IMF Chief Urges Global Shift of Fossil Fuel Subsidies to Tackle Climate Change

DAVOS, Switzerland — In a stark call to action, International Monetary Fund (IMF) Managing Director Kristalina Georgieva has urged nations to redirect approximately $70 trillion in direct and indirect annual subsidies for fossil fuels to fund the fight against climate change.

Speaking at the World Economic Forum in Davos, Georgieva outlined that the total fossil fuel subsidies include $13 trillion in direct government support and additional indirect subsidies that fail to account for carbon emissions pricing, stressing that by 2030, the price should be set at $85 per ton. She made these remarks during a climate panel attended by World Bank President Ajay Banga.

Georgieva emphasized that implementing a carbon pricing mechanism at a 25% rate would generate $800 billion for climate change mitigation, while a 50% rate could yield $1.5 trillion. "So my point is, let's bring the resources, take them from where they hurt to where they can provide help," she asserted.

She added that the IMF is incorporating emission reduction goals into its macroeconomic policy discussions with high-emitting countries and climate adaptation objectives with vulnerable nations.

Addressing the urgency of transitioning to cleaner energy sources, Banga stated at the forum, "The world cannot afford another several decades of high-emission growth." He emphasized the need for leaders to intensify efforts in finding financing solutions for clean energy and pave the way for private capital investments.

"We cannot be the ones doing all these projects and putting them on our balance sheet. Our balance sheet is limited," Banga remarked. He added that the World Bank is taking measures to reduce political risks, aiming to increase political risk guarantees from the current $6-7 billion to $200 billion by 2030.

Banga highlighted that regulatory uncertainty and foreign exchange risks are also hindering private investment in many countries undergoing energy transitions, and the World Bank can assist in absorbing some of these risks. "These countries don't have markets for hedging that are broad enough or deep enough. Institutions like ours have to find a way to help fill that gap," Banga concluded.

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