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The IMF and Climate Change

Climate change presents a major threat to long-term growth and prosperity, and it has a direct impact on the economic wellbeing of all countries. The IMF has a role to play 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.

We are gradually mainstreaming climate-related risks and opportunities into our macroeconomic and financial policy advice. Climate considerations are now embedded in our bilateral and multilateral surveillance, capacity development, and lending, while we also increasingly collaborate with other institutions and fora.

Through our analytical work we have examined policy issues such as an international carbon price floor, the transition to a green economy, border carbon adjustments, scaling up private climate finance in emerging market and developing economies, strengthening climate information architecture, fiscal policies to support adaptation, and green public investment and public financial management.

Our Policy Guidance Relates to:

Mitigation

Including advice on measures to contain and reduce emissions through policies—such as increasing carbon taxes, reducing fuel subsidies and improving regulation—and providing tools to help countries achieve their Nationally Determined Contributions.

Adaptation

Including guidance on building financial and institutional resilience to natural disasters and extreme weather events, and infrastructure investments to cope with rising sea levels and other warming-related phenomena.

Transition to a low-carbon economy

Including updates to financial sector regulation to cover climate risks and exposure to “brown” assets, as well as measures to help countries diversify economies away from carbon-intensive industries while mitigating the social impact on affected communities.

What is the IMF doing to help tackle climate change?

Data

The IMF's Climate Change Indicators Dashboard provides a platform for disseminating climate change data for macroeconomic and financial stability analysis. The dashboard helps users assess the linkage between economic and financial activities and government policies on the one hand, and climate change (and environment more broadly) on the other—either on a country-level or cross-country basis—by analyzing a standardized set of comparable data.

Macroeconomic Surveillance

Article IV consultations will cover macro-critical issues triggered by climate change and/or the need to contain it. These include countries’ contributions to the global mitigation effort, especially by large emitters; domestic policy challenges that arise in the context of achieving countries’ nationally determined contributions under the Paris Agreement; macroeconomic policies to adapt to and build resilience to climate change; and challenges presented by a global transition to low-carbon energy.

Financial Stability Assessment Program (FSAP)

FSAPs are paying increasing attention to climate risk analysis for the financial system. Recent FSAPs have looked at the implications of transition risk in Norway, South Africa, Chile, Colombia and the UK, and physical risk in the Philippines. Where relevant, climate risk considerations are also being embedded in FSAP reviews of financial supervision and regulation.

Capacity Development

The IMF already supports member countries through capacity development in countries vulnerable to climate change and natural disasters and will further expand on that. For example:

The Climate Policy Assessment Tool (CPAT) to analyze impact of carbon pricing and other policies for Paris pledges and energy subsidies.
The climate-module of Public Investment Management Assessments (C-PIMA).
The Climate Macroeconomic Assessment Program (CMAP) pilots.
Green Public Financial Management.
Capacity development on financial sector issues related to climate risks, and public policies to support the transition to a climate-resilient and low-carbon economy.
The Climate Change 101 training and other regional workshops help build knowledge at Finance Ministries and Central Banks

Resilience and Sustainability Trust

The IMF’s Resilience and Sustainability Trust (RST) helps low-income and vulnerable middle-income countries build resilience to external shocks and ensure sustainable growth, contributing to their longer-term balance of payments stability. It complements the IMF’s existing lending toolkit by providing longer-term, affordable financing to address longer-term challenges, including climate change and pandemic preparedness.

In Depth

Green innovation and technology diffusion

Climate change and fiscal policy

Fossil fuel subsidies

Climate-related investment information

Focus Area

Blogs

Benefits of Accelerating the Climate Transition Outweigh the Costs

December 5, 2023

Climate Change Indicators Dashboard shows that avoiding physical damage from climate change can have sizable benefits

How the Middle East and Central Asia Can Better Address Climate Challenges

November 29, 2023

Investment of up to 4 percent of GDP annually is needed to ensure climate resilience and meet emissions reduction targets

World Needs More Policy Ambition, Private Funds, and Innovation to Meet Climate Goals

November 27, 2023

International cooperation is more important than ever because no country can address climate change by itself

Climate Change is Disrupting Global Trade

November 15, 2023

Panama’s drought shows how trade disruptions from climate extremes can reverberate around the world

How Green Innovation Can Stimulate Economies and Curb Emissions

November 7, 2023

Coordinated climate policies can spur innovation in low-carbon technologies and help them spread to emerging market and developing economies

