Climate Change and Long-Term Growth
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Mr. Nikoloz Gigineishvili
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Iulia Ruxandra Teodoru
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Narek Karapetyan
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Ms. Yulia Ustyugova
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Mr. Jean van Houtte
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Jiri Jonas
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Wei Shi
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Shant Arzoumanian
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Mr. Kalin I Tintchev
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Maxwell Tuuli
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Faten Saliba
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Farid Talishli https://isni.org/isni/0000000404811396 International Monetary Fund

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Moataz El-Said
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Fernanda Brollo
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Climate change is reshaping global climate patterns, including in the Caucasus and Central Asia (CCA). Mean temperatures have risen faster in the CCA than elsewhere and, coupled with more unstable rain cycles, have led to more intense weather calamities (Figure 28). Droughts have become more frequent, which could further increase aridity, especially in drought-prone regions of Central Asia, jeopardizing water and food security. More frequent floods have already caused significant damage to infrastructure and a large human toll in CCA’s mountainous areas. Rising temperatures and frequent weather calamities weigh on agriculture, which has historically been the main source of livelihood for rural populations in the region. Furthermore, erratic water supply disrupts mining and hydropower generation, while natural disasters also discourage tourism, particularly in vulnerable mountainous areas.

Abstract

Climate change is reshaping global climate patterns, including in the Caucasus and Central Asia (CCA). Mean temperatures have risen faster in the CCA than elsewhere and, coupled with more unstable rain cycles, have led to more intense weather calamities (Figure 28). Droughts have become more frequent, which could further increase aridity, especially in drought-prone regions of Central Asia, jeopardizing water and food security. More frequent floods have already caused significant damage to infrastructure and a large human toll in CCA’s mountainous areas. Rising temperatures and frequent weather calamities weigh on agriculture, which has historically been the main source of livelihood for rural populations in the region. Furthermore, erratic water supply disrupts mining and hydropower generation, while natural disasters also discourage tourism, particularly in vulnerable mountainous areas.

3. Climate Change and Long-Term Growth

A. Introduction

Climate change is reshaping global climate patterns, including in the Caucasus and Central Asia (CCA). Mean temperatures have risen faster in the CCA than elsewhere and, coupled with more unstable rain cycles, have led to more intense weather calamities (Figure 28). Droughts have become more frequent, which could further increase aridity, especially in drought-prone regions of Central Asia, jeopardizing water and food security. More frequent floods have already caused significant damage to infrastructure and a large human toll in CCA’s mountainous areas. Rising temperatures and frequent weather calamities weigh on agriculture, which has historically been the main source of livelihood for rural populations in the region. Furthermore, erratic water supply disrupts mining and hydropower generation, while natural disasters also discourage tourism, particularly in vulnerable mountainous areas.

Figure 28.
Figure 28.

Climate Change in the CCA

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

Sources: The World Bank; EM-DAT; and IMF staff calculations.

The main policy challenge is to place the region on a more sustainable growth path. This requires balancing multiple policy objectives, including curbing greenhouse gas emissions and protecting the environment, transitioning to a low-carbon and higher efficiency growth model, adapting human and physical capital to this new model, and protecting the vulnerable. As will be shown below, climate policy has an important role to play in reducing climate risks and the associated output and employment losses, and in financing the low-carbon transition.

CCA oil importers and oil exporters are facing different climate policy trade-offs. Decarbonization is expected to lead to reduced global oil demand and lower energy prices, impacting in different ways CCA oil importers and oil exporters. Global mitigation and domestic adaptation can significantly reduce climate-related output losses in CCA oil importers, supported by improvements in their terms of trade. However, to reap potential gains from global mitigation, CCA oil exporters also need to address transition risks through timely diversification and countercyclical fiscal policies. Failure to diversify away from hydrocarbons could result in terms of trade and fiscal volatility, with negative repercussions to long-term growth.

