In Conversation with Kristalina Georgieva on pursuing a green economic recovery

The cost of crises

In a jarring estimate, Kristalina Georgieva, second-ever woman Managing Director of the International Monetary Fund (IMF), outlined that the economic loss of the current crisis for 2020/2021 could amount to $12 trillion – the equivalent of the Eurozone not producing anything for an entire year. She remained optimistic, however, and stressed that Europe has taken all the right measures to fight the current crisis and to anticipate the next one: climate change.

5:19 – Europe’s reaction
6:34 – The economic impact of the health crisis
8:39 – Future dangers of climate change

The need to “move from taxing people and labour to taxing pollution”

The Managing Director stressed that the immense stimulus packages implemented by most governments across the world offer an opportunity to build back better and not return to the old status quo. The IMF therefore recommends taxing carbon emissions and creating incentives for individuals and firms to lower their emissions. Georgieva highlighted the need to “move from taxing people and labour to taxing pollution”. With the funds raised from such carbon pricing, governments could support more green investments and job-rich sectors in innovation and renewable energy.

8:16 – “Please spend, but keep the receipt”
11:44 – the IMF’s studies on climate mitigation
12:09 – the IMF’s recommendations
17:19 – the EU’s role at the global stage in fighting for the carbon price floor
18:29 – the need to rebuild better

“We don’t want to add fuel to the trade disputes fire”

The EU’s economy cannot suffer under its ambitious green goals for the future. Large differences in carbon prices between the EU and its trading partners could, however, lead to trade distortions and the move of carbon-heavy industries elsewhere (i.e. ‘carbon leakage’). Georgieva stressed that the IMF isn’t seeking “to add fuel to the trade dispute fire” and until the world is ready for a global carbon price floor, the EU should start charging for the carbon content of imported products the same way as for domestic products. This would also minimise carbon leakage.

28:30 – the best solution: carbon price floor across the major emitting countries
29:55 – the next best solution: an EU carbon border tax adjustment
30:46 – issues that need to be considered
32:35 – on green bonds, financial markets and own resources

“Just transition is not just a slogan”

The European Union is in a unique position to “become the winner in the competition for the economy of tomorrow” with 90% of its population actually acknowledging that the climate crisis is an urgent risk. However, regions and sectors that rely on carbon-heavy production will have to reinvent themselves. The Managing Director concluded by stating that “just transition is not just a slogan” but requires decisive policy action and a stronger political narrative.

34:35 – Turn away from carbon-intensive industries
39:23 – Europe’s economy of tomorrow
50:17 – Just transition