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    IMF sees major shortfall in green investments


As much as 10% of annual global GDP may be needed to fight climate change.

by: Daniel Graeber

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IMF sees major shortfall in green investments

The International Monetary Fund (IMF) on July 22 estimated that additional global investments of as much as $10 trillion are needed to stave off the impacts of climate change.

“Radically transforming our energy system will require investments to be scaled up to finance the shift from fossil fuels to renewables as well as for smart electricity networks, energy efficiency measures, and electrification in sectors like transport, buildings, and industry,” economists Florence Jaumotte and Gregor Schwerhoff wrote.

The International Energy Agency (IEA) said in a report on global decarbonisation efforts that emissions of CO2 will reach record levels within two years and continue to increase from there. To address the mounting challenges from climate change brought on by elevated atmospheric levels of greenhouse gases, the IMF said an additional $6 trillion to $10 trillion, or as much as 10% of annual global GDP, is needed.

Governments have set aside around $380bn for clean energy measures as part of their post-coronavirus economic recovery plans, and this should add $350bn/yr to spending on clean energy and electricity networks between 2021 and 2023. But this is still only 35% of the amount of investment that the Paris-based IEA sees as necessary for the world to remain on track for net-zero emissions by 2050.

The IMF said the world’s largest polluters are also among the biggest backers of the energy transition.

“Still, without a global climate policy, today’s smaller emitters will become major emitters as their populations and incomes grow,” the IMF economists wrote. “These are also the countries, often harder hit by the effects of climate change, for which the transition costs are more difficult to bear, due to fast-growing energy needs and less budgetary space to finance green investments.”

In its report, the IEA estimated that advanced economies are allocating 60% of the necessary investment to reach net zero, while emerging and developing economies are only spending 20%.