This chapter assesses the impact of climate change on long-term growth in the CCA. It investigates channels of transmission of climate change and its distributional impact, and potential gains from appropriately designed macroeconomic policies. It extends the model by Kahn and others (2021) by introducing new features that examine the impacts of temperature and a new drought index on factors of production.22 The novelty of the approach is to integrate adaptation and transition risks in standard global mitigation scenarios, which allows to investigate complex trade-offs and interactions between climate policies and macroeconomic policies and their implications for long-term growth.23

B. Long-Term Growth Impact of Climate Change24

Climate change could considerably lower long-term growth in the CCA. Model estimates suggest a strong impact through total factor productivity (TFP), but capital and employment also suffer because global warming and related natural disasters discourage investment (Burke, Hsiang, and Miguel 2015), damage human health and reduce productivity (Dell, Jones, and Olken 2014). If temperature deviations from their long-term trend increase persistently by 0.01 degrees Celsius per year for an extended period, then annual long-term per capita GDP growth would be lower by about 0.08 percentage points over this period. The estimates also imply that temperature negatively affects growth with lags of up to four years and therefore its effects cumulate over years. This persistent nature of climate change also implies that continued shocks can impact long-term growth rates (Kahn and others 2021).

Poorer countries appear particularly susceptible to climate change. The estimates point to a negative nonlinear relationship between countries’ vulnerability to climate change and income levels. Countries with per capita incomes below $10,000 appear most sensitive to global warming (Figure 29), likely because these economies rely on climate-sensitive sectors such as agriculture, energy, mining, and tourism and lack sufficient financial and human resources. Moreover, the sensitivity of growth to global warming increases with the size of poverty gaps suggesting that climate change can lead to cross-country divergence of incomes in the long term (Figure 30).25

Figure 29.
Figure 29.

Growth Responses by Income Level

(Long-run responses to temperature shocks)

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

Sources: World Bank; and IMF staff estimates.
Figure 30.
Figure 30.

Poverty Gap Response by Poverty Level

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

Sources: World Bank; and IMF staff estimates.Note: Estimates from quantile regressions.

Climate policies can bring distinct and mutually reinforcing economic benefits to the CCA. Global mitigation is essential to contain temperature increases, but domestic adaptation policies to increase fiscal savings, and strengthen human capital and social protection could improve resilience to climate change.26 Global warming is found to weaken growth more in countries with large agricultural and industrial sectors and where water insecurity is high. Hence, early measures to increase water availability would also strengthen resilience in water-dependent sectors. These findings are consistent with the region’s relatively low rank on key structural determinants of resilience to climate change, which in addition to income, include the output structure, productivity, human and physical capital, and social spending.

The scenario analysis (Box 1) confirms that climate change could significantly dent CCA’s long-term growth potential, but the losses could be substantially reduced with global mitigation, domestic adaptation, and transition policies. Without global mitigation, regional temperatures will continue to rise faster than the global average, and CCA’s annual output loss could reach nearly 6.5 percent of the baseline GDP by 2060 (Figure 31). Collective growth-friendly mitigation as committed under the Paris Agreement could cut these losses by close to 4 percent of GDP or less if the Paris Agreements are partially implemented and fiscal and external balances weaken.

Figure 31.
Figure 31.

CCA: Projected Output Loss in Climate Scenarios

(Per capita annual GDP losses in percent of baseline)

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

Sources: World Bank, and IMF staff estimates.Note: Panel 1 shows the output loss from policy inaction above the x-axis and the positive effect of policies below the x-axis as well as the remaining (residual) loss. The first transition scenario assumes no active transition policies (diversification, fiscal savings, etc.) while in the second scenario such policies are put in place.

Well-designed adaptation could further reduce the residual output losses. Without adaptation (but with global mitigation), average annual output losses in the CCA would exceed 2.5 percent of the baseline GDP by 2060.27 Adaptive capacity will improve with income growth but to be effective, adaptation policies need to be targeted at strengthening fiscal buffers, social protection, and human capital. Countries that proactively address climate risks and start building buffers early will be better positioned to prevent long-term scarring. Domestic adaptation policies can reduce climate-related output losses by about 1.5 percent of the baseline GDP by 2060.

