Opening Remarks— COVID-19: Opportunities for a Green Recovery
IMF News, May 22, 2020
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Bibliographic details
- Published: May 22, 2020
Context and framing
- Speaker: Tao Zhang, IMF Deputy Managing Director.
- Event: Organization for Security and Cooperation in Europe Parliamentary Web Dialogue.
- Date: May 22, 2020.
- Central premise: The COVID-19 pandemic is acute and immediate; climate change is slower burning but equally critical. Economic policy choices made now will crucially affect long-term climate outcomes, so recovery efforts should promote a “green recovery.”
Key priorities and policy recommendations
- Develop an ambitious medium-term climate plan for the UN Climate Change Conference next year; the EU is cited as setting ambitious targets in the Green Deal.
- Use public support wisely:
- Prioritize green investment.
- Make financial lifelines to carbon-intensive companies conditional on commitments to reduce carbon emissions.
- Fiscal context note: transitioning to a low-carbon world requires $2.3 trillion in clean energy investment each year.
- The $2.3 trillion estimate includes the current investment of $1.8 trillion plus additional investment needs of $0.5 trillion.
- Put the right price on carbon:
- Existing carbon taxes and emissions trading schemes impose an average price of only $2 per ton.
- Measures equivalent to a global carbon price of at least $75 per ton by 2030 will be needed to keep global warming under 2 degrees Celsius.
- Promote green finance:
- Use targeted guarantees to mobilize private finance for green investment.
- Mandate improved disclosure of climate risks in lending and investment portfolios for banks receiving public support.
- Improve pricing of climate risk; IMF analysis underscores that climate-related disasters have so far had little effect on equity markets.
- Promote a just transition:
- Assist vulnerable households, workers, regions, and trade-exposed or fuel producing firms.
- Use carbon pricing revenues in broad tax reductions or public investments that boost growth and benefit all households.
- Coordinate internationally:
- Stabilizing the climate system requires going well beyond the Paris Accord.
- The IMF proposed complementing Paris commitments with a carbon price floor arrangement among major stakeholders (as in the October 2019 Fiscal Monitor).
IMF role and follow-up actions
- The IMF is scaling up support to member countries with policy advice, financial resources, and a global platform for joint action.
- The Managing Director has placed climate change high on the IMF agenda once the immediate crisis has passed.
- Within Europe, the IMF is preparing an analytic paper on Climate Policies in the EU to inform discussions with member countries.
Supporting references cited in remarks
- IMF Special Series Note: Fiscal Policies to Respond to COVID-19: “Greening the Recovery,” April 20, 2020.
- October 2019 Fiscal Monitor (basis for $2.3 trillion estimate and policy proposals).
- Forthcoming IMF publication—April 2020 Global Financial Stability Report, Chapter 5: “Physical Risk and Equity Prices.”
Opening Remarks— COVID-19: Opportunities for a Green Recovery — Tao Zhang, May 22, 2020.
Content in this bundle
- Greening the Recovery