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Youssouf Camara, Bjart Holtsmark, and Florian Misch
This paper empirically estimates the effects of electric vehicles (EVs) on passenger car emissions to inform the design of policies that encourage EV purchases in Norway. We use exceptionally rich data on the universe of cars and households from Norway, which has a very high share of EVs, thanks to generous tax incentives and other policies. Our estimates suggest that household-level emission savings from the purchase of additional EVs are limited, resulting in high implicit abatement costs of Norway’s tax incentives relative to emission savings. However, the estimated emission savings are much larger if EVs replace the dirtiest cars. Norway’s experience may also help inform similar policies in other countries as they ramp up their own national climate mitigation strategies.
Amar Bhattacharya, Maksym Ivanyna, William Oman, and Nicholas Stern
Climate change is a major threat to the sustainability and inclusiveness of our societies, and to the planet’s habitability. A just transition to a low-carbon economy is the only viable way forward. This paper reviews the climate change challenge. It stresses the criticality of systems changes (energy, transport, urban, land use, water) in a climate-challenged world, and the importance of infrastructure investment geared toward such systems changes. The key policies to enable the transition are: public spending on and investment frameworks for sustainable infrastructure, pricing carbon, regulations, promoting sustainable use of natural resources, scaling up and aligning finance with climate objectives, low-carbon industrial and innovation policies, building resilience and adaptation, better measurement of well-being and sustainability, and providing information and education on climate risks. Implemented well, climate action would unlock the inclusive growth story of the 21st century, making our societies more sustainable, inclusive, and prosperous.
Mr. Adil Mohommad
The employment impact of environmental policies is an important question for policy makers. We examine the effect of increasing the stringency of environmental policy across a broad set of policies on firms’ labor demand, in a novel identification approach using Worldscope data from 31 countries on firm-level CO2 emissions. Drawing on evidence from as many as 5300 firms over 15 years and the OECD environmental policy stringency (EPS) index, it finds that high emission-intensity firms reduce labor demand upon impact as EPS is tightened, whereas low emission-intensity firms increase labor demand, indicating a reallocation of employment. Moreover, tightening EPS during economic contractions appears to have a positive effect on employment, other things equal. Quantifications exercises show modest positive net changes in employment for market-based policies, and modest negative net changes for non-market policies (mainly emission quantity regulations) and for the combined aggregate EPS. Within market-based policies, the percent decline in employment in high-emission firms (correspondingly the increase in low-emission firms) for a unit change in a policy index is smallest (largest) for trading schemes (“green” certificates, and “white” certificates)—although stringency is not comparable across indices. Finally, the employment effects of EPS are not persistent.
Johannes Emmerling, Davide Furceri, Francisco Líbano Monteiro, Mr. Prakash Loungani, Mr. Jonathan David Ostry, Pietro Pizzuto, and Massimo Tavoni
COVID-19 has had a disruptive economic impact in 2020, but how long its impact will persist remains unclear. We offer a prognosis based on an analysis of the effects of five previous major epidemics in this century. We find that these pandemics led to significant and persistent reductions in disposable income, along with increases in unemployment, income inequality and public debt-to-GDP ratios. Energy use and CO2 emissions dropped, but mostly because of the persistent decline in the level of economic activity rather than structural changes in the energy sector. Applying our empirical estimates to project the impact of COVID-19, we foresee significant scarring in economic performance and income distribution through 2025, which be associated with an increase in poverty of about 75 million people. Policy responses more effective than those in the past would be required to forestall these outcomes.
Dalya Elmalt, Mr. Divya Kirti, and Ms. Deniz O Igan
As climate change looms larger, many look to sustainable investing that incorporates environmental, social, and governance (ESG) concerns as part of the way forward. To assess scope for ESG-conscious investing to achieve climate change goals, we explore the link between emissions growth and ESG scores using firm-level data for the largest emitters around the world. Discouragingly, our analysis uncovers at best a weak relationship: firms with better ESG scores do display somewhat slower emissions growth but this link is substantially attenuated and no longer statistically significant if we limit attention to within-country or within-firm variation. Our findings suggest limited scope for sustainable investing strategies conditioned solely on ESG indicators to meaningfully help mitigate climate change and, more broadly, underscore the need to continue to build consensus towards effective economy-wide policies to address climate change.
International Monetary Fund. External Relations Dept.
