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Political Science > Environmental Policy

You are looking at 1 - 10 of 15 items for :

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  • Staff Climate Notes x
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Cover Staff Climate Notes
Unlocking Adaptation Finance in Emerging Market and Developing Economies
Deepali Gautam, Ekaterina Gratcheva, Fabio M Natalucci, and Ananthakrishnan Prasad
Mitigation and decarbonization efforts are falling short of the 1.5°C goal, making adaptation critical. Developing economies are affected the most, despite having contributed the least to the problem. Nearly 98 percent of adaptation finance comes from public actors, with highly fragmented flows from the private sector. As financing needs increase, bringing private sector finance becomes critical and requires reframing adaptation investments from being seen not just as a risk exposure but also as an investment opportunity. This requires addressing real and perceived investment barriers, public-private collaboration and risk sharing, as well as financial incentives and innovation to unlock scalable, inclusive solutions. Adaptation is more complex than mitigation, with challenges in defining, evaluating, pricing, and scaling investments. Progress on adaptation requires policy reforms, incentives, and partnerships between governments, businesses, and communities and public-private risk sharing.
Keywords:
climate finance; climate adaptation; climate resilience; climate finance architecture; adaptation finance; emerging markets and developing countries; private finance mobilization; sustainability; IMF Resilience and Sustainability Trust.; IMF staff climate note; IMF resilience; IMF staff climate Note 2024/007; Climate change; Financial sector; Climate policy; Global
Cover Staff Climate Notes
Sleepwalking to the Cliff Edge? A Wake-up Call for Global Climate Action
Simon Black, Ian W.H. Parry, and Karlygash Zhunussova
Urgent action to cut greenhouse gas (GHG) emissions is needed now. Early next year, all countries will set new emissions targets for 2035 while revising their 2030 targets. Global GHGs must be cut by 25 and 50 percent below 2019 levels by 2030 to limit global warming to 2°C and 1.5°C respectively. But current targets would only cut emissions by 12 percent, meaning global ambition needs to be doubled to quadrupled. Further delay will lead to an ‘emissions cliff edge’, implying implausible cuts in GHGs and putting put 1.5°C beyond reach. This Note provides IMF staff’s annual assessment of global climate mitigation policy. It illustrates options for equitably aligning country targets with the Paris Agreement’s temperature goals. It also provides guidance on modelling needed to set emissions targets and quantify climate mitigation policy impacts.
Keywords:
Paris Agreement; climate mitigation; carbon pricing; climate finance; climate investment; IMF staff Climate note; part of the International Monetary Fund; IMF staff Climate; IMF analysis; IMF staff Climate Note 2024/006; cliff edge; Greenhouse gas emissions; Climate change; Global
Cover Staff Climate Notes
Harnessing Renewables in Sub-Saharan Africa: Barriers, Reforms, and Economic Prospects
Kailhao Cai, Thibault Lemaire, Andrea Medici, Giovanni Melina, Gregor Schwerhoff, and Sneha D Thube
Sub-Saharan Africa needs to significantly accelerate its electricity generation. While hydropower is prominent in some countries, solar and wind power generation has lagged other world regions, even though sub-Saharan Africa has some of the most favorable conditions. A mix of domestic and external financing can increase both renewable electricity generation and GDP. In a scenario where about $25 bn in climate finance flows are allocated annually to renewable energy, renewable electricity production could be up to 24 percent higher than in a scenario excluding this financing, and annual GDP growth would be boosted by 0.8 percentage point on average over the next decade, accompanied by stronger labor demand in the electricity sector. Policies can help catalyze climate finance. An ambitious package of governance, business regulations, and external sector reforms is associated with a 20 percent increase in climate finance flows and a 7 percent increase in electricity generation over five years. In addition, implementing climate policies is linked to increases in green foreign direct investment announcements and green electricity production.
