The tax measures implemented by governments against the novel coronavirus must be harmonized in order to combat climate change and ensure an environmentally sound recovery from the pandemic, the executive director of the International Monetary Fund (IMF) said on Wednesday.
“If this recovery is to be sustainable – if our world is to become more resilient – we must do everything in our power to promote a green recovery,” said Kristalina Georgieva.
Georgieva noted that action to combat the climate crisis is not just a nice to have, it is a must if we are to leave a better world for our children.
“When governments provide financial lifelines to carbon-intensive companies, they should make commitments to reduce carbon emissions,” she said.
She recalled the global financial crisis of 2008 and said some automakers had committed to higher fuel efficiency standards at the time.
“With oil prices at record low, now is the time to phase out harmful subsidies,” she said, adding that governments need to prioritize investments in green technologies, clean transport, sustainable agriculture and climate resilience.
She stressed that in the energy sector alone, the IMF estimates that a decade of low-carbon transition would require an annual investment of $ 2.3 trillion.
Promote environmentally friendly finance
Georgieva stressed that the world should focus on the use of green bonds and other forms of sustainable finance.
“Given the expanded use of government guarantees, some of them can be used to mobilize private finance for green investments,” she said.
Financial firms need to be mandated to better disclose climate risks in their credit and investment portfolios, she added.
She also said better ways of pricing climate risk should be found.
“New IMF analyzes show that climate-related disasters have had only a modest impact on the stock markets over the past 50 years. Obviously, many investors still have to face the new climate reality. “
Right price for carbon
Georgieva warned that a much higher carbon price would be needed to encourage climate-friendly investments and accelerate the shift to cleaner fuels and greater energy efficiency.
It found that the current global price of carbon is only $ 2 per ton, well below the level needed to keep global warming below 2 degrees Celsius, which the IMF estimated at $ 75 per ton.
This transition must be fair and growth friendly, she said.
“For example, carbon tax revenues can be used to provide upfront support to poorer households, reduce burdensome taxes and support investments in health, education and infrastructure.”