CCA oil exporters will also face the challenges of transition to a low-carbon environment. CCA’s oil and gas are exported mainly to the EU and China, which have both pledged to reach carbon neutrality by 2050-60. The EU is also considering introducing a carbon border tax for non-EU importers. Moreover, in a net zero global scenario by 2050 the International Energy Agency projects gas demand to decline by 55 percent and oil demand by 75 percent from the 2020 levels (IEA 2021). This would result in lower prices and demand for CCA’s oil and gas, stranded assets and consequently a significant contraction of fossil fuel production and exports, which are currently primary sources of growth, national income, foreign exchange, and fiscal revenue. Without successful transition policies, CCA oil exporters will face formidable macro-stability challenges, permanently low growth, rising unemployment, and worsening economic welfare.

The estimates show that persistent shocks to oil exporters’ terms of trade and primary fiscal balances would largely erode the growth benefits of global mitigation. This erosion, however, could be avoided by building fiscal buffers and timely diversification through reforms to promote production and use of green energy, strengthening the business environment, and supporting private sector development (Figures 32 and 33).

Figure 32.
Figure 32.

Transition Losses in CCA Oil Exporters, 2060

(Per capita GDP losses in USD)

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

Sources: World Bank; and IMF staff estimates.Note: CCA’s gains from global mitigation are netted against its estimated transition-related output losses. Panel 1 reflects the transition losses that would prevail if no transition policies were implemented (diversification, fiscal savings, etc.). Panel 2 is based on the transition losses implied by the scenario with active transition policies.
Figure 33.
Figure 33.

Potential Policy Gains in CCA Oil Importers and Exporters, 2060

(Per capital GDP losses in percent of baseline)

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

Sources: World Bank; and IMF staff estimates.Note: Middle bars represent avoided output losses.

Scenario Analysis

Five policy scenarios are considered. In the high-emission scenario no global mitigation policies are implemented, and global temperatures persistently rise by more than 4 degrees Celsius by 2100. In the low-emission scenario, global mitigation consistent with the Paris Agreement keeps temperature increases below 1 degrees Celsius. The gains from global mitigation are estimated as a difference in projected outputs between these two scenarios. The adaptation scenario gauges potential output gains from reducing the sensitivity of growth to climate change. Lastly, two scenarios look at transition trade-offs for oil exporters by estimating output losses with and without timely transition measures in anticipation of the declines in hydrocarbon prices and production. Output losses are benchmarked against the baseline where temperatures follow long-term trends

Box Figure 1.1.
Box Figure 1.1.

Temperature Projections

(Cumulative increase; degrees celsius)

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

Sources: World Bank, Climate Change Knowledge Portal; and IMF staff estimates.

C. Climate Policies

Mitigation

CCA’s carbon footprint is small and accounts for less than 2 percent of global emissions (Figure 34). However, per capita emissions are high, especially in Central Asia. Kazakhstan, Turkmenistan, and Uzbekistan account for the bulk of regional emissions, 40 percent of which come from electricity and agricultural sectors. In oil exporters, power generation is mostly based on fossil fuels and accounts for the largest share of emissions. In oil importing countries, agriculture contributes the most to emissions.

Figure 34.
Figure 34.

CCA Countries: Carbon Emissions

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

Sources: Google Earth Engine; Ritchie and Roser (2020); and IMF staff estimates.

All CCA countries have committed to reducing their carbon footprint as part of the Paris Agreement and submitted nationally determined contributions (NDC). Most countries have since ratcheted up their unconditional targets to reduce GHG by 2030 (Table 3). The progress, however, has been uneven across the region. The IMF’s Carbon Pricing Assessment Tool (CPAT) (Black and others, 2022) suggests that the current mitigation policy mix in Azerbaijan, the Kyrgyz Republic and Kazakhstan may not be sufficient to curtail emissions to their targets. On the other hand, Georgia, Uzbekistan, and Tajikistan appear to be on track to meet their unconditional commitments. Armenia is also likely to achieve its conditional target.

Table 3.

CCA: Nationally Determined Contributions

(Percent below 1990 emission levels unless indicated otherwise)

article image
Sources: Cerutti and others (2021); and UNFCCC NDC Registry. Note: NDC = nationally determined contribution.

