The IMF recently published a paper that provides country-level guidance on the role and design of fiscal policies for implementing climate mitigation strategies as well as addressing vulnerabilities in disaster-prone countries.
The paper offers a spreadsheet tool that judges the likely impact of several instruments on emissions, fiscal revenues, local air pollution mortality, and economic welfare. Among the instruments considered are carbon taxes, emissions trading systems and incentives for energy efficiency. It also suggests and analyses possible uses of the revenue from those instruments. It defends holistic national strategies that include a range of ways to diversify natural disaster and climate risks, while incorporating the risk of future damages into projections of national output and debt sustainability.
The paper defends that countries’ policy choices need to consider various aspects such as efficiency, distributional and political economy considerations and the need to incorporate ex-ante resilience-building in macro-fiscal and financial frameworks.