The global transition to renewable energy must be swift, with "the right measures implemented immediately," to keep costs manageable, the IMF said today in its World Economic Outlook.
"Decades of procrastination have transformed what could have been a smooth transition to a more carbon-neutral society into what will likely be a more challenging one," the organisation said. Although there is "little consensus on the expected near-term macroeconomic consequences of climate change policies," any costs will be "dwarfed by the innumerable long-term costs of inaction," it said.
Decarbonisation agendas should not be slowed by concerns about accelerating rates of inflation and about energy security, the IMF said. These factors have pushed several European countries to look to coal for power generation for winter 2022-23, in a temporary backslide from transition moves. Delays "would only amplify transition costs," requiring greenhouse gas taxes to be raised by more and faster, it said.
The IMF cautioned that "less credible" climate policies will lead to further inflationary pressure and additional challenges for monetary authorities. It singled out the use of green subsidies — which it argued would encourage green investment from the private sector — as helping to lower inflation by 2030, compared with other paths.
International collaboration will allow for faster decarbonisation, the IMF found. This is in line with a recommendation made in September by Paris-based energy watchdog the IEA and the International Renewable Energy Agency (Irena).