Carbon pricing is a direct and efficient way of reducing carbon emissions by incentivizing firms and households to internalize the related costs based on carbon content. This can be accomplished either through carbon taxation or an emissions trading system (ETS). A carbon tax determines the CO2 price directly, allowing emissions to adjust, while an ETS controls emissions through quotas which firms can trade with one another while the market determines the price. Carbon emissions can also be priced through payments for emission reductions to governments and firms (for example, World Bank Emission Reductions Payment Agreements Program-ERPAs). The recent IMF research has shown that carbon taxation could be an effective source of revenue (Parry, Black, and Roaf 2021).28

More than 60 carbon taxes and emissions trading programs currently exist at national, regional, and subnational levels, but they cover only about one-fifth of global emissions, with an average carbon tax of $3 per tonne. This is far from the $75 per tonne needed to reduce emissions to the levels consistent with the Paris Agreement (Parry, Black, and Roaf 2021). Apart from carbon pricing schemes, the World Bank has concluded ERPAs with 65 countries. To support Paris Agreement goals, the IMF has recently proposed a differentiated international carbon price floor for large emitters (Parry, Black, and Roaf 2021), ranging from $25 per ton for low-income countries to $75 per ton for advanced economies.

A regional carbon pricing mechanism for the CCA could help meet the Paris Agreement commitments while generating revenue for economic greening (Figure 35). Kazakhstan is the only CCA country with a functioning ETS (IMF 2022b). The CPAT suggests that the weighted average NDC emissions target in the CCA can be met with a uniform $25 carbon tax on average, before elimination of subsidies. This would generate about 2.6 percent of GDP in revenue (from about 3.3 percent of GDP in Uzbekistan to 2 percent of GDP in Armenia). While the emission levels in Armenia, Georgia, and Uzbekistan are low and their emission targets can be achieved without a carbon tax, Kazakhstan and Tajikistan could reach their targets with a tax of less than $25 while Azerbaijan and the Kyrgyz Republic-with $75.29

Figure 35.
Figure 35.

Emission Reduction and Pledges

(Emissions, percent of baseline)

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

Sources: IMF CPAT tool; and IMF staff estimates.Note: Armenia, Georgia and Uzbekistan have pledges that imply emissions increase in 2030 against the baseline. Turkmenistan’s NDC is unquantifiable.

A broader fuel pricing reform to eliminate implicit and explicit subsidies could support regional mitigation. Current fuel prices do not reflect the environmental cost of fossil fuel (Figure 36), and in almost all CCA countries are below their efficient levels, which in addition to supply costs reflect environmental costs and revenue considerations (Coady and others 2019). Explicit fossil fuel subsidies have declined somewhat over the last decade but continue to account for more than 2 percent of GDP in the Caucasus and Kazakhstan. Low fuel prices discourage energy savings and disincentivize investment in renewable energy.

Figure 36.
Figure 36.

CCA: Efficient Fuel Pricing

(US dollars)

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

Sources: IMF, CPAT tool; and IMF staff estimates.Note: 2020 prices. Supply costs are defined as the opportunity costs of consuming domestically instead of exporting, based on import/export price parity.

Revenue from carbon taxation could offset its impact on the vulnerable and finance investments needed for diversification. Higher fuel prices could be a burden on the poor and businesses, which could be alleviated through targeted transfers to low-income households, investment in renewables, and possible cuts of other distortionary taxes (for example, labor income taxes). Carbon pricing could be gradually phased in and could be considerably lower than the estimated $25/tonne if preceded by removal of energy subsidies (see IMF 2022c).

Adaptation

Adaptation policies are aimed at strengthening resilience of the economy to climate change and should be an integral part of broader developmental frameworks. This includes building climate-resilient infrastructure; investing in health and education to strengthen human capital; improving social protection to shield the poor; and building economic buffers, reducing poverty and unemployment, promoting income and gender equality and spurring innovation. These frameworks should also reflect climate risks and key adaptation priorities, supported by appropriate funding mechanisms, governance, coordination, and control (Figure 37).

Figure 37.
Figure 37.

Holistic Adaptation Strategies

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

Source: IMF (2022a).

