Deputy Managing Director Zhang Speech: Climate Change: From Awareness to Action

IMF News, June 9, 2020

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Speech delivered for Delphi Economic Forum V: “The Day After” on June 9, 2020.
Immediate context: the COVID-19 pandemic is the current crisis, but climate change is identified as a slower-moving, equally critical crisis that is linked to policy choices made during the pandemic response.
Paris COP21 referenced as the five-year prior commitment point for global action to curb temperature rise.
Europe highlighted as being at the forefront of climate action.

Key EU ambition: to be carbon neutral by 2050.
European Green Deal and related policy initiatives and investment are presented as central to the EU response.
EU recovery architecture: the new Economic Recovery Fund and a revised EU budget under discussion aim to support a green recovery after the pandemic.
Noted challenges:
- The carbon price under the Emissions Trading System is currently around €25 a ton.
- To achieve carbon neutrality by 2050, much higher effective carbon prices and more ambitious emissions reductions are needed.
- Distributional impacts of ambitious climate policies must be assessed and addressed to ensure a “just and inclusive transition.”
- Transition requires massive investment in renewables, smart grids, and electric vehicles and will require mobilizing private finance.
Opportunity: the transition to a carbon-neutral economy brings new growth opportunities.

Greece has ample solar and wind capacity that can be tapped.
Potential co-benefits of green policies in Greece:
- New jobs through smarter urban development and social policies.
- Better housing and improved air quality reducing illnesses and deaths related to pollution.
- Savings on health spending and increased tourism.
Current status:
- Greece is among the few countries that have already achieved their 2030 greenhouse gas emission targets.
- This achievement mainly reflects reductions in energy demand from the recession.
- Greece’s energy structure remains more carbon-intensive than that of many other European countries.
National plan:
- The new Greek national energy and climate plan envisions a substantial boost in green investment and full closure of lignite plants over the medium term.
Two sets of policy questions posed:
- What will happen to the lignite-producing areas of Western Macedonia as plants close and workers are adversely affected? What policies are needed to help in the transition toward greener economic activity?
- What are the implications for climate change, and climate policies, of Greece’s role as a shipping and tourism hub? These two industries account for about a quarter of Greece’s GDP.
Suggested approaches:
- Targeted support to affected groups and sectoral diversification to mitigate transitional costs.
- A supportive investment climate as a key element to successful transition.

IMF is scaling up work on both mitigation and adaptation.
Analytical and policy work includes:
- Carbon pricing analysis: helping countries understand needed carbon prices, trade-offs with other instruments, and how to design comprehensive, growth-friendly, politically acceptable policies.
- Pricing climate risks and providing incentives for climate-resilient investment.
- Integrating climate risks and adaptation spending into economic and fiscal plans.
- Assessing countries’ climate strategies together with the World Bank, starting with small countries most vulnerable to climate change.
- Stress testing of financial systems to assess resilience to natural disasters and climate-motivated policy changes.
- Working more closely with central banks on climate-change risks affecting financial and price stability.
Example of central bank engagement: the Central Bank of Greece has been very active in this area.
Emergency and pandemic-related financing as of June 4:
- Nearly $24 billion in emergency financing to 67 countries.
- Debt relief of $229 million to 27 of the IMF’s poorest members.
The IMF’s readiness:
- Emergency lending facilities designed to provide speedy assistance when natural disasters strike or in pandemics.
- The IMF is gearing up efforts to help membership recover toward a better, greener future.

Keep climate change in mind as countries move from rescue to recovery; ensure a “green recovery” for Greece, Europe, and the planet.
Act on multiple fronts:
- Reduce emissions and offset what cannot be reduced.
- Address social and economic consequences of the transition (ensure fairness and inclusivity).
- Seize economic opportunities from a greener economy through investment and private finance mobilization.
No institution or individual can stand on the sidelines; coordinated action is required across fiscal, financial, and structural policies.

Source: Deputy Managing Director Zhang Speech: Climate Change: From Awareness to Action (Delphi Economic Forum V), June 9, 2020.