Climate Change and the Age of Adaptation
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Bibliographic details
- Authors: KRISTALINA GEORGIEVA
- Published: December 1, 2019
Overview
- Kristalina Georgieva (Managing Director of the International Monetary Fund) argues we are entering an age of adaptation and must accelerate the global transition to a low-carbon economy.
- No individual or institution can stand on the sidelines; actions now determine outcomes for future generations.
Human and long-term scenarios
- Illustrative lifetime impacts:
- Kristalina Georgieva’s 9-year-old granddaughter:
- By age 20: climate change may push an additional 100 million people into poverty.
- By age 40: 140 million may become climate migrants.
- By age 90: the planet may be 3–4° hotter and barely livable.
- Core message: reduce emissions, offset what cannot be reduced, and adapt to new climate realities.
Reality check and rationale for adaptation
- Observed trends:
- More frequent and more severe weather-related events: more droughts, more floods, more heat waves, more storms.
- Adaptation framing:
- Adaptation is not a defeat but a defense; the right investments deliver a “triple dividend”:
- Averting future losses.
- Spurring economic gains through innovation.
- Delivering social and environmental benefits, especially to those most at risk.
- Examples of adaptation measures:
- Updated building codes to better withstand extreme events.
- Investing in climate-resilient agriculture, including research and development.
Mitigation: carbon pricing and fiscal design
- IMF analysis recommendation:
- Large emitting countries need to introduce a carbon tax that rises quickly to $75 a ton in 2030, consistent with limiting global warming to 2°C or less.
- Fiscal design principles:
- Carbon taxes must be implemented in a careful and growth-friendly fashion.
- Retool the tax system in fair, creative, and efficient ways—not just add a new tax.
- Example: Sweden’s approach—low- and middle-income households received higher transfers and tax cuts to offset higher energy costs after introducing a carbon tax.
- Revenue uses and magnitudes:
- Revenues estimated at 1–3 percent of GDP.
- Portions of revenue could be directed back to low-income households and to support firms and households choosing green pathways.
Adaptation, resilience-building, and IMF operational role
- Economic impacts of disasters:
- Countries vulnerable to natural disasters suffer immediate losses and long-lasting economic effects.
- In some countries, total economic losses exceed 200 percent of GDP—as when Hurricane Maria struck Dominica in 2017.
- IMF tools and activities:
- Emergency lending facilities provide speedy assistance to low-income countries hit by disasters.
- Support resilience-building strategies in highly vulnerable countries to prepare for and rebound from disasters.
- Provide training and technical assistance to help governments better manage disaster risks and responses.
- Collaborate with the World Bank on Climate Change Policy Assessments to assess mitigation and adaptation plans, risk management strategies, and financing, and to identify investment, policy, and capacity gaps.
Financial sector, central banks, and new frontiers
- Engagement with central banks and regulators:
- Work more closely with central banks, recognizing their roles in financial and price stability as they adapt regulatory frameworks and practices to climate risks.
- Support improving climate risk disclosure and classification standards to help financial institutions and investors assess climate-related exposures and help regulators gauge system-wide risks.
- IMF engagement includes working with the Network of Central Banks and Supervisors for Greening the Financial System and other standard-setting bodies.
- Climate-related stress testing:
- Central banks and regulators should help banks, insurers, and nonfinancial firms develop climate-related “stress tests.”
- Such stress tests can identify likely impact of severe adverse climate-driven shocks on solvency and financial stability.
- IMF will push forward climate-change stress testing, including through country financial-sector and economy assessments.
- Careful calibration is needed because testing must assess effects of shocks or policy actions that may have little historical precedent.
Mobilizing finance and collective action
- Financial signals and instruments:
- Rapid increase of green bonds is a positive trend, but much more is required to secure the future.
- Call to action:
- Intensify efforts to exchange knowledge and ideas, formulate and implement policies, and finance the transition to the new climate economy.
- Emphasis on collective responsibility: “we all need to intensify our efforts … Our children and grandchildren are counting on us.”
Source: "Climate Change and the Age of Adaptation", Kristalina Georgieva, IMF F&D Magazine, December 2019
Content in this bundle
- كلام صريح
- Climate Change and the Age of Adaptation – IMF F&D | DECEMBER 2019
- Hablando claro: La era adaptativa ● Finanzas y Desarrollo ● Diciembre de 2019
- Il est temps de s’adapter
- Эпоха адаптации
- Climate Change and the Age of Adaptation – IMF F&D | DECEMBER 2019