How Channeling SDRs is Supporting Vulnerable Economies

October 13, 2023

Special drawing rights are providing an important boost for countries that need one, but greater support is encouraged to strengthen our unique lending tools

What's new

Asia’s Perspectives on Climate Change: Policies, Perceptions, and Gaps

November 29, 2023

Asia and the Pacific’s green transition will have far-reaching implications for the global economy. Over the past decades, the region has become the engine of global economic growth. With relatively heavy reliance on coal and high energy intensity, the region has recently become the largest contributor to growth in global GHG emissions, accounting for nearly 40 percent of the total emissions in 2020. Achieving net zero by 2050 requires an energy transition at an unprecedented scale and speed, even as the region must ensure energy security and affordability. The region must also address its vulnerability to climate change as it comprises many countries highly exposed to climate hazards increasing in severity and frequency with global warming. If managed well, the green transformation in Asia and the Pacific will create opportunities for economies not only in the region, but also around the world for inclusive and sustainable growth. The global economy is still far from achieving net zero by 2050, and the Asia and the Pacific region must play its part to deliver on mitigation and adaptation goals. Understanding Asia’s perspectives on the constraints and issues with climate ambitions, climate policy actions, and constraints is central for devising climate strategies to meet climate goals. To this end, this chapter draws on novel surveys of country authorities and public in the region to distill climate ambitions and challenges faced and identify sources of major gaps in achieving mitigation and adaptation goals. Measures to help close the gaps are drawn from policy discussions with country authorities in bilateral surveillance and related studies.

Resilience and Sustainability Facility—Operational Guidance Note

November 28, 2023

This note provides general guidance on the operationalization of the Resilience and Sustainability Facility (RSF) for arrangement requests and reviews. The RSF complements the existing IMF lending toolkit by providing longer-term, affordable financing to members to help them address longer-term structural challenges from climate change and pandemic preparedness. The note has benefited from experience gained during early operationalization of the RSF.

Is the Paris Agreement Working? A Stocktake of Global Climate Mitigation

November 21, 2023

Urgent and aggressive action to cut greenhouse gas emissions this decade is needed. As countries take stock of the Paris Agreement, this Note provides IMF staff’s annual assessment of global climate mitigation policy. Global ambition needs to be more than quadrupled: emissions cuts of 50 percent below 2019 levels by 2030 are needed for 1.5 degrees Celsius, but current targets would only achieve 11 percent. We provide options for ratcheting-up ambition equitably. Implementation could be accelerated via agreements on minimum carbon prices. Drastic increases in mitigation investment are needed, requiring policies to shift private sector incentives. Climate finance should be scaled-up, with a new goal aligned with needs in developing countries. The development and diffusion of low-carbon technologies should be accelerated collaboratively. Overall, the Paris Agreement is making progress, but a response to the Global Stocktake that prioritizes decisive action this decade is critical.

Pakistan: Technical Assistance Report–Public Investment Management Assessment–PIMA and Climate PIMA

November 17, 2023

Pakistan is working to improve its public investment management (PIM) to support economic growth and service delivery and make public infrastructure more sustainable and resilient to climate change. This assessment applies the IMF’s Public Investment Management Assessment (PIMA) framework, including the Climate-PIMA module. It highlights some of the important efforts made in recent years to strengthen PIM and identifies scope for further strengthening of key institutions. In a context where fiscal space is tight and climate action urgent, it recommends a number of targeted actions to move reforms forward.

Benin: Technical Assistance Report-Public Investment Management Assessment–PIMA and C-PIMA

November 16, 2023

This technical report discusses the results of the Public Investment Management Assessment (PIMA) of Benin, undertaken in March 2023 to update a previous assessment based on an October 2017 mission. The mission found out that public investment in Benin has significantly increased from its 2019 low and should help sustain progress in terms of physical access to infrastructure. The assessment highlighted progress since the late 2017 PIMA with respect to the institutional framework for public investment management, facilitated by the adoption of a comprehensive PIM legal framework. It also identified areas where effectiveness is still lagging, notably in terms of project appraisal and selection, maintenance and for PIMA institutions related to the execution of public investment. The report also includes the results of the climate module of the PIMA evaluation, which reflect that Benin’s long-lasting commitment in the fight against climate change, captured in a 2018 national law against climate change, are starting to feed into some public investment management practices. On the basis of this assessment, the report proposes seven high-priority recommendations that could greatly improve public investment management in the short to medium term.