Political Science

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Emanuele Massetti and Mr. Matthieu Bellon
This Staff Climate Note is part of a series of three Notes (IMF Staff Climate Note 2022/001, 2022/002, and 2022/003) that discuss fiscal policies for climate change adaptation. A first Note (Bellon and Massetti 2022, henceforth Note 1) examines the economic principles that can guide the integration of climate change adaptation into fiscal policy. It argues that climate change adaptation should be part of a holistic, sustainable, and equitable development strategy. To maximize the impact of scarce resources, governments need to prioritize among all development programs, including but not limited to adaptation. To this end, they can use cost-benefit analysis while ensuring that the decision-making process reflects society’s preferences about equity and uncertainty. A second Note (Aligishiev, Bellon, and Massetti. 2022, henceforth Note 2) discusses the macro-fiscal implications of climate change adaptation. It reviews evidence on the effectiveness of adaptation at reducing climate change damages, on residual risks, and on adaptation investment needs, and suggests ways to integrate climate risks and adaptation costs into national macro-fiscal frameworks with the goal of guiding fiscal policy. It stresses that lower-income vulnerable countries, which have typically not contributed much to climate change, face exacerbated challenges that warrant increased international support. This third Note considers how to translate adaptation principles and estimates of climate impacts into effective policies.
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.
Ian W.H. Parry, Mr. Peter Dohlman, Mr. Cory Hillier, Mr. Martin D Kaufman, Florian Misch, Mr. James Roaf, Mr. Christophe J Waerzeggers, and Miss Kyung Kwak
This Climate Note discusses the rationale, design, and impacts of border carbon adjustments (BCAs), charges on embodied carbon in imports potentially matched by rebates for embodied carbon in exports. Large disparities in carbon pricing between countries is raising concerns about competitiveness and emissions leakage, and BCAs are a potentially effective instrument for addressing such concerns. Design details are critical, however. For example, limiting coverage of the BCA to energy-intensive, trade-exposed industries facilitates administration, and initially benchmarking BCAs on domestic emissions intensities would help ease the transition for emissions-intensive trading partners. It is also important to consider how to apply BCAs across countries with different approaches to emissions mitigation. BCAs are challenging because they pose legal risks and may be at odds with the differentiated responsibilities of developing countries. Furthermore, BCAs provide only modest incentives for other large emitting countries to scale carbon pricing—an international carbon price floor would be far more effective in this regard.
Caio Ferreira, Mr. David L Rozumek, Mr. Ranjit Singh, and Felix Suntheim
Strengthening the climate information architecture is paramount to promote transparency and global comparability of data and thus improve market confidence, safeguard financial stability, and foster sustainable finance. This note provides a conceptual framework around the provision of climate-related information, discusses the progress made to date, and points toward the way forward. Progress and convergence are required on the three buildings blocks of a climate information architecture: (1) high-quality, reliable, and comparable data; (2) a globally harmonized and consistent set of climate disclosure standards; and (3) a globally agreed upon set of principles for climate finance taxonomies. A decisive, globally coordinated effort is needed to move forward on all three fronts.
Mr. Fabien Gonguet, Mr. Claude P Wendling, Ozlem Aydin Sakrak, and Bryn Battersby
Public financial management (PFM) consists of all the government’s institutional arrangements in place to facilitate the implementation of fiscal policies. In response to the growing urgency to fight climate change, “green PFM” aims at adapting existing PFM practices to support climate-sensitive policies. With the cross-cutting nature of climate change and wider environmental concerns, green PFM can be a key enabler of an integrated government strategy to combat climate change. This note outlines a framework for green PFM, emphasizing the need for an approach combining various entry points within, across, and beyond the budget cycle. This includes components such as fiscal transparency and external oversight, and coordination with state-owned enterprises and subnational governments. The note also identifies principles for effective implementation of a green PFM strategy, among which the need for a strong stewardship located within the ministry of finance is paramount.
Mr. Jonathan David Ostry and Mr. Andrew Berg