Best practices suggest that adaptation should be guided by National Adaptation Plans (NAP) underpinned by robust legal and institutional frameworks.30 CCA’s NAP processes are still developing. All CCA countries are parties to the United Nations Framework Convention on Climate Change (UNFCCC) and have committed to developing NAPs (UNFCCC 2021). Armenia is the first CCA country to have published its NAP in September 2021 and has taken measures to implement its plans and integrate them into national development planning. Georgia has also made progress, completing two out of the four elements of the NAPs.31 Azerbaijan and Central Asia have taken initial steps of laying the NAP groundwork and addressing gaps. Adaptation priorities could be further developed in sector-specific legal acts and plans focused on water, renewable energy, biodiversity, etc.

Adaptation priorities are increasingly reflected in CCA’s legal and development frameworks. Kazakhstan’s new environmental law sets adaptation priorities and institutional responsibilities. The Kyrgyz Republic enacted laws and programs to develop renewable and efficient energy and put in place a sectoral action plan for climate adaptation. Tajikistan’s new adaptation and green development strategies take a multi-sectoral approach aimed at energy, water, agriculture, industry, and construction. Uzbekistan adopted a Low Carbon Energy Strategy and is developing a NAP focusing on irrigation, agricultural chains, and green energy.

Adaptation policy implementation should be supported by adequate funding. Cost estimates for the region ranged between 0.6 percent and 3.3 percent of GDP in 2020 (IMF 2022a). In addition to carbon taxation, fiscal space for adaptation can be generated from multiple sources: elimination of energy subsidies (Figures 38 and 39), reprioritizing expenditure, diversifying the tax base, removing tax exemptions, and strengthening revenue administration. Possibilities for public-private partnerships should also be explored. Adaptation needs should be subject to rigorous cost-benefit analysis and weighted against other government priorities (Bellon and Massetti 2022). Some adaptation measures (like social safety nets) overlap with other development policies and thus come without added cost (Hallegatte, Rentschler, and Rozenberg 2020).

Figure 38.
Figure 38.

Adaptation Costs and Fuel Subsidies, 2020

(Percent of GDP)

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

Sources: Parry, Black, and Vernon (2021); IMF, World Economic Outlook; and IMF staff calculations.Note: The data do not reflect subsequent subsidy reforms. Climate adaptation costs cover floods and storms and do not capture investments needed to protect against other risks, including droughts and heatwaves.
Figure 39.
Figure 39.

Average Adaptation Financing, 2009–19

(2019 US dollars, billions)

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

IMF; OECD; and IMF staff calculations.

A number of external financing sources are available. Multilateral development banks provide climate financing, particularly in sectors such as water, energy, infrastructure, and food production. The IMF Resilience and Sustainability Facility offers long-term financing for reforms to strengthen resilience to climate change. Grant-based assistance is available from bilateral donors and UNFCCC sources, including the GCF, The Least Developed Countries Fund, and the Special Climate Change Fund.

Other multilateral providers include the Pilot Program for Climate Resilience, the Adaptation for Smallholder Agriculture Program, and the Adaptation Fund.

Transition

Decisive steps are needed to address transition risks. A smooth transition will require measures to reduce dependence on oil, build countercyclical fiscal buffers, and strengthen the business climate to support non-oil investments. Achieving these goals will take time, which underscores the urgency of early action and policy debate on these long-term challenges. The needed policy packages could include:

  • Diversification of the economy will be key to minimizing transition risks. This will require advancing structural reforms to address the most binding constraints to non-oil growth and raise potential output (see Chapter 1). Priority reforms include governance and transparency, the rule of law, competition, and access to finance and trade. These reforms are important to improve the business environment and support regional integration and access to global value chains. Targeted tax incentives could be used sparingly to promote a switch to greener technologies.

  • Improving energy efficiency would contribute to decarbonization and strengthen fiscal buffers. Oil exporters need to reduce energy leakages and technical losses; raise energy prices to full cost recovery, including externalities; and encourage greater private sector participation in the energy and transportation sectors.

  • Targeted social protection for the affected communities would need to be increased and combined with active labor market policies such as training, skills upgrading, and retooling (Peszko and others 2020).

