IMF Managing Director, Kristalina Georgieva and Lord Nicholas Stern, of the London School of Economics, discuss the challenges brought by climate change and how the IMF can play a role in mitigating risks.
• Climate change is macro critical according to Georgieva and therefore central to the IMF’s mandate. Fund must integrate climate action into what it already does on fiscal, financial and monetary policy. Can contribute on how to approach carbon pricing / taxing. Can advise on how to improve the quality of expenditure and investment decisions to ensure a sustainable future.
• Strong commitment to work with CBs to look at greening financing. Stress test the financial system for a new category of risks. Think of climate action not as a drag but as a booster, transformation to low carbon, climate resilience is a good investment, better jobs.
• Climate change may be the silver bullet we need at a time of low productivity, low inflation, low rates. But we need policy to pull through investment and the right financing must be available.
• What about the losers, coal dependent countries etc. Sustainable growth should be viewed as an opportunity everywhere to boost demand, investment and growth. Dislocation in the move away from old technologies is inevitable but you also get job creation in new industries.
Why does this matter? A more vocal IMF on climate change suggests more scope for central banks and policymakers around the world to engage in climate-related policy interventions, whether Green New Deals or QE in green bonds.
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