Speech

Mr. President,

Special Envoy Kerry,

Secretary Yellen,

At the IMF we look at climate change as central in our work on macroeconomic and financial stability, growth and employment.  It presents huge risks to the functioning of our economies and offers incredible opportunities for transformative investments and green jobs.

Let me focus on three areas where the right policies can make a significant difference in accelerating the transition to the new climate economy.

First, a robust price on carbon: it provides a critical market signal to producers and consumers in all sectors of the economy.  It 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 also help secure a just transition, compensating households for price increases and helping businesses and workers move from high to low carbon intensity activities. 

Our analysis shows that without it, we will not reach our climate stabilization goals. It also shows that 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. Many businesses now use a shadow carbon price in their models. Over 60 pricing schemes have been implemented. But 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.

Because of the urgency to act we 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 could facilitate an agreement, covering up to 80 percent of global emissions.

Such a price floor has to be pragmatic and equitable, with differentiated pricing for countries at different levels of economic development. And it can be implemented through carbon taxes, carbon trading systems, or equivalent measures that match local policy preferences.

Crucially, a price floor could avoid less efficient and contentious border carbon adjustments if some countries move ahead with robust pricing while others do not. 

Second, green taxonomy and standardized reporting of  climate related financial risks.  Both are necessary to unlock trillions of dollars in private finance.

The financial industry is already stepping up, but 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. That is why the IMF is working with our members and partners on data quality and disclosure, as well as on financial sector stress testing for climate-related risks.

The third area is financial support to developing countries.

They offer many of the lowest-cost opportunities—so it’s 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 it will make it possible to decouple growth and carbon emissions.

We will play our part, integrating climate change into our annual economic ‘health checks’ of countries and financial systems and actively promoting low carbon and climate resilient growth paths.