QUANTITATITIVE CLIMATE RISK ASSESSMENT FISCAL TOOL (Q-CRAFT)
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- QUANTITATITIVE CLIMATE RISK ASSESSMENT FISCAL TOOL (Q-CRAFT)
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Purpose and overview
- Q-CRAFT helps governments assess the fiscal risks posed by climate change.
- The tool enables quantitative, long-term analysis of climate change impacts on key macroeconomic and fiscal indicators, including government debt.
- Q-CRAFT assesses risks across various Intergovernmental Panel on Climate Change (IPCC) emission scenarios through the end of the century.
Tool description and capabilities
- Developed by the IMF's Fiscal Affairs Department (FAD) as a transparent, flexible, and easy-to-use Excel-based tool.
- Projects key macroeconomic variables and fiscal aggregates, such as:
- GDP,
- fiscal deficit,
- debt-to-GDP ratio.
- Uses publicly available data and user assumptions for over 170 economies through to the end of the century.
- Assesses fiscal aggregate evolution under different IPCC emission scenarios and various speeds of economic adaptation to rising temperatures.
- Can be adapted to use national data and integrate additional shocks, such as natural disasters.
Policy relevance and how Q-CRAFT informs policymaking
- Equips government institutions, such as Ministries of Finance and Independent Fiscal Institutions, with comprehensive, data-driven assessments of long-term macroeconomic and fiscal risks from climate change.
- Enables projection of key variables like GDP growth and debt-to-GDP ratios through 2100.
- Policy uses:
- Identify slow-building fiscal risks from climate change that may not appear in short-term budgets or medium-term fiscal frameworks.
- Assess the impact of different emission scenarios on public finances to aid resilience-building policies and support earlier and smoother policy interventions.
- Integrate climate risks into longer-term fiscal planning and strategy development, complementing other macroeconomic models that account for factors like aging populations.
- Enhance long-term fiscal analysis by incorporating climate-change impacts on fiscal variables and extending the time horizon for fiscal policy analysis.
Capacity development application
- Through Capacity Development (CD) support, FAD helps member countries integrate climate considerations into fiscal risk frameworks using Q-CRAFT.
- CD objectives and outcomes:
- Quantify climate-related fiscal risks and strengthen macro-fiscal forecasting capabilities.
- Foster cross-government collaboration.
- Lead to inclusion of climate change fiscal risk analysis in Fiscal Risk Statements in numerous countries globally.
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