IMF chief: $1 trillion post-coronavirus stimulus must tackle climate crisis

Kristalina Georgieva is urging governments to invest emergency loans in green sectors, scrap subsidies to fossil fuels and tax carbon

Kristalina Georgieva, chief executive of the International Monetary Fund (Pic: IMF Photo/Cory Hancock)

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As it gears up to lend $1 trillion to governments hit by the coronavirus pandemic, the International Monetary Fund (IMF) is giving guidance on using the cash to tackle climate change.

Economic activity has slumped worldwide amid travel restrictions to prevent the spread of Covid-19. More than 100 countries have applied to the IMF for emergency finance.

Money to rebuild after the public health crisis should be directed into green investments and not subsidise fossil fuels, according to IMF chief Kristalina Georgieva.

It would be a mistake to “pause” action on climate change while responding to coronavirus, she said. “We are about to deploy enormous, gigantic fiscal stimulus and we can do it in a way that we tackle both crises at the same time… If our world is to come out of this [coronavirus] crisis more resilient, we must do everything in our power to make it a green recovery.”

Georgieva urged governments to consider taxing carbon to raise revenue for the recovery and incentivise the private sector to cut emissions.

She was speaking at a virtual summit on climate finance, supported by the German and UK governments and Climate Policy Initiative, on the sidelines of the Petersberg Climate Dialogue.

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Mark Carney, a UN special envoy on climate finance and advisor to the UK hosts of the next UN climate negotiations, elaborated on the theme.

“To build back better, we need to learn from our current predicament,” he said. “We cannot wish away systemic risk.”

In his previous role as governor of the Bank of England, Carney warned climate change impacts and the shift to a clean economy could destabilise financial markets. He promoted initiatives to make corporations come clean about climate-related threats to their business models, so money could be more wisely invested.

As economies adapt to post-coronavirus conditions there will be a “massive reallocation of capital,” he said. For example, health and education services may move online, shifting investments from bricks and mortar into telecomms.

Endorsing Georgieva’s advice, Carney added that governments should “use this opportunity to implement a new financial framework that is centred around the transition” to a clean economy.

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Among the latest recipients of IMF emergency relief is Nigeria, which as an oil exporter is suffering from plummeting oil demand.

The country got a $3.4 billion loan to mitigate the impact of the oil crash on the wider economy. At the same time, the government ditched an expensive petrol subsidy.

Climate Home News has asked the IMF whether financial support will come with binding green conditions.

Read more on: Carbon price | Climate Finance | Fossil fuel subsidies