{
  "title": "Finding the Right Policy Mix to Safeguard our Climate",
  "publication": "IMF Blog, October 7, 2020",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2020/10/07/blog-finding-the-right-policy-mix-to-safeguard-our-climate",
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  "summary": "Global temperatures have increased by about 1°C since the pre-industrial era because of heat-trapping greenhouse gases accumulating in the atmosphere.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Global temperatures have increased by about 1°C since the pre-industrial era because of heat-trapping greenhouse gases accumulating in the atmosphere.\n- Without strong action, global temperatures could increase by an additional 2–5°C by the end of this century.\n- Keeping temperatures to levels deemed safe by scientists requires bringing net carbon emissions to zero on net globally by mid-century.\n- The World Economic Outlook argues economic policy tools can pave a road toward net zero emissions by 2050 while supporting economic growth, employment, and income equality."
    },
    {
      "heading": "Policy tools and how they work",
      "content": "- Economic policies affect climate through two main channels:\n  - Composition of energy (high- vs. low-emission sources).\n  - Total energy usage.\n- Carbon tax:\n  - Makes dirty fuels more expensive, incentivizing shifts toward greener fuels.\n  - Reduces total energy consumption because energy becomes more expensive.\n- Green energy subsidies and direct public investment:\n  - Increase the share of low-emissions energy.\n  - By making energy cheaper overall, can stimulate or at least not reduce total energy demand."
    },
    {
      "heading": "Findings from the World Economic Outlook scenario analysis",
      "content": "- Recommendation: Pair carbon taxes with policies that cushion consumers’ energy costs and initially opt for a green investment stimulus (clean public transportation, smart electricity grids, retrofitting buildings).\n- Two goals of green infrastructure push:\n  - Boost global GDP and employment in the initial years of the recovery from the COVID-19 crisis.\n  - Increase productivity in low-carbon sectors, incentivizing private investment and easing adaptation to higher carbon prices.\n- Quantified impacts:\n  - A comprehensive mitigation strategy could boost global GDP in the first 15 years of the recovery by about 0.7 percent of global GDP on average.\n  - Employment could increase for about half of that period, leading to about 12 million extra persons being employed globally.\n- Long-term effects:\n  - Preannounced and gradually rising carbon prices become a powerful tool to deliver the needed reduction in carbon emissions as the recovery takes hold.\n  - The net effect would approximately halve the expected output loss from climate change and provide long-term, real GDP gains well above the current course from 2050 onward."
    },
    {
      "heading": "Transition costs and heterogeneity across countries",
      "content": "- Aggregate transitional costs:\n  - Between 2037–50, the mitigation strategy would hold global GDP down by about 0.7 percent on average each year.\n  - By 2050, the drag would be about 1.1 percent relative to unchanged policies.\n- Contextualization:\n  - These costs are manageable given global output is projected to grow by 120 percent between now and 2050.\n  - Drag on output could be reduced if policies incentivize technological development in clean technologies (e.g., R&D subsidies).\n  - The package would be neutral for output during that period if benefits from better health outcomes (due to reduced pollution) or less traffic congestion are considered.\n- Cross-country variation:\n  - Some advanced economies may experience smaller economic costs or even gains throughout the transition due to earlier investments in renewables.\n  - Countries with fast economic or population growth (India, especially) and most oil producers should expect larger economic costs by forgoing cheap forms of energy, such as coal or oil.\n  - Output costs remain small for most countries and must be weighed against avoided climate damages and health benefits from reduced fossil fuel use."
    },
    {
      "heading": "Distributional impacts and measures to reduce the burden",
      "content": "- Low-income households are more likely to be hurt by carbon pricing because they:\n  - Spend a relatively large share of their income on energy.\n  - Are more likely to be employed in carbon-intensive manufacturing and transportation.\n- Policy options to limit adverse effects:\n  - Rebate carbon revenues through cash transfers.\n    - To fully protect consumption of households in the bottom 40 percent of the income distribution:\n      - The U.S. government would need to transfer 55 percent of all carbon pricing revenues.\n      - The Chinese government would need to transfer 40 percent of all carbon pricing revenues.\n  - Higher public spending on clean public infrastructure to create new jobs in low-carbon, often labor-intensive sectors to offset job losses in high-carbon sectors.\n  - Retooling workers to smooth job transitions to low-carbon sectors."
    },
    {
      "heading": "Policy recommendation",
      "content": "- Governments should move swiftly to ensure a growth-friendly and just transition by:\n  - Implementing a green investment stimulus early in the recovery.\n  - Preannouncing and gradually raising carbon prices paired with measures to cushion consumer impacts.\n  - Supporting R&D in clean technologies and targeted transfers or public spending to protect vulnerable households and workers.\n\nBased on Chapter 3 of the World Economic Outlook, “Mitigating Climate Change – Growth and Distribution-Friendly Strategies,” by Philip Barrett, Christian Bogmans, Benjamin Carton, Oya Celasun, Johannes Eugster, Florence Jaumotte, Adil Mohommad, Evgenia Pugacheva, Marina M. Tavares, and Simon Voigts.\n\n---\n\n\n References\n\n- عربي\n- 日本語\n- Português\n- latest World Economic Outlook\n\nSource: https://www.imf.org/en/blogs/articles/2020/10/07/blog-finding-the-right-policy-mix-to-safeguard-our-climate"
    }
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    "Authors: the end of this century. Keeping temperatures to levels deemed safe by scientists requires bringing net carbon emissions to zero on net globally by mid-century.",
    "Published: October 7, 2020",
    "Global temperatures have increased by about 1°C since the pre-industrial era because of heat-trapping greenhouse gases accumulating in the atmosphere.",
    "Without strong action, global temperatures could increase by an additional 2–5°C by the end of this century.",
    "Keeping temperatures to levels deemed safe by scientists requires bringing net carbon emissions to zero on net globally by mid-century.",
    "The World Economic Outlook argues economic policy tools can pave a road toward net zero emissions by 2050 while supporting economic growth, employment, and income equality.",
    "Economic policies affect climate through two main channels:",
    "Carbon tax:",
    "Green energy subsidies and direct public investment:",
    "Recommendation: Pair carbon taxes with policies that cushion consumers’ energy costs and initially opt for a green investment stimulus (clean public transportation, smart electricity grids, retrofitting buildings).",
    "Two goals of green infrastructure push:",
    "Quantified impacts:",
    "Long-term effects:",
    "Aggregate transitional costs:",
    "Contextualization:",
    "Cross-country variation:",
    "Low-income households are more likely to be hurt by carbon pricing because they:",
    "Policy options to limit adverse effects:",
    "Governments should move swiftly to ensure a growth-friendly and just transition by:",
    "[عربي](https://www.imf.org/ar/News/Articles/2020/10/07/blog-finding-the-right-policy-mix-to-safeguard-our-climate)",
    "[日本語](https://www.imf.org/ja/News/Articles/2020/10/07/blog-finding-the-right-policy-mix-to-safeguard-our-climate)",
    "[Português](https://www.imf.org/pt/News/Articles/2020/10/07/blog-finding-the-right-policy-mix-to-safeguard-our-climate)",
    "[latest World Economic Outlook](https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020)"
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