Diversifying climate change mitigation financing: IMF

The International Monetary Fund (IMF) is cautioning governments of developing countries to diversify financing measures for climate change mitigation beyond loans and subsidies.

In its study published Friday, the IMF said developing countries heavily reliant on loans and subsidies would need more funds or another two percent of their gross domestic product (GDP) each year to achieve a net zero carbon emission by 2050.

Depending on each economy's overall budget and GDP levels, the IMF said this means that government debt might climb to 125 percent of GDP.

To ensure manageable government debt, the IMF recommended carbon pricing which consists of carbon taxes and carbon credits.

"The emerging economy's existing rule would need to implicitly assume a large fiscal adjustment in the non-green budget, which would undermine its credibility," IMF said.

"Thus, the new rule will be needed to build broad public consensus for a more comprehensive fiscal strategy that tackles the difficult policy tradeoffs that will be required and takes into account long-term effects," it added.