## Asia-Pacific, the Gigantic Domino of Climate Change

_IMF Blog, March 25, 2021_

## Source details

**Canonical URL:** [Asia-Pacific, the Gigantic Domino of Climate Change](https://www.imf.org/en/blogs/articles/2021/03/25/asia-pacific-the-gigantic-domino-of-climate-change)

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## Bibliographic details
- Authors: Vitor Gaspar, Chang Yong Rhee
- Published: March 25, 2021

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### Scale and strategic importance
- Asia-Pacific contains the world’s biggest population and the fastest-growing part of the global economy.
- The region accounts for the largest share of emissions globally, producing about half the world’s carbon dioxide.
- China and India are identified as the first and third-largest emitters respectively, with the US second.
- The region is the most exposed to extreme weather events and includes some of the smallest and most vulnerable countries as well as many leaders in green technology.
- The authors and date: Vitor Gaspar, Chang Yong Rhee, March 25, 2021.

### Immediate opportunity: green recovery from COVID-19
- The COVID-19 recovery presents an opportunity to direct recovery spending into stimulating sustainable jobs and growth.
- Green investment is described as generally more labor-intensive than regular investment, providing near-term extra spending and jobs while strengthening long-term sustainability and resilience.
- Suggested public investments and policies to accelerate transitions include:
  - investing in renewable energy;
  - retrofitting buildings;
  - upgrading the electricity grid;
  - facilitating electric cars;
  - incentivizing research;
  - upgrading infrastructure projects and developing coastal protection where adaptation is the priority.
- The IMF’s role: integrating climate into annual country economic assessments and scaling up capacity development for government officials.

### Mitigation: carbon pricing and complementary policies
- Carbon taxes are presented as a highly effective but underused tool in the region.
- Key numeric findings and targets:
  - A gradually introduced and relatively modest carbon tax of $25 per ton would achieve the region’s aggregate Paris Agreement target.
  - Models suggest that $50-100 per ton is required globally to keep warming below 2 degrees.
- Targeted fuel approaches:
  - Targeting the most polluting fuels (notably coal in China, India, and Mongolia) could be very effective.
  - Reducing coal use also reduces air pollution, which could save some 3 million lives in China alone by 2030.
- Compensation and distributional policy:
  - Households, workers, and firms adversely affected by higher energy prices need to be identified and compensated.
  - Compensation approaches include targeted benefits or universal transfers.
  - Examples of revenue use: China could use carbon tax revenues to increase its minimum guaranteed income scheme, finance green investment, or reduce other taxes.
- Complementary instruments and policies:
  - Expanding emissions trading systems to include more sectors.
  - Financial incentives for less-polluting alternatives (e.g., electric vehicles).
  - Stricter air quality regulations to support decarbonization.

### Adaptation: increasing resilience and financing needs
- Even with mitigation, historic emissions mean some warming is inevitable; adaptation is urgent.
- Rising sea levels could directly affect a billion people by mid-century, potentially submerging many cities and wiping out entire nations.
- Priority adaptation actions for vulnerable countries:
  - protect infrastructure;
  - make water resources more resilient;
  - adapt dryland agriculture;
  - restore mangroves;
  - improve early warning systems for natural disasters.
- Scale of public investment needed:
  - Adaptation requires stepping up public investment, on average by about 3 percent of GDP annually.
  - For the smallest and least-polluting countries, costs are higher in GDP terms.
  - Example: a recent IMF/World Bank assessment concluded that Tonga would have to spend $67 million a year in climate adaptation for 10 years — equal to 14 percent of its GDP — highlighting the need for greater international support.

### Policy synthesis and strategic message
- Three priority areas of recommended action:
  - More carbon taxes, with compensation mechanisms for affected groups.
  - Increase adaptability through stepped-up public investment and targeted adaptation measures.
  - Use COVID-19 recovery spending to accelerate greener investments and technology transfer, and expand multilateral climate funds.
- The overarching warning and opportunity:
  - Asia-Pacific is framed as a “gigantic domino” whose actions will determine global climate outcomes.
  - The pandemic recovery phase is presented as the timely opportunity to secure a better 2055.

*Source: Asia-Pacific, the Gigantic Domino of Climate Change — IMF blog post by Vitor Gaspar and Chang Yong Rhee, March 25, 2021.*

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## References

- [日本語](https://www.imf.org/ja/News/Articles/2021/03/25/blog032521-asia-pacific-the-gigantic-domino-of-climate-change)
- [newly released IMF staff paper](https://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2021/03/24/Fiscal-Policies-to-Address-Climate-Change-in-Asia-and-the-Pacific-Opportunities-and-49896)
- [recent IMF/World Bank assessment](https://www.imf.org/en/Publications/CR/Issues/2020/06/30/Tonga-Technical-Assistance-Report-Climate-Change-Policy-Assessment-49537)

_Source: https://www.imf.org/en/blogs/articles/2021/03/25/asia-pacific-the-gigantic-domino-of-climate-change_