  • Transition management, including investment in green energy and industries, will require significant financial resources. Fiscal buffers can be strengthened by saving a higher share of oil and gas revenue, including the windfalls from the current high fossil fuel prices, and enhancing investment policies of sovereign funds to generate higher returns. In addition, carbon taxation has a large revenue generation potential in some countries (for example, Kazakhstan). Reduction of non-priority spending and elimination of energy subsidies would create additional fiscal space. In addition, countries should seek external climate financing although the rising debt levels may become a constraint.

Expanding green electricity generation capacity would serve both mitigation and transition objectives. At present, the region generates most of its electricity from fossil fuels (Figure 40), and the sector accounts for the bulk of carbon emissions. In the Caucasus only about 10 percent of energy supply comes from hydro and renewable sources while in Central Asia this share is about 15 percent. Changing this balance entails transition risks, and CCA oil exporters would need to invest in renewable electricity. Azerbaijan, Kazakhstan, and Uzbekistan have pledged to increase shares of renewables in power generation to 15-30 percent by 2030 and to about 50 percent by 2050-60 (IEA 2015). They have made initial strides to develop their solar, wind, and small hydropower potentials but progress is hindered by regulatory and financial constraints (Laldjebaev, Isaev, and Saukhimov 2021). Kazakhstan currently hosts the largest wind farm in Central Asia and is planning to build wind and solar parks in the windy parts of its territory and hydropower stations in the mountains. There is also scope for oil exporters to leverage the significant hydropower potential of the Kyrgyz Republic and Tajikistan and by partnering with these countries on new hydropower projects and sharing the costs.

Figure 40.
Figure 40.

Total Energy Mix

(Percent of total energy supply)

Citation: Departmental Papers 2023, 004; 10.5089/9798400239175.087.A003

Sources: International Energey Agency; and IMF staff calculations.Note: Renewable energy capacity installed after 2019 is not included.

Conclusions

The CCA region is particularly vulnerable to climate change. Rising temperatures and more frequent and severe climate hazards expose CCA’s economies, which are concentrated in weather-prone sectors, such as agriculture, energy, mining, and tourism, especially in Central Asia. Without strong global mitigation efforts and climate policies, regional temperatures will continue to rise, causing significant loss of output through productivity, investment, and employment channels. Proactive and early implementation of climate policies is needed to shield CCA economies from the impact of climate change. Global mitigation and domestic adaptation would almost fully eliminate climate-induced output losses in oil-importing countries. Oil exporters would also need to manage transition risks, which if left unaddressed could take a significant toll on growth.

CCA’s carbon footprint is small, but its per capita emissions are high, and CCA countries should contribute their fair share to global mitigation efforts. Efficient fuel pricing would eliminate wasteful and regressive subsidies, cover negative externalities, and disincentivize the use of fossil fuel, which is a major carbon pollutant. Carbon pricing mechanisms could also reduce carbon emissions and generate revenue for investments in renewables or to finance social assistance programs.

The region’s adaptive capacity is constrained by fiscal space, which has been largely eroded by two successive global shocks-the COVID-19 and Russia’s war in Ukraine. CCA countries need to rebuild fiscal buffers to strengthen macroeconomic resilience, introduce or raise carbon taxation, invest in infrastructure and human capital, and strengthen social safety nets, all of which can reduce their sensitivity to climate change. Improving water management and investing in sustainable green agriculture is also critical to address the risk of water and food insecurity. Given large adaptation costs, countries should actively seek domestic and external climate financing.

Transition risks for CCA oil exporters can be substantially reduced by diversifying their economies away from hydrocarbons, which will require structural reforms to improve productivity of the non-oil sector and support regional integration and access to global value chains. Priority areas include governance, the rule of law, competition, infrastructure, trade, and green power generation.

Climate change transcends borders and can be tackled most effectively through regional policy coordination. The latter is key for developing cost-effective mechanisms for information sharing and early detection and management of disaster risks. Regional partnerships-such as regional carbon price floors or Emission Trading Systems, improved connectivity of CCA transmission networks, and joint green investment projects-would allow sharing of costs and benefits and yield significant net welfare gains to all countries.

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  • Shatberashvili, N., I. Rucevska, H. Jorstad, K. Artsivadze, B. Mehdiyev, M. Aliyev, G. Fayvush, and others. 2015. Outlook on Climate Change Adaptation in the South Caucasus Mountains. United Nations Environment Programme, GRID-Arendal and Sustainable Caucasus. Nairobi.

