IMF Managing Director’s intervention at the Leaders Summit on Climate, Session 2: Investing in Climate Solutions
IMF News, April 22, 2021
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Bibliographic details
- Published: April 22, 2021
Context and framing
- As Prepared for Delivery, April 22, 2021.
- Climate change is central to IMF work on macroeconomic and financial stability, growth and employment.
- Climate change presents both huge risks to economic functioning and opportunities for transformative investments and green jobs.
Key policy areas emphasized
- The speech focuses on three areas where the right policies can accelerate the transition to a new climate economy:
- A robust price on carbon.
- Green taxonomy and standardized reporting of climate-related financial risks.
- Financial support to developing countries.
Carbon pricing: findings and recommendations
- Findings:
- A robust price on carbon provides a critical market signal to producers and consumers across all sectors.
- Carbon pricing has proven to advance investments in renewable energy, electric mobility, energy efficient buildings, reforestation and other climate friendly activities, with positive impact on growth and jobs while reducing carbon emissions.
- Carbon revenues can help secure a just transition by compensating households for price increases and helping businesses and workers move from high to low carbon intensity activities.
- Without carbon pricing, IMF analysis shows climate stabilization goals will not be reached.
- A mix of steadily rising carbon prices and green infrastructure investment could increase global GDP by more than 0.7 percent per year over the next 15 years—and create millions of new jobs.
- Carbon pricing is gaining momentum: over 60 pricing schemes have been implemented; many businesses use a shadow carbon price in their models.
- The average global price is currently $2 a ton, and needs to rise to $75 a ton by 2030 to curb emissions in line with the goals of the Paris Agreement.
- Recommendations:
- Propose an international carbon price floor among large emitters, such as the G20.
- Focus on a minimum carbon price among a small group of large emitters to facilitate agreement; such an approach could cover up to 80 percent of global emissions.
- Ensure the price floor is pragmatic and equitable, with differentiated pricing for countries at different levels of economic development.
- Implement through carbon taxes, carbon trading systems, or equivalent measures that match local policy preferences.
- A price floor could avoid less efficient and contentious border carbon adjustments if some countries move ahead with robust pricing while others do not.
Green taxonomy and standardized reporting
- Findings:
- Both green taxonomy and standardized reporting of climate-related financial risks are necessary to unlock trillions of dollars in private finance.
- The financial industry is stepping up, but data quality and availability remain major barriers.
- In a recent survey of major investors, more than half cited the poor quality or availability of data as the biggest barrier to sustainable investing.
- IMF actions:
- Working with members and partners on data quality and disclosure.
- Developing financial sector stress testing for climate-related risks.
Financial support to developing countries
- Findings and rationale:
- Developing countries offer many of the lowest-cost opportunities for mitigation and adaptation.
- It is in everyone’s interest to fulfill the commitment of $100 billion a year in climate finance for the developing world.
- Combined with technology transfer and policy support, climate finance will make it possible to decouple growth and carbon emissions.
- IMF role:
- Integrate climate change into annual economic “health checks” of countries and financial systems.
- Actively promote low carbon and climate resilient growth paths.
Kristalina Georgieva — IMF Managing Director; As Prepared for Delivery, April 22, 2021.