The costs of climate failure will exceed the economic consequences of the transition, says the IMF

The IMF has outlined an “overwhelming” case for tackling climate change that would dwarf the projected near-term increase in the cost to the economy of switching energy to renewable sources by 2030.

The near-term costs would rise as governments around the world “procrastinate further” in an effort to cut greenhouse gas emissions by the 25 percent needed over the next eight years to limit global warming.

The fund estimated a fall in global growth from the implementation of climate change policies by the end of the decade, stating that a “rapid” transition to low-carbon technologies would cost the global economy between 0.15 and 0.25 percentage points of GDP growth annually through 2030 .

Lower GDP growth costs are forecast for China, the US and Europe, ranging between 0.05 and 0.2 percentage points annually.

It would also push inflation up by 0.1 to 0.4 percentage points a year compared to the baseline, assuming governments adopt fiscally neutral policies, the IMF said.

However, there is “overwhelming evidence” that “any short-term costs are dwarfed by the long-term benefits (in terms of performance, financial stability, health) of mitigating climate change,” she added.

While there is “little consensus” on the short-term macroeconomic consequences of climate change policies, the costs are “manageable” if “the right measures are implemented immediately and phased in over the next eight years.”

Under the terms of the 2015 Paris Agreement, 189 countries agreed to limit global warming to below 2°C and preferably to around 1.5°C. Temperatures have already risen by at least 1.1°C due to industrial-age human activity.

Earlier this year, the United Nations Intergovernmental Panel on Climate Change found that a 43 percent reduction in global greenhouse gas emissions by 2030 compared to 2019 levels would be needed to meet the goals of the Paris climate agreement.

The IPCC report, compiled by 278 scientists from 195 countries, found that without immediate action, the world was poised for a 3.2°C temperature rise by the end of the century.

The IMF said achieving such targets would require large increases in greenhouse gas emissions taxes, emissions regulations and significant investment in low-carbon technologies.

Greenhouse gas taxes should be introduced immediately and increased in “small and predictable increments,” the fund says, and combined with incentives for investment and research into climate-neutral technologies that would help shift consumption patterns to low-carbon alternatives.

Earlier this year, a World Bank report found that carbon pricing schemes cover around 23 percent of total greenhouse gas emissions. But only 4 percent of global emissions are currently covered by a carbon price high enough to reduce emissions by the amount needed to meet 2030 climate targets.

The IMF has proposed three policy scenarios that could cut emissions by 25 percent by 2030, all funded by revenues from greenhouse gas taxes. These included a mix of redistributing greenhouse gas tax revenues among households, using them to reduce labor taxes, and using them to subsidize investments in electric vehicles and clean energy production.

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https://www.ft.com/content/445db695-21a2-4424-9067-b8215c5feb7e The costs of climate failure will exceed the economic consequences of the transition, says the IMF

Adam Bradshaw

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