Why Countries Must Cooperate on Carbon Prices
(IMF)
Policymakers face a particularly challenging set of problems as they respond to shock after shock, from Russia’s invasion of Ukraine to rising debt vulnerabilities and exchange-rate volatility, Kristalina Georgieva said at the start of the IMF’s annual research conference on Thursday.
Arguably, the biggest challenge for central banks in both advanced and emerging market economies is to bring down inflation and to pursue responsible fiscal policy in an environment of persistent price pressures, the IMF’s managing director said.
“Although the priority must be to protect vulnerable households with targeted measures to alleviate the impact of rising food and fuel prices, it should not do so in ways that further fuel inflation and sidetrack the efforts of monetary policy.”
The two-day conference in Washington, named after Dutch economist Jacques Polak, a member of the Netherlands delegations to the 1944 Bretton Woods Conference that established the IMF, is a forum for discussing innovative research on a wide range of topics relevant to the global economy.
Gita Gopinath, the IMF’s first deputy managing director, told the conference that geo-economic fragmentation was undermining global growth, with some 30 countries restricting trade in food, energy, and other key commodities since Russia’s invasion of Ukraine. Â
“Improving cooperation and the constructive resolution of disputes is a key challenge.”
Visit the conference website to watch speeches by Kristalina Georgieva and Gita Gopinath and read papers covering dollar dominance, interest rates, international trade, financial liberalization, the macroeconomic costs of rare events, and more.
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Middle East and Central Asia
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Most Urgent Challenges
(COP27)
Countries in the Middle East and Central Asia must choose fiscal strategies that help them meet commitments to curb greenhouse-gas emissions while limiting the disruptions to their economies.
In a first-of-its-kind study, IMF staff estimate that countries in the region have pledged to reduce annual emissions by 13 percent to 21 percent in 2030. This means that the region will need to reduce per-capita emissions by as much as 7 percent over the next eight years.
“Only a few countries have achieved such a reduction while maintaining economic growth,” Jihad Azour, the director of the IMF’s Middle East and Central Asia Department, writes in a blog.
One option is to raise fossil fuel prices, by removing of fuel subsidies and introducing a carbon tax of $4 to $8 per ton of CO2 emissions. Another option is to accelerate the energy transition by increasing investment in renewables. But significant public spending could weaken fiscal positions and macroeconomic stability, leaving fewer resources available to future generations.
As Azour writes, “Countries should choose an option that best suits their circumstances and the available budget resources.”
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The global energy crisis is fueling fierce debate around the world over which new energy projects should or shouldn’t go ahead, writes executive director of the International Energy Agency, Fatih Birol, in an article for Finance & Development magazine.
Massive investment in clean energy—including energy efficiency, renewables, electrification, and a range of clean fuels—is the best guarantee of energy security in the future and will also drive down harmful greenhouse gas emissions, he writes.
“A new global energy economy is emerging, and the governments and businesses that invest early and wisely stand to reap the benefits.”
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Finance & Development, the IMF's flagship magazine and online editorial platform, publishes cutting-edge analysis and insight on the latest trends and research in international finance, economics, and development. It is written by both IMF staff and prominent international experts, and is read by leading policymakers, academics, economic practitioners, and other decisionmakers around the world.
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