## Asia’s Climate Emergency ## Source details **Canonical URL:** [Asia’s Climate Emergency](https://www.imf.org/en/publications/fandd/issues/2021/09/asia-climate-emergency-role-of-fiscal-policy-imf-dabla) ## Other formats - [Markdown version](/en/publications/fandd/issues/2021/09/asia-climate-emergency-role-of-fiscal-policy-imf-dabla/index.md) - [Structured JSON version](/en/publications/fandd/issues/2021/09/asia-climate-emergency-role-of-fiscal-policy-imf-dabla/index.json) - [Bundle manifest](/en/publications/fandd/issues/2021/09/asia-climate-emergency-role-of-fiscal-policy-imf-dabla/bundle-manifest.json) ## Bibliographic details - Authors: ERA DABLA-NORRIS, MASAHIRO NOZAKI, JAMES DANIEL - Published: September 2, 2021 --- ### The problem and regional exposure - Temperatures are rising two times faster in Asia than the global average. - By mid-century, rising waters will impact nearly a billion people in the Asia-Pacific region. - Cities at risk include Mumbai, Dhaka, Bangkok, Ho Chi Minh City, Jakarta, and Shanghai; Indonesia is planning to move its capital, Jakarta, to the island of Borneo. - For small Pacific island countries such as Kiribati, the Marshall Islands, and Tuvalu, rising sea levels pose an existential threat. - The region produces about half of the world’s carbon dioxide (CO2) emissions and contains five of the largest greenhouse-gas-emitting countries. - Coal-based power generation and carbon-intensive manufacturing (steel and cement, motor vehicles, agriculture, domestic cooking and heating) have resulted in dangerously high levels of particulate matter; Delhi, Dhaka, Ulaanbaatar, Kathmandu, Beijing, and Jakarta are among today’s 10 most polluted cities. - In 2019, India experienced a severe heat wave leading to water scarcity; torrential rains in South Asia caused large-scale displacement; the Mekong Delta experienced unprecedented low water levels; Australia faced historic bushfires; and more than 25 tropical cyclones damaged Pacific and Indian Ocean coasts. ### Mitigation tools and fiscal policy measures - Carbon tax: - A carbon tax can be an effective tool to reduce CO2 emissions. - Example: Gradually introducing a carbon tax of $25 a ton over the next decade in Vietnam would help meet its Paris mitigation targets. - Carbon revenues of about 1 percent of GDP could finance adaptation and mitigation plans or other social development needs. - Coal tax: - In China, India, and Mongolia, about 68–80 percent of emissions come from coal. - A specific tax on coal produced or consumed at an equivalent carbon tax rate could be considered. - India’s coal tax, introduced in 2010 and doubled in 2020, could be further strengthened. - Implementing a coal tax equivalent to $25 a ton could save about three million lives by 2030 in China alone. - Emissions trading systems and complementary measures: - Emissions trading currently covers power generators and large industries and typically covers only about half of national emissions in most countries in the region (China and Korea, for example). - Extending coverage to small-scale users would help. - Complementary measures include feebates (sliding scale of fees or rebates by emission rates) and stricter regulations on air quality, fuel quality, and vehicle emission standards. - Supporting green investment: - Investments in clean public transportation, smart electricity grids to incorporate renewables, and retrofitting buildings to improve energy efficiency will complement mitigation efforts. - Market-based incentives to promote access to green finance can ease financial constraints for firms. ### Managing transition and distributional impacts - Side-effects to manage: rising energy costs for households and firms, labor displacement, unequal regional impacts. - Distributional outcomes of a carbon tax vary by country: - Moderately regressive in China and Mongolia. - Moderately progressive in India. - Compensation and support measures: - Use carbon revenue to finance transfers: In India, using revenue to finance a universal lump sum transfer (possibly using Aadhaar unique identification numbers) would leave 80 percent of households better-off and reduce inequality. - In China, both a universal lump-sum transfer per person and a subsidy to rural households would reduce inequality. - Support for displaced workers: extended unemployment benefits, training, and reemployment services. - Public spending on clean public infrastructure can create new jobs in low-carbon sectors. ### Adaptation needs, costs, and priorities - Adaptation priorities: develop early warning systems, build resilient infrastructure, reduce exposure, ensure appropriate financing mechanisms, and decide what to protect versus relocate. - Gaps in adaptive capacity are large for Pacific island countries (Vanuatu and Tonga) and developing economies (Bangladesh, Indonesia, the Philippines). - Public investment needs for climate-proofing infrastructure are estimated to average 3.3 percent of GDP annually for the region. - Country-specific costs: - In Tonga, climate-related investment needs (of which adaptation investment accounts for a major part) are estimated at 14 percent of GDP annually for 10 years. - Public investment needs are sizeable in Indonesia, Laos, and the Philippines because of their large existing stock of exposed assets. - Investment returns and finance implications: - Investing in adaptive infrastructure can unlock private capital, reduce disaster recovery spending and debt distress, and enable quicker economic rebounds. - Financing adaptation will require revenue mobilization and spending prioritization and efficiency to ease growth-debt trade-offs. - For the most vulnerable low-income and Pacific island countries with limited fiscal space, meeting adaptation needs will require concessional financing. ### Exploiting synergies and leveraging recovery packages - Fiscal packages to jump-start COVID-19 recovery should exploit synergies between infrastructure needs and opportunities for emissions reduction and adaptation. - Innovation in climate-smart infrastructure and technologies (for example, carbon capture and storage) can help reduce mitigation costs. - The region’s advantages: countries such as China and Japan are at the forefront of innovation—from electric vehicles to renewables—positioning the region to capitalize on scale and technology. - More active promotion of green finance will help ensure more funds flow into low-carbon, climate-resilient investments. - Examples of adaptation leadership: Japan, Singapore, and Thailand perform well in frameworks for identifying, assessing, and reducing natural disaster risks; measures include restoring mangroves, protecting coral reefs, and adopting national and local adaptation plans. - For developing economies with large infrastructure needs (Vietnam and Indonesia), ensuring new infrastructure is climate-resilient (for example, roads with drainage or built on higher ground) is a relatively inexpensive way to reduce future risks. *Authors: ERA DABLA-NORRIS; MASAHIRO NOZAKI; JAMES DANIEL — Asia’s Climate Emergency, F&D Magazine, September 2021.* --- ## Content in this bundle - **1tonea2020001** - [1tonea2020001 (Markdown version)](/-/media/files/publications/cr/2020/english/1tonea2020001.pdf.md){rel="alternate" type="text/markdown"} - [1tonea2020001 (PDF)](/-/media/files/publications/cr/2020/english/1tonea2020001.pdf){rel="external" type="application/pdf"} - 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**亚洲气候紧急状态 - 金融与发展 - 国际货币基金组织季刊 2021年9月号·第58卷·第3期** - [亚洲气候紧急状态 - 金融与发展 - 国际货币基金组织季刊 2021年9月号·第58卷·第3期 (Markdown version)](/-/media/files/publications/fandd/article/2021/september/zh/dabla.pdf.md){rel="alternate" type="text/markdown"} - [亚洲气候紧急状态 - 金融与发展 - 国际货币基金组织季刊 2021年9月号·第58卷·第3期 (PDF)](/-/media/files/publications/fandd/article/2021/september/zh/dabla.pdf){rel="external" type="application/pdf"} --- _Source: https://www.imf.org/en/publications/fandd/issues/2021/09/asia-climate-emergency-role-of-fiscal-policy-imf-dabla_