The Managing Director’s Statement on the Role of the Fund in Addressing Climate Change
Policy Papers, November 25, 2015
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- Published: November 25, 2015
- Series: Policy Papers
Role of the Fund
- The Fund has a role in helping its members address those challenges of climate change "for which fiscal and macroeconomic policies are an important component of the appropriate policy response."
- The paper identifies areas in which the Fund can contribute to supporting its members deal with the macroeconomic challenges of climate change, "consistent with national circumstances."
- It draws on materials contained in a forthcoming Staff Discussion Note (Farid et al. 2015) and benefited from discussions at informal Board meetings on IMF work on climate change held on September 30 and November 24, 2015.
- Publication date: November 25, 2015.
Greenhouse gas mitigation pledges and carbon pricing
- Finding: Greenhouse gas mitigation pledges were submitted by "over 160 countries" ahead of the Climate Conference in Paris in December.
- Analysis: These pledges "represent an important step by the international community towards containing the extent of global warming."
- Policy recommendation(s):
- Carbon pricing can play a critical role in meeting commitments "in the most efficient and effective way."
- Carbon pricing can raise substantial revenues that can be used to reduce other, more distorting taxes.
- Through its incentive effects, carbon pricing can help mobilize private finance for mitigation activities and spur the innovation needed to address climate challenges.
- Finance ministries have a key role in promoting and implementing carbon pricing policies and ensuring efficient use of the revenue raised.
- Recognition: Strategies for reducing emissions will reflect countries’ differing initial positions, political constraints and circumstances.
Macroeconomic impacts, vulnerabilities, and adaptation needs
- Finding: "The process of climate change is set to have a significant economic impact on many countries, with a large number of lower income countries being particularly at risk."
- Policy recommendation(s):
- Macroeconomic policies in at‑risk countries need calibration to accommodate more frequent weather shocks, including by building policy space to respond to shocks.
- Infrastructure will need upgrading to enhance economic resilience.
- It will be important that developing countries seeking to make these adaptations have access to "sufficient financial support on generous terms."
Financial markets, institutions, and stability
- Finding: Financial markets will play an important role in helping economic agents and governments cope with climate change‑induced shocks.
- Analysis: Heightened climate vulnerabilities and the structural adjustments associated with a shift towards a low‑carbon economy over the medium term "will have important implications for financial institutions and financial stability."
Synthesis of contributions and next steps
- The statement frames the Fund’s contribution around fiscal and macroeconomic policy expertise, support for carbon pricing, helping build policy space, advising on infrastructure resilience, and assessing implications for financial stability.
- The work is positioned as consistent with national circumstances and informed by Staff Discussion Note (Farid et al. 2015) and informal Board discussions on September 30 and November 24, 2015.
Source: The Managing Director’s Statement on the Role of the Fund in Addressing Climate Change (November 25, 2015).