With the world economy reeling from the fallout from the Covid-19 pandemic, nations must do all they can to promote a recovery that also fights against the climate-change crisis, International Monetary Fund Managing Director Kristalina Georgieva said.
“Taking measures now to fight the climate crisis is not just a ‘nice-to-have,’ it is a ‘must-have’ if we are to leave a better world for our children,” she said in prepared remarks to be delivered at the Petersberg Climate Dialogue Wednesday.
The IMF’s fiscal affairs department recommends nations mandate commitments to reduce carbon emissions when they provide financial lifelines to companies that are carbon-intensive, adding that record-low oil prices make this an opportune time to phase out subsidies.
State guarantees can be used to mobilize private finance for green investment, the lender said. It must be mandatory for financial firms to better disclose climate risks in their lending portfolios, and the industry must find better ways of pricing in this risk, it said.
The IMF also recommends a substantially higher carbon price to encourage climate-smart investment and accelerate the shift to cleaner fuels.
“The current global carbon price is only $2 per ton, way below the levels needed to keep global warming under 2 degrees Celsius (35.6 degrees Fahrenheit), which we estimate to be $75 per ton,” Georgieva said. For the transition to be fair and growth-friendly, carbon-tax revenues can be used to provide upfront assistance to poorer households, lower burdensome taxes, and support investments in health, education, and infrastructure, she said.