Fight against global warming need not dent growth: IMF

Yahoo News 4 Apr 08;

The International Monetary Fund on Thursday said it was possible to fight global warming without negatively impacting economic growth.

"Climate change is a potentially catastrophic global externality and one of the world's greatest collective action problems," the IMF said in releasing analytical chapters of its twice-yearly World Economic Outlook.

To curb global warming, the IMF suggests a worldwide long-term scheme of gradual increases in carbon prices.

Carbon-dioxide emissions are largely blamed for the rise in greenhouse gases that are heating the planet.

Such a framework would "induce the needed shifts in investment and consumption away from emission-intensive products and technologies."

For example, the IMF said, staff estimates showed that mitigation policies introduced in 2013 and aiming to stabilize carbon-dioxide-equivalent concentrations at 550 parts per million by 2100 would entail only a 0.6 percent reduction in the net present value of world consumption by 2040.

"Even with this loss, world GNP (gross national product) would still be 2.3 times higher in 2040 than in 2007," said the 185-nation institution, whose core mission is to maintain global financial stability.

"Over the long term, carbon pricing should help enhance economic growth, as it would create incentives for people and businesses to innovate and shift to using more efficient, low-emissions products and technologies."

For the multilateral policy to be effective, the IMF said that all countries must participate because emerging and developing economies are expected to produce 70 percent of global emissions during the next 50 years.

"Any policy framework that does not include large and fast-growing economies (such as Brazil, China, India, and Russia) ... would be extremely costly and politically untenable," it said.

The chapter, entitled "Climate Change and the Global Economy," was released ahead of next week's WEO world growth forecasts and the spring meetings of the IMF and the World Bank on April 12-13 in Washington.

Good policies can contain climate change costs: IMF
Lesley Wroughton, Reuters 3 Apr 08;

WASHINGTON (Reuters) - Economic costs of damages caused by climate change can be contained by implementing well designed policies that are adopted by a large group of countries, the International Monetary Fund said on Thursday.

In new analysis, the IMF said those costs can be reduced through long-term, flexible policies that can avert further climate changes, including a carbon pricing system that is credible to both people and businesses.

For example, higher carbon prices would spur shifts in investments and consumption away from products and technologies that increase greenhouse gases that cause global warming.

The IMF's research, the first ever that looks at the effects of climate change on economies, cautioned that climate policies could also have wide-ranging economic consequences.

It pointed to the increase in global food prices and inflation caused by biofuels production, which is draining maize stocks and pushing up prices of staples.

The IMF's research comes as countries begin to flesh out a global agreement on addressing climate change to extend or replace the existing Kyoto Protocol, which expires in 2012.

U.N. climate experts want the new pact to cut greenhouse gases in all countries, although there is wide disagreement about how to share the burden between rich nations led by the United States and emerging countries such as China and India.

Nearly 200 countries agreed in talks in Bali, Indonesia, in December to try and clinch a new climate deal by the end of 2009.

The IMF said the risk from potential damages caused by climate change could be large and even catastrophic if global warming was left not properly addressed.

The IMF said mitigation policies should encourage all countries, from rich to poor, to start pricing their emissions. Any framework that does not include large and fast-growing economies would be costly and politically difficult, the IMF said.

That is because during the next 50 years, 70 percent of emissions are projected to come from emerging and developing economies, the fund added.

IMF researcher Natalia Tamirisa said incentives to cut emissions would depend on the design of policies to cut emissions.

"For example, on the cap and trade policies or hybrid policies, it is possible to design them in a way that would generate some financial transfers towards emerging and developing countries," she told reporters.

The IMF said carbon pricing policies should aim for a common world price for emissions that targets the cheapest emissions cuts, thereby reducing the cost of fighting climate change.

The IMF also said that carbon pricing should have enough flexibility to accommodate the ups and downs of the business cycle. In periods of high demand, it would be more costly for firms to reduce emissions, for example, it said.

It recommended a gradual increase in carbon prices, starting early and from a low level, which would minimize adjustment costs by spreading them over a longer period.

The IMF said it had not produced any regional estimates of damages from climate change, but added that generally the costs would likely burden future generations.

(Editing by Gary Hill)