'Commodity Boom: How Long Will It Last?' asks how economies will fare after the record-high prices of key raw materials posted in recent months, which build on dramatic increases from their lows of 2000. The lead article warns that the impact on headline inflation levels might persist throughout 2008, even without further commodity price hikes. It urges policymakers to ensure efficient functioning of market forces at the global level, and to move swiftly to protect the poorest. Another article addresses the effects of climate change on agriculture, warning that farm production will fall dramatically—especially in developing countries—if steps are not taken to curb carbon emissions. Other articles on this theme argue that policies to reduce greenhouse gas emissions need not hobble economies, and that financial markets can help address climate change. 'People in Economics' profiles John Taylor; 'Picture This' says the global energy system is on an increasingly unsustainable path; 'Country Focus' spotlights South Africa; and 'Straight Talk' examines early warnings provided by credit derivatives. Also in this issue, articles examine China's increasing economic engagement with Africa, and the outsourcing of service jobs to other countries.
International Monetary Fund. External Relations Dept.
Commodity Boom: How Long Will It Last?" asks how economies will fare after the record-high prices of key raw materials posted in recent months, which build on dramatic increases from their lows of 2000. The lead article warns that the impact on headline inflation levels might persist throughout 2008, even without further commodity price hikes. It urges policymakers to ensure efficient functioning of market forces at the global level, and to move swiftly to protect the poorest. Another article addresses the effects of climate change on agriculture, warning that farm production will fall dramatically-especially in developing countries-if steps are not taken to curb carbon emissions. Other articles on this theme argue that policies to reduce greenhouse gas emissions need not hobble economies, and that financial markets can help address climate change. "People in Economics" profiles John Taylor; "Picture This" says the global energy system is on an increasingly unsustainable path; "Country Focus" spotlights South Africa; and "Straight Talk" examines early warnings provided by credit derivatives. Also in this issue, articles examine China's increasing economic engagement with Africa, and the outsourcing of service jobs to other countries.
International Monetary Fund. External Relations Dept.
En “Boom de los productos básicos: ¿Cuánto durará?” se analiza cómo reaccionarán las economías ante la reciente escalada sin precedentes de los precios de las materias primas, los cuales contrastan marcadamente con los mínimos registrados en 2000. En el artículo de fondo se advierte que las repercusiones del alza del nivel general de inflación podrían persistir a lo largo de 2008, aun si no se produjeran nuevos aumentos de precios de las materias primas. Las autoridades deben garantizar el funcionamiento eficiente de las fuerzas del mercado a escala mundial y actuar con celeridad para proteger a los más pobres. En otro artículo se analiza el impacto del cambio climático en la agricultura y se advierte que, si no se reducen las emisiones de carbono, la producción agrícola disminuirá notablemente, sobre todo en los países en desarrollo. En otros artículos se plantea que las políticas para reducir las emisiones de gases de efecto invernadero no tienen por qué ser perjudiciales para las economías y que los mercados financieros pueden ser parte de la solución del problema del cambio climático. En “Gente del mundo de la economía” se entrevista a John Taylor; en “Bajo la lupa” se observa cómo el sistema mundial de energía avanza hacia una situación cada vez más insostenible; en “Panorama nacional” se pasa revista a Sudáfrica; y en “Hablando claro” se examinan las señales de alerta que emiten los instrumentos financieros derivados sobre crédito. En otros artículos se analiza la creciente presencia económica de China en África y la relocalización en el extranjero de los empleos del sector de servicios.
International Monetary Fund. External Relations Dept.
Ce numéro, intitulé « Boom des matières premières : pour combien de temps encore ? », pose la question suivante : comment l'économie va-t-elle évoluer après le niveau record des prix des matières premières observées au cours des derniers mois, qui accumulent des augmentations très éloignées des niveaux faibles des premières années de la décennie ? L'article principal met en garde contre la possibilité que les retombées pour les taux d'inflation pourraient persister tout au long de l'année 2008, même en l'absence de nouvelle hausse des prix des matières premières. Il exhorte les dirigeants à veiller au bon fonctionnement des forces du marché à l'échelle mondiale, et à prendre sans tarder des mesures pour protéger les populations les plus pauvres. Un autre article s'intéresse aux effets du changement climatique sur l'agriculture, et averti que la productivité agricole pourrait fortement chuter, en particulier dans les pays en développement, si rien n'est fait pour diminuer les émissions de carbone. D'autres articles sur ce thème allèguent que les politiques de réduction des émissions de gaz à effet de serre ne nuisent pas forcément à l'économie, et que les marchés financiers peuvent contribuer à atténuer le changement climatique. Dans les rubriques habituelles, « Paroles d'économistes » est consacré à John Taylor,« Pleins feux » indique que le système énergétique mondial suit une trajectoire de moins en moins durable, « Gros plan » est consacré à l'Afrique du Sud, et« Entre nous » s'intéresse aux signaux d'alarme indiqués par les dérivés de crédit. D'autres articles de ce numéro s'intéressent aux liens économiques de plus en plus étroits entre la Chine et l'Afrique, ainsi qu'à la délocalisation des emplois de services à l'étranger.