Kristalina Georgieva is very keen to talk about the research one of her International Monetary Fund economists is doing. Surprisingly, this is not about any of the issues that have gripped the organisation in the past 75 years: balance of payments crises or global recessions. It is about whales and the part they play in the fight against climate change.
“Whales act like giant pumps,” says Georgieva, noting that in its lifetime each of these mammals sequesters 33 tonnes of carbon dioxide from the atmosphere, while an average tree absorbs about 20kg a year.
Comments like this from the new managing director of the IMF have seen her getting some stick since she took over as managing director from Christine Lagarde at the start of October. With the world economy slowing and another financial crash looming, some who attended the IMF’s annual meeting in October said in private that Georgieva was spending too much time on climate change and not enough on the institution’s bread and butter: maintaining financial stability and helping countries in economic trouble.
Georgieva is unrepentant. The climate crisis and financial stability are linked, she says, because if left unattended, global heating will threaten financial stability. “When people say we should be sticking to our mandate, I fully agree,” she says. “That’s exactly what we are doing.”
Climate change is not just already visible, but tends to hit the world’s poorest countries and poorest people hardest Kristalina Georgieva
Asked which she sees as the bigger risk, another global crash or global heating, she replies: “Climate change is an existential threat. It is a risk that we all have to take very seriously because from the perspective of an institution that deals with economic matters, it can push back development. We have seen that repeatedly over recent years.”
She is speaking before a meeting of COP25, the UN climate change summit in Madrid this week that will monitor progress towards meeting the carbon-reduction pledges made in Paris four years ago.
Georgieva, who was number two at the World Bank before getting the top job at the IMF, says it makes sense for her organisation to play a prominent role in the fight to prevent temperatures rising to catastrophic levels, and insists the crisis is an opportunity as well as a threat.
“In a world that’s eager for higher growth, this is an opportunity to accelerate investment in low-carbon technologies and speed up the transition to a low-carbon world.”
The industrial revolution was the start of a period that led to tremendous improvement in the people’s lives, but at a cost, she went on: “The law of unintended consequences means it has created problems, but they are problems we can solve.”
Many environmentalists see a contradiction between the IMF’s pursuit of growth and its new mission to tackle climate change. Georgieva disagrees: “These things are not necessarily against each other. You can have growth and it can be clean, green, sustainable and equitable.” She says her message to the COP 25 is simple: “We all recognise the risks. Now is the time to concentrate on action.”
Georgieva says the IMF is looking at two specific areas where it thinks it has a role to play: tax and spending policy, and making the financial sector more resilient to global heating.
On the fiscal side, the fund is pushing for a carbon tax that would reflect the damage burning fossil fuels causes to the planet. This is currently levied at an average rate of $2 a tonne; the IMF thinks it should be increased to $75 a tonne by 2030.
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