Benefits of Accelerating the Climate Transition Outweigh the Costs
IMF Blog, December 5, 2023
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Bibliographic details
- Authors: Jens Mehrhoff
- Published: December 5, 2023
Key findings from NGFS scenarios
- Making an orderly transition to net zero by 2050 could result in global gross domestic product being 7 percent higher than under current policies.
- Temperatures are, on average, up 1.2 degrees Celsius from pre-industrial levels.
- This year will be the warmest on record, according to the World Meteorological Organization.
- Droughts and heatwaves are the largest source of risk across regions in NGFS models:
- Europe and Asia are most exposed to heatwaves.
- Africa, North America, and the Middle East are most vulnerable to droughts.
Economic tradeoffs and mitigation
- Transitioning to a low-carbon economy will have negative impacts on demand from higher carbon prices and energy costs.
- These negative impacts can be partially offset by recycling carbon revenues into government investment and lower employment taxes.
- Most importantly, lowering emissions will reduce the physical impacts of climate change, which lowers macroeconomic costs.
Investment and policy implications
- Transitioning to a net-zero economy will require substantial investment in green electricity and energy storage.
- How economies approach making this investment poses policy tradeoffs, as detailed in the October Fiscal Monitor.
Institutional context and tools
- The Network for Greening the Financial System (NGFS) is a group of 127 central banks and financial supervisors working to manage climate risks and boost green investment; it was established in 2017.
- The climate scenarios are aligned with international best practices and supplement scenarios from other international organizations such as the Intergovernmental Panel on Climate Change and the International Energy Agency.
- The IMF is one of 20 international organizations that are NGFS observers, and actively contributes to the scenario design and analysis.
- A selection and visualization of key indicators from the NGFS climate scenarios is curated by the IMF on the Climate Change Indicators Dashboard.
Source: Benefits of Accelerating the Climate Transition Outweigh the Costs (IMF, December 5, 2023).