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Mr. Johannes Wiegand

fail to play along initially. JEL Classification Numbers: D62, F64, O13, Q54 Keywords: Development, Climate Change, Climate Change Mitigation, Climate Financing Author’s E-Mail Address: jwiegand@imf.org Table of Contents Abstract I. Introduction II. The Basic Model III. Climate Compensation: Equity vs. Efficiency IV. Variations A. EMDEs are Large B. Some EMDEs are Disproportionately Vulnerable to Climate Change V. Energy Efficiency, Clean Energy Technologies and Technology Transfers VI. Summary and Conclusions Annex: Altruistic

Mr. Johannes Wiegand
Climate financing and compensation have emerged as key themes in the international climate mitigation debate. According to one argument in support of compensation, advanced economies (AEs) have used up much of the atmosphere’s absorptive capacity, thus causing global warming and blocking a similar, fossil-fuel driven development path for emerging markets and developing economies (EMDEs). This paper develops a simple model of a sequential, fossil-fuel driven development process to discuss these issues systematically. The results suggest: (i) AEs have typically a stronger interest in climate change mitigation than EMDEs, (ii) from an equity perspective, compensation is called for only if EMDEs are relatively small; (iii) there can also be an efficiency case for compensation, however, with AEs buying EMDEs out of some of their GHG emissions; (iv) ultimately, a superior option—for both the world’s climate and growth prospects—is the development of clean energy technologies by AEs and their transfer to EMDEs. The latter requires strong mitigation efforts by AEs even if EMDEs fail to play along initially.
Mr. Boileau Loko, Nelie Nembot, and Mr. Marcos Poplawski Ribeiro

observatons, minimum observations per country, and number of countries. The regressions tests confirm the goodness of fit and validity of the regressions with significant F-test and high R-squareds for the OLS-FE regressions. The other econometrictests for the2-stage system GMM further corroborate the estimator,instruments and econome tricstrategy pursued. Table 1. Estimation of Main Savings Determinants, 1983–2021 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) VARIABLES SSA economies Full Sample a LICs a EMDEs (exclusing SSA) a

Mr. Johannes Wiegand

section analyzes the impact of such modifications on climate mitigation and compensation policies. 14 A. EMDEs are Large Figure 3 triples the size of EMDEs relative to AEs. The larger a country or country block, the more profitable development opportunities exist, hence the EMDEs’ development curve (1) shifts outward. Figure 3. Large EMDEs Note: the lower panel is not drawn to scale. Some results from the basic specification persist: relative to their size, advanced economies build up more productive capacity and emit more GHGs than EMDEs. AEs

Oya Celasun, Jungjin Lee, Mr. Mico Mrkaic, and Mr. Allan Timmermann

.0 4.2 0.0 0.32 0.40 0.27 n.a. n.a. n.a. 0.31 n.a. EMDE Fuel Importers 0.07 0.29 -0.20 0.04 10.4 14.8 8.7 4.3 6.1 1.7 11.3 5.2 0.36 0.41 0.37 0.30 0.38 0.39 0.38 0.35 DASIA 0.01 0.32 0.15 0.23 8.0 20.0 16.0 8.0 4.0 4.0 8.0 8.0 0.39 0.42 0.41 0.35 0.40 0.41 0.51 0.38 EEUR 0.43 -0.12 -0.94 -0.44 11.1 11.1 11.1 0.0 0.0 0.0 33.3 0.0 0.23 0.32 0.42 n.a n.a n.a 0.31 n.a LAC 0.17 0.44 -0.10 0.10 0.0 12

Mr. Simon Black, Ian Parry, Mr. James Roaf, and Karlygash Zhunussova
Achieving the Paris Agreement’s temperature goals requires cutting global CO2 emissions 25 to 50 percent this decade, followed by a rapid transition to net zero emissions. The world is currently not yet on track so there is an urgent need to narrow gaps in climate mitigation ambition and policy. Current mitigation pledges for 2030 would achieve just one to two thirds of the emissions reductions needed for limiting warming to 1.5 to 2oC. And additional measures equivalent to a global carbon price exceeding $75 per ton by 2030 are needed. This IMF Staff Climate Note presents extensive quantitative analyses to inform dialogue on closing mitigation ambition and policy gaps. It shows purely illustrative pathways to achieve the needed global emissions reductions while respecting international equity. The Note also presents country-level analyses of the emissions, fiscal, economic, and distributional impacts of carbon pricing and the trade-offs with other instruments—comprehensive mitigation strategies will be key.