What is a Climate Policy Diagnostic (CPD)?

The Climate Policy Diagnostic (CPD) provides countries with an in-depth analysis of their climate policies, focusing on mitigation and adaptation strategies. It also addresses the necessary institutional and legal frameworks to support these policies. The CPD complements other IMF climate capacity development tools, such as the C-PIMA (Climate-Public Investment Management Assessment) and Green Public Financial Management (PFM), as well as diagnostics from other international organizations like the World Bank Country Climate and Development Reports (CCDR). Furthermore, we've developed the Climate Macroeconomic Assessment Programs (CMAP) to offer a comprehensive approach for creating policy responses to the economic impacts of climate change. We've successfully conducted CMAP pilots in Samoa and Madagascar.

The CPD's flexible and modular design is tailored to meet the specific needs, contexts, and challenges of each country. It provides a detailed set of recommendations, including potential timelines and priorities, to help countries build long-term resilience to climate challenges. The CPD has already been instrumental in shaping the Resilience and Sustainability Facility programs in countries like Tanzania, Moldova, Cabo Verde, and Honduras.

As part of the IMF’s support to countries on climate mitigation, adaptation, and institutional issues, the CPD leverages the Fund’s analytical tools and diagnostic products. This support is crucial for integrating climate change considerations and related fiscal measures into macro-fiscal policies, planning, and frameworks.

What Does the CPD Cover?

The CPD supports the design and implementation of fiscal policies that back countries' climate strategies through three main pillars:

Mitigation Support

The IMF analyzes the environmental, fiscal, economic, and distributional impacts of a wide array of mitigation policies, including carbon pricing, using the Climate Policy Assessment Tool (CPAT). CPAT aids our capacity development missions in assisting member countries to design and implement effective policies to achieve their climate objectives. Our policy advice is further supported by other tools like the Vehicle Feebates Model, Border Carbon Adjustment Model, Fossil Fuel Subsidy Database, and National Determined Contributions (NDC) conversions.

The IMF also offers advice on sector-specific mitigation policies across transportation, energy, industry, or forestry, and land use. For fossil fuel exporters, we provide guidance on upstream mitigation measures and fiscal regime reform options to facilitate the energy transition. Our capacity development extends to comprehensive support for mitigation policies, including compensating measures and social safety nets. We also conduct regional and country-specific workshops on our analytical tools and climate mitigation policies, such as a recent workshop supporting Chile.

Macro-Fiscal Analysis and Adaptation Support

The IMF offers a broad climate fiscal assessment and recommendations to help our member countries meet their climate goals and enhance resilience to climate challenges. Our capacity development spans sectoral fiscal policy issues, including those related to water and energy sectors, and disaster risk financing and management. Leveraging our extensive database of country-level historical climate observations and future scenarios, we assist countries in assessing future climate scenarios, including extreme events. This enables countries to develop analytical insights and empirical evidence for integrating climate change into macro-fiscal planning and frameworks.

Enabling Institutions

Our capacity development efforts include evaluating the institutional and legal frameworks that underpin the implementation of climate policies. This involves reviewing climate strategies, policies, and frameworks to ensure their comprehensiveness and alignment with NDCs. The IMF also assesses institutional mechanisms supporting NDC implementation and offers recommendations for mainstreaming climate considerations in decision-making processes and developing internal capacities.

How Can I Request a CPD?

Government representatives can request a CPD in the same manner as any other capacity development service. This can be done by reaching out through their country’s respective Executive Director office or directly contacting IMF staff at FADCP-AST@imf.org.