Speech

Remarks by the Managing Director at the COP26 Session on Financing our Future

November 3, 2021

Climate risks present a significant danger to macroeconomic and financial stability.

And with the same token, climate action offers opportunities for green growth and green jobs.

What we concentrate on is to support our membership in three areas.

The first is to have comprehensive mitigation and adaptation strategies that are integrated in economic plans.

Why is this important? Because those plans have to be ambitious, but they also have to be cost-effective.

And this is where our engagement with the membership comes.

At the heart of it is creating strong incentives for advancing mitigation faster. And we believe that placing a carbon price in these mitigation strategies plays an enormously important role. I look at Indonesia—that just moved in the direction of getting a carbon price.

The good news is we are finally seeing pick up through tax or trade and, in some cases, regulatory equivalency.

Last year, only 17 percent of emissions were covered by a carbon price. This year, we are edging to 22 percent. We have a long way to go on coverage, but the shift in integrating carbon price is there and we are working very hard to support countries to take that shift.

So, when we have that shift and when we provide forward guidance—so businesses and consumers know how the price is going to go up—this drives investments in a very powerful manner.

Where we are today—an average global price of carbon $3 a ton.

Where do we need to be by 2030? $75 a ton, at least.

So how we do this forward guidance is incredibly important.

At the IMF, staff came up with a proposal that is equitable and pragmatic for an international carbon price floor, differentiated by levels of development.

So, if you are a rich country, your price is higher. If you are a poor country, your price is much lower. But with that forward guidance to move towards a higher level, so we incentivize decarbonization, strongly.

Secondly, we work with our members on their public spending plans.

And we do the research that shows that what many have said today is true—green investments generate jobs, they generate revenues.

We did a calculation. If we have a big green public investment push, we would see global GDP two percent higher, and 30 million jobs more.

And finally—last, but not least—we recognize we have to innovate.

Our membership is fantastic. They supported us to issue six hundred and fifty billion dollars special drawing rights.

This is for all countries boosting reserves. More capacity to deal with the pandemic and take the green transition.

But they did something more—very creative. They said: “OK, some of us don't need these reserves because we have strong positions. Why not pass it to the members that need them?”

So, we have an ambition to move a hundred billion dollars from those who have, but them don't need them, to those who really need them.

And we are creating—for the first time in the history of the IMF—a Resilience and Sustainability Trust, with longer-term financing, a longer grace period to support the structural adjustment needed to get to the new climate economy faster.

And of course, we partner with other organizations.

So that is additional instrument in the hands of policymakers so they can go faster, where we all need to go.