The International Monetary Fund (IMF) has issued a new climate note to its staff saying “immediate actions” are needed to reach the Paris agreement’s temperature and adaptation goals. The IMF says these should be accompanied by commensurate financing flows to close global financing gaps, particularly in emerging market and developing economies (EMDEs). Estimates of the global investments needed to address the climate challenge and vulnerabilities to shocks range from US$3 trillion to US$6 trillion per year until 2050. Current annual global spending on clean energy, estimated at US$750 billion, is “a fraction of what is needed”, and “especially insufficient” in EMDEs (excluding China), the staff note says. The note explores the factors that limit climate finance and what policymakers can do to address them, discussing potential ways to mobilise domestic and foreign private sector capital in climate finance. Policy options discussed in the report include the adoption of carbon pricing paths to ensure well-functioning market and prices, and increased public investment in infrastructure, R&D, and renewable energy technologies to support and incentivise inflows of private sector climate capital. The note also suggests the implementation of policies to complement carbon pricing, address climate data gaps, adopt data disclosure standards, develop sustainable finance taxonomies, and enhance sustainable finance regulations. The note says: “The IMF is also playing a leading part in advocating carbon pricing and in identifying data gaps, promoting climate-related disclosures, and developing guidelines for taxonomies of sustainable finance.”
