ian W.H., and Antonio M. Bento, 2000. “Tax Deductions, Environmental Policy, and the “Double Dividend Hypothesis.” Journal of Environmental Economics and Management 39: 67–96.
- Raddatz, Claudio, 2007. “Are External Shocks Responsible for the Instability of Output in Low-Income Countries?” Journal of Development Economics 84 (1): 155–87.
- Verisk Maplecroft, 2015, Climate Change Exposure Index. Bath, United Kingdom.

*Compiled from the References section of _sdn1601.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/sdn/2016/_sdn1601.pdf_