Keywords:
Sub-Saharan Africa; electricity generation; renewable energy; climate finance; economic development; market reforms; climate policies; IMF staff Climate note; harnessing renewable; part of the International Monetary Fund; IMF analysis; IMF staff Climate; Electricity; Climate policy; Africa; Global; East Africa
Cover Staff Climate Notes
Policies to Foster Green FDI: Best Practices for Emerging Market and Developing Economies
Florence Jaumotte, Jaden Kim, Samuel Pienknagura, and Gregor Schwerhoff
Meeting COP28 goals requires a substantial increase in clean energy investment by 2030, including in emerging market and developing economies (EMDEs). Amid domestic financial constraints, foreign direct investment (FDI) could play a key role in EMDEs’ ability to close their renewable energy investment gap and finance green projects, more broadly. This Note finds that strengthening climate policies boosts FDI into renewable energy in EMDEs, especially in those with solar power potential, while less clear effects are found for FDI into EVs and green hydrogen possibly due to their recent emergence. Closing the average climate policy gap with respect to AEs could secure 40 percent of the private finance needed for renewable energy investment in EMDEs, helping overcome the impact of high financing costs. Strengthening the macro-structural framework, such as through improving trade and capital account openness and institutional quality, would also raise green FDI inflows, complementing climate policies. Case studies show that countries that attracted FDI into renewable energy put in place a large and diverse set of policies in the electricity sector, including those that secure a revenue stream for investors in the initial phases, such as power-purchase agreements/feed-in tariffs, renewables targets, and complementary investments. Countries that successfully attracted FDI into EVs relied on the development of national sectoral strategies including production and adoption subsidies, prior comparative advantage in the sector, and bilateral alliances with key players in the EV market. Finally, comprehensive national hydrogen strategies that leverage international efforts to boost production, and good conditions for production of renewable energy, were key drivers of green hydrogen FDI. Global initiatives such as the Just Energy Transition Partnerships and the EU strategy for green hydrogen are benefitting FDI to EMDEs.
Keywords:
Low carbon technologies; FDI; Climate Policies; Renewable Energy; Green Hydrogen; Electric Vehicles; IMF staff Climate note; green FDI; part of the International Monetary Fund; IMF analysis; FDI inflow; Foreign direct investment; Climate policy; Climate finance; Non-renewable resources; Global; East Asia; Europe; Africa
Cover Staff Climate Notes
Embedded in Nature: Nature-Related Economic and Financial Risks and Policy Considerations
Charlotte Gardes-Landolfini, William Oman, Jamie Fraser, Mariza Montes de Oca Leon, and Bella Yao
The economy is embedded in, and dependent on, nature. Yet economic activity is degrading nature at an unprecedented pace. Interacting with climate change, nature loss and transformation generates significant threats to the global economy and financial system. However, work on the implications of nature-related risks for macroeconomic and financial sector policies remains at an early stage. This note seeks to contribute to this emerging policy space in three main ways: (i) it proposes a conceptual framework for understanding nature-related risks by mapping out macroeconomic transmission channels, emphasizing their impact on the economy and financial systems through “double materiality;” (ii) it conducts empirical analysis, finding that nearly 38 percent of bank loans of the 100 largest global banks are to harmful subsidies-dependent sectors and 44 percent are exposed to conservation areas under the Global Biodiversity Framework, and that industries most exposed to nature degradation are not well prepared to manage these risks; and (iii) it discusses takeaways for macroeconomic and financial sector policies and frameworks.
