Vital steps to reduce greenhouse gases by 25% by the end of the decade will lead to lower growth and higher inflation but the costs of inaction would be far greater, the International Monetary Fund has said.
The IMF said decades of procrastination meant what could have been a smooth transition to decarbonized economies would now be more challenging, and the world had to cut fossil fuel use by a quarter in eight years to have a chance of hitting the global climate crisis goals set in Paris in 2015.
“Because the energy transition needed to accomplish this has to be rapid, it is bound to involve some costs in the next few years,” the Washington-based fund said in a chapter from its forthcoming half-yearly World Economic Outlook.
IMF officials have estimated growth will be reduced by between 0.15 and 0.25 percentage points a year between now and 2030 while inflation will be between 0.1 and 0.4 points higher.
But the IMF said its central message was “that if the right measures are implemented immediately and phased in gradually over the next eight years, the costs will remain manageable and are dwarfed by the innumerable long-term costs of inaction”.