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  • 1 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund

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© 2021 International Monetary Fund

WP/21/259

IMF Working Paper

Fiscal Affairs Department

Monitoring the Climate Impact of Fiscal Policy -Lessons from Tracking the COVID-19 Response1

Prepared by Khaled Eltokhy, Katja Funke, Guohua Huang, Yujin Kim, Genet Zinabou

Authorized for distribution by James Daniel

October 2021

IMF Working Papers describe research in progress by the authors and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Abstract

In the wake of the COVID-19 crisis, governments around the world announced unprecedented fiscal packages to address the economic impact of the crisis. The unusually large scale of the packages was accompanied by widespread calls for “greening” them to meet the dual goals of economic recovery and environmental sustainability. In response, several researchers and international organizations attempted to assess the “greenness” of the fiscal policy response of the world’s largest economies. This paper takes stock of the contributions made by these various trackers, identifies strengths and weaknesses of their methodologies, and draws lessons for assessing the climate impact of fiscal policy going forward. It finds that: trackers provided useful assessments of the (generally low) level of greenness and raised awareness; trackers’ methodologies, while valid and innovative, varied significantly with some important, if currently largely unavoidable, weaknesses; and the way forward should involve tracking the greenness of entire government budgets, rather than just their response to the COVID-19 crisis.

JEL Classification Numbers: Q51, Q58

Keywords: Green fiscal policy tracker, green budgeting, COVID-19 response, climate impact assessment

Authors’ E-Mail Address: KEltokhy@imf.org, KFunke@imf.org, GHuang@imf.org, YKim9@imf.org, GZinabou@imf.org

Contents

  • I. INTRODUCTION

  • II. THE IMF GREEN TRACKER

  • III. OTHER GREEN TRACKERS FOLLOWING THE COVID-19 RESPONSE

  • IV. LIMITATIONS OF EXISTING TRACKER APPROACHES

  • V. A COMPREHENSIVE VIEW ON THE GREENNESS OF BUDGETS

  • VI. A POTENTIAL WAY FORWARD

  • VII. APPENDIX

  • VIII. REFERENCES

  • FIGURES

  • 1. G20 Contribution to Global Greenhouse Gas Emissions

  • 2. G20 COVID-19 Response Climate Impact

  • 3. Climate Relevance of Fiscal Measures in the G20 COVID-19 Response, March 2021

  • 4. Climate Relevance of Fiscal Measures in the G20 COVID-19 Response, October 2020

  • 5. Comparison of the Assessment of Green Trackers Covering G20 Fiscal Policies

  • 6. Countries that have Applied Green Budget Tagging

  • TABLES

  • 1. IMF Green Tracker Policy Archetypes

  • 2. COVID-19 Green Trackers – Summary of Key Features

  • 3. Correspondence between COFOG and CEPA Classifications

Monitoring the Climate Impact of Fiscal Policy - Lessons from Tracking the COVID-19 Response
Author: Khaled Eltokhy, Ms. Katja Funke, Guohua Huang, Yujin Kim, and Genet Zinabou