IMF recognises climate change as ‘macro-critical’

Following a major review, the International Monetary Fund (IMF) will include climate-related risks and policies in its annual monitoring and reporting of economic conditions in its member countries.

All 190 countries will now be assessed for “macro-critical” climate-related risks, vulnerabilities, and adaptation efforts. However, coverage of mitigation efforts will be confined to the 20 largest emitters of greenhouse gases.

The IMF monitors economic conditions in all member countries annually, reviewing its monitoring process every 7-10 years in the Comprehensive Surveillance Review (CSR). The latest CSR, released last week, outlines the strategic direction for the Fund’s surveillance work and identifies key surveillance priorities, including climate change.

Although the Fund has engaged with individual member countries on climate-related issues in the past, this has been done on an ad hoc basis. The new CSR now explicitly includes climate change risks and impacts in its annual assessment and reporting, and adds climate-related issues to the IMF’s criteria to be analysed for the granting of credit.

Introduced by a press release summarising the deliberations of the IMF executive board, the review itself consists of 10 policy papers, many of them touching on climate change. Topics include new surveillance methods, ‘spillovers’ effects between countries, scenario planning, and the integration of climate change into the Article IV consultations that form the basis of the Fund’s annual review.

While climate and civil society groups welcomed recognition of the climate crisis within the CSR, they remain strongly critical of the IMF’s climate response to date.

“IMF advice still hinders countries from disentangling their economies from long-established reliance on fossil fuel related industries,” said Sargon Nissan, IMF project manager at Recourse. Pointing to research showing significant support for coal and gas operations in IMF policy reforms, Nissan charged the Fund with reflecting the priorities of the world’s biggest economies and shareholders.

“The historic unwillingness to confront the Fund’s own most powerful stakeholders for the damage their policies do to others has to dramatically shift to make this new stance go beyond empty rhetoric,” he said.

Others criticised the lack of concrete detail on how climate risks and responses will be measured and evaluated.

“[The CSR] falls short of providing clear thresholds for when it will consider adaptation and transition risks in its Article IV surveillance with countries,” said Jon Sward, environment project manager at the Bretton Woods Project. “The IMF must also ensure its common policy prescriptions – including fiscal consolidation and support for carbon-intensive exports – are not exacerbating countries’ exposure to climate transition risks.”

The new CSR is the first review of the IMF’s economic monitoring since 2014 and the first to include climate change. The Fund’s most recent World Economic Outlook, published last October, devoted a chapter to climate change, calling for “an initial green investment push” and steadily rising carbon prices.