Monitoring the Climate Impact of Fiscal Policy - Lessons from Tracking the COVID-19 Response
IMF Working Papers, October 29, 2021
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- Monitoring the Climate Impact of Fiscal Policy - Lessons from Tracking the COVID-19 Response
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Bibliographic details
- Authors: Khaled Eltokhy, Katja Funke, Guohua Huang, Yujin Kim, Genet Zinabou
- Published: October 29, 2021
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781589067769.001
Summary
- Context: In the wake of the COVID-19 crisis, governments announced unprecedented fiscal packages to address the economic impact of the crisis; there were widespread calls for “greening” these packages to meet the dual goals of economic recovery and environmental sustainability.
- Scope: The paper takes stock of contributions by various trackers that assessed the “greenness” of fiscal policy responses of the world’s largest economies, identifies strengths and weaknesses of their methodologies, and draws lessons for assessing the climate impact of fiscal policy going forward.
- Core conclusion: Trackers provided useful assessments of the (generally low) level of greenness and raised awareness; trackers’ methodologies, while valid and innovative, varied significantly with some important, if currently largely unavoidable, weaknesses; the recommended way forward is to track the greenness of entire government budgets, rather than just the COVID-19 response.
Key findings
- Trackers provided useful assessments of the (generally low) level of greenness and raised awareness.
- Trackers’ methodologies:
- Were valid and innovative.
- Varied significantly across efforts.
- Included some important weaknesses that are largely unavoidable at present.
- Policy focus recommendation: Move from tracking only the COVID-19 fiscal response to tracking the greenness of entire government budgets.
Methodological observations
- Variation: Methodologies across trackers differed substantially, affecting comparability and interpretation.
- Limitations: The paper identifies important methodological weaknesses in existing trackers; these weaknesses are characterized as currently largely unavoidable.
- Value added: Despite methodological issues, trackers played a role in raising awareness and providing assessments of fiscal greenness.
Policy recommendations and way forward
- Primary recommendation: Track the greenness of entire government budgets rather than limiting assessments to crisis-related fiscal measures.
- Rationale: A whole-of-budget approach will provide a more comprehensive and comparable assessment of fiscal policy’s climate impact.
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- Working Paper