ANKARA – Fiscal measures implemented by governments against the coronavirus disease 2019 (Covid-19) need to be harmonized to combat climate change and ensure an environmentally sustainable recovery from the pandemic, the managing director of the International Monetary Fund (IMF) said 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,” Kristalina Georgieva said.
Georgieva said taking measures now to fight the climate crisis is not just a “nice-to-have” but a “must-have if we are to leave a better world for our children.”
“When governments provide financial lifelines to carbon-intensive companies, they should mandate commitments to reduce carbon emissions,” she said.
Recalling the 2008 global financial crisis, Georgieva said some automakers committed to higher fuel-efficiency standards then.
“With oil prices at record-low levels, now is the time to phase out harmful subsidies,” she said, adding that governments need to prioritize investment in green technologies, clean transport, sustainable agriculture, and climate resilience.
Georgieva highlighted that in the energy sector alone, the IMF estimates that a low-carbon transition would require an investment of USD2.3 trillion every year for a decade.
Promoting green finance, she said the world should focus on using green bonds and other forms of sustainable finance.
“In light of the extended use of government guarantees, part of them can be deployed to mobilize private finance for green investment,” Georgieva said.
Financial firms have to be mandated to better disclose climate risks in their lending and investment portfolios, she added.
Georgieva also said that better ways of pricing in climate risk should be found.
“New IMF analysis shows that over the past 50 years, climate-related disasters have had only a modest effect on equity markets. Clearly, many investors have yet to face up to the new climate reality,” she said.
Right price on carbon
Georgieva warned that a substantially higher carbon price is needed to encourage climate-smart investment and to accelerate the shift to cleaner fuels and more energy efficiency.
She said the current global carbon price is only USD2 per ton, way below the levels needed to keep global warming under 2°C, which the IMF estimated to be USD75 per ton.
This transition must be fair and growth-friendly, Georgieva said.
“For example, carbon tax revenues can be used to provide upfront assistance to poorer households, lower burdensome taxes, and support investments in health, education, and infrastructure,” she said. (Anadolu)