Keywords:
nature; environment; macroeconomics; macroeconomic policies; financial stability; banks; nature-related risks; financial regulation; financial supervision; Minsky moment; ecosystem services; planetary boundaries.; IMF staff climate note; ecosystem service; biodiversity loss; biodiversity conservation; biodiversity hotspot; Environmental policy; Climate change; Financial sector policy; Natural resources; Global
Cover Staff Climate Notes
Energy Transition and Geoeconomic Fragmentation: Implications for Climate Scenario Design
Charlotte Gardes-Landolfini, Pierpaolo Grippa, William Oman, and Sha Yu
The transition to a low-carbon economy, which is needed to mitigate climate change and meet the Paris Agreement temperature goals, has been affected by the supply chain and energy supply disruptions that originated during the COVID-19 pandemic, the Russian invasion of Ukraine, and the subsequent energy crisis and exacerbation of geopolitical tensions. These developments, and the broader context of the ongoing “polycrisis,” can affect future decarbonization scenarios. This reflects three main factors: (1) pullbacks in climate mitigation policies and increased carbon lock-in in fossil fuel infrastructure and policymaking; (2) the decreasing likelihood of continuous cost reduction in renewable energy technologies; and (3) the likely intensification of macroeconomic shocks amid increasing geoeconomic fragmentation, and the associated policy responses. In this context, the note assesses the implications of the polycrisis for hypothetical scenarios used to assess climate-related financial risks. Following an analysis of the channels through which these effects are likely to materialize over short- and long-term horizons and some policy implications, the note proposes potential adjustments to the design of the climate scenarios used by financial institutions, central banks, and financial sector supervisors and regulators within their risk management frameworks.
Keywords:
Climate scenarios; polycrisis; climate risks; carbon lock-in; risk assessment; geoeconomic fragmentation; energy transition; energy security; disorderly transition; trade multilateralism; fossil fuel development; IMF staff climate note; IMF staff climate NOTE 2023/003; climate scenario; Renewable energy; Climate policy; Climate change; Non-renewable resources; Global; Central America; Caribbean
Cover Staff Climate Notes
Climate Challenges in Fragile and Conflict-Affected States
Laura Jaramillo, Aliona Cebotari, Yoro Diallo, Rhea Gupta, Yugo Koshima, Chandana Kularatne, Jeong Dae Lee, Sidra Rehman, Mr. Kalin I Tintchev, and Fang Yang
Fragile and conflict-affected states (FCS) already face higher temperatures than other countries and will be more exposed to extreme heat and weather events going forward. Using innovative approaches, the paper finds that in FCS, climate vulnerability and underlying fragilities—namely conflict, heavy dependence on rainfed agriculture, and weak capacity—exacerbate each other, amplifying the negative impact on people and economies. FCS suffer more severe and persistent GDP losses than other countries due to climate shocks because their underlying fragilities amplify the impact of shocks, in particular in agriculture. At the same time, climate shocks worsen underlying fragilities, namely conflict. Macro-critical adaptation policies are needed to facilitate the immediate response to climate shocks and to build climate resilience over time. Sizeable and sustained international support—especially grants, concessional financing and capacity development—is urgent to avoid worse outcomes, including forced displacement and migration. The IMF is stepping up support to FCS in dealing with climate challenges through carefully tailored policy advice, financing, and capacity development.
Keywords:
Fragile and Conflict-Affected States; climate change; natural disasters; conflict; food security; adaptation; resilience; climate finance; IMF staff climate note; financing climate adaptation; climate vulnerability; climate resilience overtime; climate adaptation policy; Climate policy; Global
Cover Staff Climate Notes
Getting on Track to Net Zero: Accelerating a Global Just Transition in This Decade
Mr. Simon Black, Jean Chateau, Ms. Florence Jaumotte, Ian W.H. Parry, Gregor Schwerhoff, Sneha D Thube, and Karlygash Zhunussova
To contain global warming to between 2°C and 1.5°C, global greenhouse gas emissions must be cut 25 to 50 percent below 2019 levels by 2030. Even if fully achieved, current country pledges would cut global emissions by just 11 percent. This Note presents illustrative options for closing this ambition gap equitably and discusses their economic impacts across countries. Options exist to accelerate a global just transition in this decade, involving greater emission reductions by high-income countries and climate finance, but further delays in climate action would put 1.5°C beyond reach. Global abatement costs remain low under 2°C-consistent scenarios, with burdens rising with income levels. With efficient policies of carbon pricing with productive revenue use, welfare costs become negative when including domestic environmental co-benefits, before even counting climate benefits. GDP effects from global decarbonization remain uncertain, but modeling suggests they exceed abatement costs especially for carbon-intensive and fossil-fuel-exporting countries. Ratcheting up climate finance can help make global decarbonization efforts more progressive.
