In its latest World Economic Outlook report, the IMF again tackled the issue of climate change, global warming and what to do about it.  As it did last year, the IMF recognised that climate change was a burning issue for humanity and the planet.  But this time it claimed that there were policy options that could stop any further heating to a tipping point beyond which there was no turning back.

Global emissions fell by 8.8 per cent in the first half of this year amid restrictions on movement and economic activity owing to the coronavirus pandemic, according to a new report.

But it’s coming back up.

"Unfortunately, the climate protection impact will be almost negligible,” from the COVID slump, says the report. Even though carbon dioxide emissions are lower than usual, the concentration of carbon dioxide in the atmosphere is still increasing due to continued fossil fuel consumption. “It makes almost no difference in global warming. Maybe one-hundredth of a degree difference, probably even less,” he said.

And in a report released this week, the United Nations forecast that unless global warming is stopped the planet will turn into “uninhabitable hell” for millions.  The UN report put it on the line: political and business leaders are being "wilfully negligent" as natural disasters nearly double this century. In the period 2000 to 2019, there were 7,348 major recorded disaster events claiming 1.23 million lives, affecting 4.2 billion people (many on more than one occasion) resulting in approximately US$2.97 trillion in global economic losses.  This is a sharp increase over the previous twenty years. Between 1980 and 1999, 4,212 disasters were linked to natural hazards worldwide claiming approximately 1.19 million lives and affecting 3.25 billion people resulting in approximately US$1.63 trillion in economic losses.

Much of the difference is explained by a rise in climate-related disasters including extreme weather events: from 3,656 climate-related events (1980-1999) to 6,681 climate-related disasters in the period 2000-2019. The last twenty years has seen the number of major floods more than double, from 1,389 to 3,254, while the incidence of storms grew from 1,457 to 2,034. Floods and storms were the most prevalent events. The report “The Human Cost of Disasters 2000-2019” also records major increases in other categories including drought, wildfires and extreme temperature events. There has also been a rise in geo-physical events including earthquakes and tsunamis which have killed more people than any of the other natural hazards under review in this report.

Much of the difference is explained by a rise in climate-related disasters including extreme weather events: from 3,656 climate-related events (1980-1999) to 6,681 climate-related disasters in the period 2000-2019. The last twenty years has seen the number of major floods more than double, from 1,389 to 3,254, while the incidence of storms grew from 1,457 to 2,034. Floods and storms were the most prevalent events. The report “The Human Cost of Disasters 2000-2019” also records major increases in other categories including drought, wildfires and extreme temperature events. There has also been a rise in geo-physical events including earthquakes and tsunamis which have killed more people than any of the other natural hazards under review in this report.

Echoing the IMF report, the UN said that "Currently, the world is on course for a temperature increase of 3.2 degrees Celsius or more, unless industrialized nations can deliver reductions in greenhouse gas emissions of at least 7.2% annually over the next 10 years in order to achieve the 1.5 degree target agreed in Paris”. 

While China is the biggest emitter of CO2, mainly because of its population size, the fastest annual growth of emissions comes from India and the US.

The IMF, however, reckons that it has the answers for avoiding impending disaster: “Unaddressed, climate change will entail a potentially catastrophic human and economic toll, but it’s not too late to change course.” Keeping temperatures to levels deemed safe by scientists requires bringing net carbon emissions to zero on net globally by mid-century at the latest, but this can be done, says the IMF with two major economic policy tools which moreover “can be pursued in a manner that supports economic growth, employment and income equality”.  This sounds very positive.

What are the IMF’s planet-saving economic policies?  The first is to reduce the use of fossil fuel energy sources and the second is to reduce energy consumption in total.  According the IMF economists, this can be done with carbon taxes and market pricing of carbon emissions.  “a carbon tax makes dirty fuels more expensive, which incentivizes energy consumers to shift their consumption towards greener fuels. Total energy consumption falls too because, overall, energy is more expensive.” And on the other side of the coin, we should make “green energy cheaper and more abundant (through subsidies or direct public investment in green energy)” .

Countries should initially opt for a green investment stimulus—investments in clean public transportation, smart electricity grids to incorporate renewables into power generation, and retrofitting buildings to make them more energy efficient.  This green infrastructure push will achieve two goals.  First, it will boost global GDP and employment in the initial years of the recovery from the COVID-19 crisis. Second, the green infrastructure will increase productivity in low-carbon sectors, thereby incentivizing the private sector to invest in them and making it easier to adapt to higher carbon prices.

The IMF has a model that claims that its strategy to mitigate climate change could actually boost global GDP in the first 15 years of the recovery by about 0.7 percent of global GDP on average, and employment for about half of that period, leading to about 12 million extra persons being employed globally. As the recovery takes hold, preannounced and gradually rising carbon prices will become a powerful tool to deliver the needed reduction in carbon emissions.  “If implemented, such a policy program would put the global economy on a sustainable path by reducing emissions and limiting climate change. The net effect would approximately halve the expected output loss from climate change and provide long-term real GDP gains well above the current course from 2050 onward.”  So it seems we can have our cake and eat it: more growth and zero emissions!