This is a guest blog by Jon Sward, Environment Project Manage at the Bretton Woods Project
Despite vocal calls by the IMF’s managing director Kristalina Georgieva about the need to green the Covid-19 recovery, and “embrace the transition to the new climate economy — one that is low carbon and climate] resilient”, a new report by ActionAid USA and the Bretton Woods Project released today shows that the IMF has been promoting fossil fuel expansion in over half of its member countries since the Paris Agreement was signed via its Article IV surveillance – the annual economic health checks it does for all its 190 members.
The report also shows that the Fund may be undermining a just energy transition that puts workers, communities, civil society groups and women’s rights organizations at the heart of national social dialogues around the energy transition. This is being done through widespread promotion of privatization in the energy sector via its surveillance and the slashing of consumer fuel subsidies, which is likely to negatively impact citizens in low- and middle-income countries and have little impact on lowering greenhouse gas emissions without parallel investment in clean energy alternatives. The Fund promoted these policies in over one-third of countries, per the report.
More broadly, the IMF’s promotion of austerity policies in many countries in the wake of the Covid-19 pandemic risks a ‘lost decade’ in much of the developing world, with climate action and a just energy transition being among the potential casualties of this damaging approach.
IMF must learn from past failings as it looks to expand its climate work on climate change transition risks
The new report comes as the IMF has signaled plans to significantly expand its focus on climate, including to address transition risks from climate change – that is, the reduction in the value of fossil fuels and related infrastructure or assets because of the low-carbon transition, which can pose risks for the wider economy.
An IMF policy paper released on 30 July noted that the Fund is seeking to assess these risks in all member countries going forward every 5-6 years. This is a new area of work for the IMF, with research by Boston University showing that only three IMF Article IV reports even mentioned transition risks in 2020.
The report published today argues that this shift presents a direct challenge to the IMF’s policy orthodoxy, which tends to be centered on ensuring reduced public spending and increasing export revenues, often through carbon-intensive sources.
The IMF must not undermine countries’ just transition efforts
The newly released report shows how existing IMF policy advice is exacerbating transition risks for many member countries and undermining their ability to achieve a just energy transition. For the IMF, aligning policy advice with just transition principles will require moving beyond a strict climate lens. Indeed, a just transition requires that policy frameworks address, rather than exacerbate, inequalities; transform energy systems to work for people, nature, and the planet; and, ensure inclusiveness and participation.
As the IMF begins the process of developing detailed guidance for staff on climate change transition risks – as well as on policy advice related to climate change adaptation and mitigation – we call on the IMF to go beyond measures that seek to mitigate harm done to the poorest via austerity policies, to working to developing new policy options that are inclusive and enable countries to have the fiscal space needed to undertake a just energy transition.
- The IMF should, at a minimum, adopt a ‘do no harm’ approach and commit to ensuring, via ex-ante assessments;
- The IMF should shift its focus to eliminating fossil fuel producer subsidies and expanding investment for renewable energy and other green alternatives;
- The IMF should re-evaluate its advice on privatisation in the energy sector;
- The IMF can help countries to better judge the costs of transitioning to a low-carbon future. For low- and middle-income countries, this should be part of a wider discussion about mobilising greater resources from wealthy countries to fund a ‘just energy transition’;
- The IMF should improve national level consultation on Article IVs, including with civil society organisations, women’s rights groups, trade unions, climate groups and indigenous peoples’ organisations, in an effort to integrate social dialogue into surveillance and the design of lending programmes.
