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Mr. Serhan Cevik
Global warming is the most significant threat to ecosystems and people’s health and living standards, especially in small island states in the Caribbean and elsewhere. This paper contributes to the debate by analyzing different options to scale up climate change mitigation and adaptation. In particular, the empirical analysis indicates that increasing energy efficiency and reducing the use of fossil fuel in electricity generation could lead to a significant reduction in carbon emissions, while investing in physical and financial resilience would yield long-run benefits. From a risk-reward perspective, the advantages of reducing the risks associated with climate change and the health benefits from higher environmental quality clearly outweigh the potential cost of climate change mitigation and adaptation in the short run. The additional revenue generated by environmental taxes could be used to compensate the most vulnerable households, building a multilayered safety net, and strengthening structural resilience.
Mr. Serhan Cevik
Tourism was one of the fastest-growing sectors before the COVID-19 pandemic, accounting for about 10 percent of global GDP. But it has also created a number of challenges including environmental degradation, especially in small island countries where the carbon footprint of tourism constitute substantial share of carbon dioxide (CO2) emissions. This study empirically investigates the impact of tourism on CO2 emissions in a relatively homogenous panel of 15 Caribbean countries over the period 1960–2019. The results show that international tourist arrivals have a statistically and economically significant effect on CO2 emissions, after controlling for other economic, institutional and social factors. Therefore, managing tourism sustainably requires a comprehensive set of policies and reforms aimed at reducing its impact on environmental quality and curbing excessive dependency on fossil fuel-based energy consumption.
Matteo Ruzzante and Nelson Sobrinho
This paper investigates the dynamic impact of natural resource discoveries on government debt sustainability. We use a ‘natural experiment’ framework in which the timing of discoveries is treated as an exogenous source of within-country variation. We combine data on government debt, fiscal stress and debt distress episodes on a large panel of countries over 1970-2012, with a global repository of giant oil, gas, and mineral discoveries. We find strong and robust evidence of a ‘fiscal presource curse’, i.e., natural resources can jeopardize fiscal sustainability even before ‘the first drop of oil is pumped’. Specifically, we find that giant discoveries, mostly of oil and gas, lead to permanently higher government debt and, eventually, debt distress episodes, specially in countries with weaker political institutions and governance. This evidence suggest that the curse can be mitigated and even prevented by pursuing prudent fiscal policies and borrowing strategies, strengthening fiscal governance, and implementing transparent and robust fiscal frameworks for resource management.
Mr. Pragyan Deb, Davide Furceri, Mr. Jonathan David Ostry, and Nour Tawk
Lockdowns resulting from the COVID-19 pandemic have reduced overall energy demand but electricity generation from renewable sources has been resilient. While this partly reflects the trend increase in renewables, the empirical analysis presented in this paper highlights that recessions result in a permanent, albeit small, increase in energy efficiency and in the share of renewables in total electricity. These effects are stronger in the case of advanced economies and when complemented with environment and energy policies—both market-based measures such as taxes on pollutants, trading schemes and feed-in-tariffs, as well as non-market measures such as emission and fuel standards and R&D investment and subsidies—to incentivize and hasten the transition towards renewable sources of energy.
Lukas Boer, Mr. Andrea Pescatori, and Martin Stuermer
The energy transition requires substantial amounts of metals such as copper, nickel, cobalt and lithium. Are these metals a key bottleneck? We identify metal-specific demand shocks, estimate supply elasticities and pin down the price impact of the energy transition in a structural scenario analysis. Metal prices would reach historical peaks for an unprecedented, sustained period in a net-zero emissions scenario. The total value of metals production would rise more than four-fold for the period 2021 to 2040, rivaling the total value of crude oil production. Metals are a potentially important input into integrated assessments models of climate change.
Mr. Rabah Arezki and Mr. Akito Matsumoto


A survey of the complex and intertwined set of forces behind the various commodity markets and the interplay between these markets and the global economy. Summarizes a rich set of facts combined with in-depth analyses distillated in a nontechnical manner. Includes discussion of structural trends behind commodities markets, their future implications, and policy implications.