Speech

Remarks of the Managing Director to P4G Summit Seoul Leaders Dialogue

May 31, 2021

President of the Republic of Korea Moon Jae-in: Madame Managing Director, can you introduce the efforts being undertaken at the international organization level to respond to the climate crisis?

The Managing Director: Thank you very much, President Moon. Thank you for bringing us together in a timely manner for this truly global summit, and thank you for your leadership over the years. 

Your pledge for Korea to achieve carbon neutrality by 2050 is an important step forward. And your Green New Deal kickstarts the progress towards the neutrality goal, while also charting a post-COVID-19 recovery path for the Korean economy. And this is exactly what we at the IMF urge countries to do, to follow that path, to embrace an inclusive, green recovery.

Each country's circumstances are different, but our research shows that there are generally three elements for a comprehensive green policy package, and I want to focus on those today. 

First, create the right incentive for low-carbon growth by pricing carbon emissions, and providing clear forward guidance for the future price trajectory. Our research shows that without a gradually increasing price on carbon, the world will not achieve the Paris Agreement goals. Carbon taxes, emission trading systems like the one in Korea, or regulatory measures that are equivalent to pricing carbon are rapidly developing. But there is a long way to go. 

So my first point, from an international perspective, is: speed up coverage of carbon emissions with an appropriate price. Today we only cover 23% of carbon emissions. Expanding this coverage must be a priority. A predictable, steadily rising carbon price drives businesses towards the right choice of low-carbon intensity activities. 

Just as the first thing for each country is to set a carbon price, large emitter nations can agree on a carbon price floor to scale up mitigation and protect their economies against erosion of competitiveness should some price carbon fairly, and others do not. 

Beyond pricing carbon, another key ingredient is to draw private finance through better standards and taxonomies that help investors around the world understand what is truly green. We currently have over 200 standard schemes. Ten years ago that was good – many flowers blooming. Today, we have to move towards making a nice bouquet, and the planned ASEAN Taxonomy of Sustainable Finance can help. 

The second lesson we learned is that making a public investment push for green projects like smarter electric grids, vehicle charging stations, building insulation, reforestation, sustainable land management is a must. 

Government spending early in the pandemic rightly focused on health. Now, we need to move towards sustainable growth for the future. And as many countries recover, green investment is gaining momentum and we see it in the EU, in the US, in Korea, and elsewhere. I just want to say, I join Special Envoy Kerry – this is a fantastic opportunity for growth and for jobs, not to be missed. 

And, of course, we need to expand public private partnerships for the innovation the private sector would bring – so we have more speed in moving to green investments. 

Let me move to the third very important point, and it is a just transition. We need to support the parts of the economy and the people affected by the shift to low-carbon growth. 

Governments need to use their fiscal capacity to create conditions for green transformation in areas that are currently relying on high-carbon intensity activities. And vulnerable people should be protected by retraining, re-skilling, and also by appropriate social protection measures. 

For instance, Indonesia is working to replace fossil fuel subsidies with targeted cash transfers so people in need don't bear the cost of this transition. 

And just as it matters within countries, a just transition matters across countries. I'm so, so excited to hear many of you speaking loud and clear of the need to fulfill the $100 billion pledge for climate finance made in the Paris Agreement to help developing countries.

Let me finish by a word about us. At the IMF, we are working with our members to integrate climate related considerations in macroeconomic and financial stability policies. We are customizing our policy advice for an inclusive, green recovery. And we are also collaborating with other institutions to advance this goal. 

We need all hands on deck. Special Envoy Kerry knows this is my phrase on this topic: act! 

P4G is a fantastic place because it is sober, but it is also optimistic and uplifting, and I'm so grateful to have been with you today. 

Thank you. Keep it up. 

President Moon: Madam Managing Director, thank you for your remarks.