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International Monetary Fund. Strategy, Policy, and & Review Department

While the IMF has been involved in the climate debate since at least 2008, a systematic account of how to integrate climate change into surveillance has been lacking to date. This paper seeks to fill the gap. It argues that domestic policy challenges related to climate change—such as adaptation efforts for climate vulnerable countries, or policies to deliver a country’s Nationally Determined Contribution under the Paris climate accord—are covered by the IMF’s bilateral surveillance mandate and therefore valid topics for Article IV consultations wherever these challenges cross the threshold of macro-criticality. Climate change mitigation is a global policy challenge and therefore falls under multilateral surveillance. The paper proposes a pragmatic approach that focusses especially on the mitigation efforts of the 20 largest emitters of greenhouse gases.

International Monetary Fund. Strategy, Policy, and & Review Department
International Monetary Fund. Strategy, Policy, &, and Review Department

Review of Implementation of IMF Commitments in Support of the 2030 Agenda for Sustainable Development

International Monetary Fund

The Fund has a role to play in helping its members address those challenges of climate change for which fiscal and macroeconomic policies are an important component of the appropriate policy response. The greenhouse gas mitigation pledges submitted by over 160 countries ahead of the pivotal Climate Conference in Paris in December represent an important step by the international community towards containing the extent of global warming. Strategies for reducing emissions will reflect countries’ differing initial positions, political constraints and circumstances. Carbon pricing can, however, play a critical role in meeting in the most efficient and effective way the commitments that countries are now entering into; it can also raise substantial revenues that can be used to reduce other, more distorting taxes. Through its incentive effects, carbon pricing will also help mobilize private finance for mitigation activities and spur the innovation needed to address climate challenges. Finance ministries have a key role to play in promoting and implementing these policies and ensuring efficient use of the revenue raised. The process of climate change is set to have a significant economic impact on many countries, with a large number of lower income countries being particularly at risk. Macroeconomic policies in these countries will need to be calibrated to accommodate more frequent weather shocks, including by building policy space to respond to shocks; infrastructure will need to be upgraded to enhance economic resilience. It will be important that developing countries seeking to make these adaptations have access to sufficient financial support on generous terms. Financial markets will play an important role in helping economic agents and governments in coping with climate change-induced shocks. And heightened climate vulnerabilities and the structural adjustments associated with a shift towards a low-carbon economy over the medium-term will have important implications for financial institutions and financial stability. This paper identifies areas in which the Fund has a contribution to make in supporting its members deal with the macroeconomic challenges of climate change, consistent with national circumstances. It draws on materials contained in a forthcoming Staff Discussion Note (Farid et al. 2015) and has benefited from the discussions at informal Board meetings on IMF work on climate change held on September 30 and November 24, 2015.

International Monetary Fund
An unprecedented policy response and rapid progress in vaccine development have helped pull the global economy from a deep recession. But the outlook is marked by high uncertainty and great divergence. Carefully calibrated policies and stronger international cooperation are vital to safely exit the crisis. Transformative policies should aim for fast convergence toward a green, digital, and inclusive future.
International Monetary Fund. Strategy, Policy, & Review Department
While the IMF has been involved in the climate debate since at least 2008, a systematic account of how to integrate climate change into surveillance has been lacking to date. This paper seeks to fill the gap. It argues that domestic policy challenges related to climate change—such as adaptation efforts for climate vulnerable countries, or policies to deliver a country’s Nationally Determined Contribution under the Paris climate accord—are covered by the IMF’s bilateral surveillance mandate and therefore valid topics for Article IV consultations wherever these challenges cross the threshold of macro-criticality. Climate change mitigation is a global policy challenge and therefore falls under multilateral surveillance. The paper proposes a pragmatic approach that focusses especially on the mitigation efforts of the 20 largest emitters of greenhouse gases.
International Monetary Fund. Strategy, Policy, & Review Department
Fund surveillance needs to evolve to face the economic and financial challenges that will shape the global landscape for years to come. This paper first takes stock of the current economic and financial landscape. To better serve the membership in this context, Fund surveillance should be prioritized around four key priorities: (i) confronting risks and uncertainties: policymakers will need to actively manage the risks of a highly uncertain outlook; (ii) preempting and mitigating adverse spillovers: shifting patterns of global economic integration will bring about new channels for contagion and policy spillovers; (iii) fostering economic sustainability: a broader understanding of sustainability to better account for the impact of economic and non-economic developments on stability; and (iv) unified policy advice: better accounting for the trade-offs and synergies among different policy combinations in the face of limited policy space and overlapping priorities, tailored to country-specific circumstances. These priorities should further enhance the traction of Fund surveillance.
International Monetary Fund. Strategy, Policy, & Review Department
Ensuring economic sustainability is key to achieving the IMF’s surveillance mandate of maintaining present and prospective balance of payments and domestic stability, assuring orderly exchange arrangements, and promoting a stable system of exchange rates. A good understanding of issues related to economic sustainability is thus essential for the IMF to provide effective surveillance and policy advice, while it requires a broad perspective and a long time horizon. With respect to the IMF’s surveillance mandate, the principle of macro-criticality, which guides the IMF’s engagement with its members, is sufficiently flexible and broad, allowing the IMF to cover issues related to economic sustainability. At the same time, given the wide range of issues that are related to economic sustainability, IMF surveillance needs to be selective and focused, with the choice of issues made on a case-by-case basis, considering country circumstances. It also needs to leverage the expertise of other institutions when necessary. The IMF and other institutions have advanced work to enhance analytical frameworks and indicators related to economic sustainability, and this should continue.