Keywords:
Climate change mitigation; ambition gap; policy gap; mitigation pledges; differentiated responsibilities; abatement costs; welfare costs; GDP; burden sharing; carbon pricing; climate finance; IMF staff climate note; abatement cost; welfare cost; climate benefit; IMF staff climate Note 2022/010; Greenhouse gas emissions; Climate change; Climate policy; Global; Africa; Eastern Europe; East Asia; Caribbean
Cover Staff Climate Notes
Climate Change and Select Financial Instruments: An Overview of Opportunities and Challenges for Sub-Saharan Africa
Anna Belianska, Nadja Bohme, Kailhao Cai, Yoro Diallo, Saanya Jain, Mr. Giovanni Melina, Ms. Pritha Mitra, Mr. Marcos Poplawski Ribeiro, and Solo Zerbo
Sub-Saharan Africa (SSA) is the region in the world most vulnerable to climate change despite its cumulatively emitting the least amount of greenhouse gases. Substantial financing is urgently needed across the economy—for governments, businesses, and households—to support climate change adaptation and mitigation, which are critical for advancing resilient and green economic development as well as meeting commitments under the Paris Agreement. Given the immensity of SSA’s other development needs, this financing must be in addition to existing commitments on development finance. There are many potential ways to raise financing to meet adaptation and mitigation needs, spanning from domestic revenue mobilization to various forms of international private financing. Against this backdrop, S SA policymakers and stakeholders are exploring sources of financing for climate action that countries may not have used substantially in the past. This Staff Climate Note presents some basic information on opportunities and challenges associated with these financing instruments.
Keywords:
Climate finance; sub-Saharan Africa; climate change; mitigation; adaptation; concessional finance; green bonds; blue bonds; sustainability bonds; debt for climate swaps; carbon credits; climate insurance; climate funds; forest conservation; green development; IMF staff Climate note; IMF staff Climate Note 2022/009; solo Zerbo; SSA policymaker; SSA government; crowding out SSA project; Climate policy; Greenhouse gas emissions; Insurance; Global; Africa
Cover Staff Climate Notes
How to Cut Methane Emissions
Ian W.H. Parry, Mr. Simon Black, Danielle N Minnett, Mr. Victor Mylonas, and Nate Vernon
Limiting global warming to 1.5 to 2°C above preindustrial levels requires rapid cuts in greenhouse gas emissions. This includes methane, which has an outsized impact on temperatures. To date, 125 countries have pledged to cut global methane emissions by 30 percent by 2030. This Note provides background on methane emission sources, presents practical fiscal policy options to cut emissions, and assesses impacts. Putting a price on methane, ideally through a fee, would reduce emissions efficiently, and can be administratively straightforward for extractives industries and, in some cases, agriculture. Policies could also include revenue-neutral ‘feebates’ that use fees on dirtier polluters to subsidize cleaner producers. A $70 methane fee among large economies would align 2030 emissions with 2oC. Most cuts would be in extractives and abatement costs would be equivalent to just 0.1 percent of GDP. Costs are larger in certain developing countries, implying climate finance could be a key element of a global agreement on a minimum methane price.
Keywords:
Climate change mitigation; methane emissions; Global Methane Pledge; carbon pricing; methane tax; extractives; agriculture; design issues; border methane adjustment; international price floor; IMF staff Climate note; methane emission; IMF staff Climate Note 2022/008; IMF analysis; Greenhouse gas emissions; Natural gas sector; Agricultural sector; Agricultural commodities; Global