In quest for net zero emissions by 2050, pricier carbon can also act as incentive
With a window rapidly closing for net zero emissions by 2050, an initial green investment push combined with steadily rising carbon prices would deliver the needed reductions, the International Monetary Fund said on Wednesday.
"A green fiscal stimulus would strengthen the macroeconomy in the short term and help lower the costs of adjusting to higher carbon prices," the IMF said in its "World Economic Outlook October" update, part of which was released on Wednesday.
Net zero emissions of greenhouse gases by 2050 are seen as vital for holding temperature increases to safe levels.
Carbon pricing is critical to mitigation because higher carbon prices incentivize energy efficiency in addition to reallocating resources from high-to low-carbon activities, the global lender said.
Global policymakers endorsed the objective of limiting temperature increases by 2100 to 1.5C-2C in the landmark 2015 Paris Agreement.
To meet that goal, sizable and rapid reductions in carbon emissions are needed. Specifically, net carbon emissions need to decline to zero by the middle of the century, according to the Intergovernmental Panel on Climate Change, or IPCC, the United Nations body for assessing the science related to climate change.
The IPCC said that as most of global warming is attributed to emissions of greenhouse gases associated with human activity, especially from burning fossil fuels, carbon emissions must be eliminated or that any remaining carbon emissions must be removed from the atmosphere by natural or artificial sinks.
"The transitional costs of carbon pricing consistent with net zero emissions by midcentury would be manageable in the context of the projected growth of the global economy over the next three decades and could be reduced further as technological innovations develop in response to carbon pricing and green research and development subsidies," the IMF report said.
In the medium term, such a strategy would place the global economy on a stronger and more sustainable growth path by avoiding serious damages from climate change and the risk of catastrophic outcomes, it said.
As the COVID-19 outbreak is still raging worldwide, the ensuing global recession makes it more challenging to enact the policies needed for mitigation and raises the urgency of understanding how mitigation can be achieved in an employment-and growth-friendly way and with protection for the poor, the IMF said.
Greener economic path
However, there are also opportunities to put the economy on a greener path, the global lender suggested.
For example, fiscal stimulus, which has been unleashed to counter the pandemic, can be an opportunity to boost green and resilient public infrastructure.
IMF Managing Director Kristalina Georgieva said on Tuesday that global economic activity had an "unprecedented fall" in the second quarter of this year, when about 85 percent of the world economy was in lockdown for several weeks.
In its June forecast, the IMF projected global GDP to contract by 4.9 percent this year, the worst downturn since the Great Depression of the 1930s. However, things seem to be less dire, Georgieva said in a curtain-raiser speech for the October annual meetings of the IMF and World Bank Group, scheduled virtually for next week.
"We now estimate that developments in the second and third quarters were somewhat better than expected, allowing for a small upward revision to our global forecast for 2020, and we continue to project a partial and uneven recovery in 2021," she said.
Highlighting the importance of joint efforts in keeping global temperature rises to safe levels, the IMF said the five largest economic powers－the United States, China, the European Union, Japan and India－acting jointly can make a large dent in global emissions.
"Building sustainably now, rather than having to rebuild infrastructure later, would lower the transitional costs of mitigation," it said.
Climate change was one of the topics in the first presidential debate on Sept 29 between US President Donald Trump and Democratic challenger Joe Biden.
Pressed repeatedly by moderator Chris Wallace if he believed that human-caused greenhouse gas emissions contribute to the warming of the planet, Trump said: "I think a lot of things do, but I think to an extent, yes."
Chris Field, director of the Stanford Woods Institute for the Environment at Stanford University, according to an Associated Press report, said: "It is a sad statement about the president's history on climate change, but it is a major development to see him clearly acknowledge a role of greenhouse gases from human emissions."
Chinese President Xi Jinping told the UN General Assembly late last month that China aims to have its carbon dioxide emissions peak before 2030 and achieve carbon neutrality by 2060, meaning that the country would descend from its emission peak far more rapidly than other major economies.