This note raises the IMF’s profile on a number of issues related to inequality, unemployment, governance, etc. It builds on earlier empirical work that examined correlations between growth downbreaks/duration of growth spells and a range of macro/policy/institutional factors. This paper is designed to be more accessible, more policy oriented, and focused squarely on the issue of inequality and the sustainability of growth. It will reference the literature that has gained prominence in the wake of the global crisis, and the possible links between the crisis and rising inequality in countries at the epicenter of the crisis. The analytical findings will also be connected to real world policy narratives in certain countries, to provide texture to the results and enhance policy relevance. The paper will argue that, based on the empirical findings, more equality in the income distribution is associated with longer-lived growth spells. Broad redistributive policies are not necessarily pro-growth, however, as these can have strong disincentive effects. The paper’s policy discussion is appropriately cautious, therefore, offering only tentative ideas, for example, active labor market policies and more attention to human capital investments designed to avoid conflicts between efficiency and equity perspectives.
Mr. Jonathan David Ostry and Mr. Andrew Berg
En esta nota se presenta el enfoque del FMI con respecto a una serie de cuestiones relacionadas con la desigualdad, el desempleo, la gestión de gobierno, etc. Se basa en estudios empíricos anteriores que examinan las correlaciones entre las desaceleraciones del crecimiento/la duración de las rachas de crecimiento y una serie de factores institucionales, macroeconómicos y de política. Este estudio se centra directamente en el tema de la desigualdad y la sostenibilidad del crecimiento, presentando el análisis de manera más asequible y con un enfoque más orientado a la aplicación de políticas. Se pasa revista a los estudios que han cobrado relevancia en el contexto de la crisis mundial, y de los posibles vínculos entre la crisis y el aumento de la desigualdad en los países en el epicentro de la crisis. Los resultados analíticos también se conectarán con conceptos aplicados en la práctica en determinados países, a fin de presentar dichos resultados de manera más ilustrativa y pertinente a los efectos de la aplicación de políticas. El artículo sugiere que, con base en las observaciones empíricas, una mayor igualdad en la distribución del ingreso va a asociada a rachas de crecimiento de mayor duración. Sin embargo, las políticas redistributivas de amplio alcance no favorecen necesariamente el crecimiento, ya que pueden generar fuertes desincentivos. Por lo tanto, el análisis de las políticas presentado en esta publicación es apropiadamente cauteloso y solo plantea ideas preliminares, por ejemplo, sobre las políticas activas del mercado laboral y sobre la necesidad de prestar más atención a la inversión en capital humano tratando de evitar que los objetivos de eficiencia y equidad entren en conflicto.
Mr. Jonathan David Ostry and Mr. Andrew Berg
This note raises the IMF’s profile on a number of issues related to inequality, unemployment, governance, etc. It builds on earlier empirical work that examined correlations between growth downbreaks/duration of growth spells and a range of macro/policy/institutional factors. This paper is designed to be more accessible, more policy oriented, and focused squarely on the issue of inequality and the sustainability of growth. It will reference the literature that has gained prominence in the wake of the global crisis, and the possible links between the crisis and rising inequality in countries at the epicenter of the crisis. The analytical findings will also be connected to real world policy narratives in certain countries, to provide texture to the results and enhance policy relevance. The paper will argue that, based on the empirical findings, more equality in the income distribution is associated with longer-lived growth spells. Broad redistributive policies are not necessarily pro-growth, however, as these can have strong disincentive effects. The paper’s policy discussion is appropriately cautious, therefore, offering only tentative ideas, for example, active labor market policies and more attention to human capital investments designed to avoid conflicts between efficiency and equity perspectives.
Parmeshwar Ramlogan and Mr. Bernhard Fritz-Krockow

Abstract

This paper describes the functions, policies, and operations of the IMF. The IMF is an independent international organization, and is a cooperative of 185 member countries, whose objective is to promote world economic stability and growth. The member countries are the shareholders of the cooperative, providing the capital of the IMF through quota subscriptions. In return, the IMF provides its members with macroeconomic policy advice, financing in times of balance-of-payments need, and technical assistance and training to improve national economic management.

International Monetary Fund

Abstract

In recent years, the IMF has become deeply involved in the international movement to prevent the abuse of financial systems and to protect and enhance the integrity of the international financial system. The IMF’s involvement has been expanded beyond anti-money-laundering efforts to include those aimed at combating the financing of terrorism. This handbook will facilitate the provision of relevant technical assistance by providing a compendium of essential materials for officials drafting legislation designed to combat such financing. The relevant international standards and obligations are presented, together with examples of existing legislation designed to meet them. The issues discussed in this book are relevant to all countries, regardless of their individual geopolitical situations.