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  • Tintchev, K., and Tuuli, M. Forthcoming. “Climate Change and Long-term Growth in the Caucasus and Central Asia.” IMF Working Paper, International Monetary Fund, Washington, DC.

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  • United Nations Framework Convention on Climate Change (UNFCCC) LDC Expert Group. 2021. National Adaptation Plans 2021, Progress Report. Bonn.

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  • United Nations Framework Convention on Climate Change (UNFCCC) LDC Expert Group. 2012. The National Adaptation Plan Process: A Brief Overview. Bonn.

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  • United Nations Intergovernmental Panel on Climate Change (IPCC). 2014. The Fifth Assessment Report. Geneva.

22

Kahn and others (2021) model climate change as persistent deviations of temperature and precipitation from their long-term trends (climate) and investigate its impact on long-term growth.

23

The approach distinguishes between weather fluctuations and climate change (Dell, Jones, and Olken 2014). While the former has predominantly short-term growth effects, the latter could impact long-term growth trajectory. The empirical analysis is based on an Autoregressive Distributed Lag model for 152 economies over the period 1970-2020. For detailed description of the methodology, see Tintchev and Tuuli (forthcoming).

24

The findings in this section are based on Tintchev and Tuuli (forthcoming).

25

The long-term responses of poverty to temperature become large and statistically significant for countries with poverty gaps above 10 percent.

26

For detailed discussion of potential policy responses see IMF (2022a).

27

This figure does not include transition risk effects.

28

In many countries with ETS, emission allowances are distributed to companies free of charge.

29

Turkmenistan is using a nonstandard target (using GDP growth as a threshold) and is not covered by the CPAT methodology.

30

The NAP process, launched by the United Nations in 2010, provides capacity building and financial support to (1) identify adaptation needs; (2) prioritize actions in national and sectoral planning; (3) strengthen institutional capacity and regional coordination; and (4) monitor, review, and update NAPs (UNFCCC 2012).

31

The four elements are (1) lay the groundwork and identify gaps in information and administration; (2) strategic orientation and preparation; (3) implementation strategies; and (4) report, monitor, and review.

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Paving the Way to More Resilient, Inclusive, and Greener Economies in the Caucasus and Central Asia
Author:
Mr. Nikoloz Gigineishvili
,
Iulia Ruxandra Teodoru
,
Narek Karapetyan
,
Ms. Yulia Ustyugova
,
Mr. Jean van Houtte
,
Jiri Jonas
,
Wei Shi
,
Shant Arzoumanian
,
Mr. Kalin I Tintchev
,
Maxwell Tuuli
,
Faten Saliba
,
Farid Talishli
,
Moataz El-Said
, and
Fernanda Brollo
  • Figure 28.

    Climate Change in the CCA

  • Figure 29.

    Growth Responses by Income Level

    (Long-run responses to temperature shocks)

  • Figure 30.

    Poverty Gap Response by Poverty Level

  • Figure 31.

    CCA: Projected Output Loss in Climate Scenarios

    (Per capita annual GDP losses in percent of baseline)

  • Figure 32.

    Transition Losses in CCA Oil Exporters, 2060

    (Per capita GDP losses in USD)

  • Figure 33.

    Potential Policy Gains in CCA Oil Importers and Exporters, 2060

    (Per capital GDP losses in percent of baseline)

  • Box Figure 1.1.

    Temperature Projections

    (Cumulative increase; degrees celsius)

  • Figure 34.

    CCA Countries: Carbon Emissions

  • Figure 35.

    Emission Reduction and Pledges

    (Emissions, percent of baseline)

  • Figure 36.

    CCA: Efficient Fuel Pricing

    (US dollars)

  • Figure 37.

    Holistic Adaptation Strategies

  • Figure 38.

    Adaptation Costs and Fuel Subsidies, 2020

    (Percent of GDP)

  • Figure 39.

    Average Adaptation Financing, 2009–19

    (2019 US dollars, billions)

  • Figure 40.

    Total Energy Mix

    (Percent of total energy supply)