IMPROVING PUBLIC FINANCE
3.1
Working éäÜÚéÝÚçéäěÜÝé climate change
Amid a series of unprece- dented events, the world must also find ways to combat cli- mate change. The International Monetary Fund calls for a front- loaded approach to advance decarbonisation. Kristalina Georgieva, managing director, International Monetary Fund ¼ÏÏÃÀÄÈÁÒÀ¼ÍÀ RAPIDLY INTEGRATING CLIMATE INTO OUR ÒÊÍÆÎϼÍÏÄÉ WITH OUR POLICY ENGAGEMENT WITH OUR MEMBERS. WE CONSIDER MITIGATION FOR COUNTRIES THAT ¼ÍÀÃÄÂÃËÊÇÇÐÏÀÍÎ ADAPTATION FOR THOSE THAT ARE ÑÐÇÉÀͼ½ÇÀ¼É¿ TRANSITION FOR THOSE THAT HAVE LARGE HYDROCARBON SECTORS.
W e are here in a rather difficult time for the world, in a more shock-prone environ- ment. Since 2020, we have experienced unthinkable events: COVID, then war in Ukraine, a cost-of- living crisis, and now conflict in this region … On top of this come geopolitical tensions that cause economic fragmen- tation, and it is in this context that we also face a climate crisis. So, the question to all of us – here at COP [Conference to the Parties of the United Nations Frame- work Convention on Climate Change] and beyond – is whether we can address this crisis effectively? … When we look at the total of all Nationally Determined Contribu- tions for this decade, they add up to a cut in emissions of just 11 percent, whereas keeping ‘1.5 degrees alive’ would require cuts of between 25 percent and 50 percent. We are also very concerned that there is inequality within and across countries. Those that are hit harder by shocks ... can lead to a dangerous divergence between those economies that have a stronger capacity, and those that are less able to cope – many of them low-income coun- tries that are especially vulnerable to climate devastation … At the IMF [International Monetary Fund], we advocate for an approach to accelerate decarbonization based on frontloaded action this decade. We believe that with a strong package of measures – including a carbon price, elimination of harmful subsidies, and policy support to accelerate decarboni- zation … we can still have the impact we need by 2030. So let me talk about these three things.
First, carbon pricing. We have seen some progress. Coverage in both national and sub-national jurisdic- tions is now close to 25 percent of global emissions, up from around 10 percent a decade ago … We are also seeing an increase in the average carbon price. In the areas cov- ered by a carbon price, it is about $20 per ton. But if you add in the 75 percent of emissions that are not covered, then the global average carbon price is just $5 a ton. Compare that to the average price of at least $85 a ton by 2030 that is needed to stay on track with the goal of the Paris Agreement … Carbon pricing is a particularly powerful instrument because it is revenue-raising and it is fair. The more emissions you create – through con- sumption or industry – the more you pay. It also allows policymakers to address inequality. Revenues from a carbon price can be redirected to compensate the most vulnerable parts of the population … Our assessment shows that 20 percent of revenues can provide support to the poorest 30 percent of the population. And a carbon price also provides a very strong incentive to shift to low-carbon investments and consumption choices. We often hear that that carbon pricing is not feasible in many places – but … it can be executed in different ways. It can be a tax – and this is the most efficient and most impactful path … It can also be implemented as trade – as is the case in Europe with the Emissions Trading Scheme that has generated Euro 175 billion in reve- nues. And it can also be implemented through regulatory compliance meas- ures such as emissions standards. Second is the elimination of subsi- dies. The IMF has calculated that direct
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Financing a Just Transition
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