Cautious optimism: How IMF economic surveillance can foster the green transition

The document evaluates the IMF's updated surveillance practices by analyzing recent reports for Indonesia and South Africa. While it notes a 'sea change' in the IMF's willingness to integrate climate issues—such as endorsing carbon taxes and green financing—it argues that the organization continues to prioritize steep fiscal consolidation and austerity. This focus on budget deficit ceilings is seen as a threat to the funding required for climate adaptation and mitigation. The authors highlight significant 'blind spots,' including the failure to fully account for the long-term fiscal risks of stranded fossil fuel assets and the potential for carbon-intensive exports to decline as trade partners decarbonize. The report concludes that while there is 'cautious optimism' due to more sophisticated analytical work, the IMF's advice remains insufficient for achieving a socially-just green transition.

• The IMF has overhauled its surveillance practices to integrate climate concerns, committing to regular mitigation coverage for the 20 largest greenhouse gas emitters and adaptation coverage for climate-vulnerable countries every three years.
• In Indonesia, the IMF's advocacy for a budget deficit ceiling of 3% of GDP by 2023 may hinder climate goals, as the financing needed for Indonesia's Nationally Determined Contribution (NDC) targets is estimated at 2.8% of GDP annually.
• The IMF's support for Indonesia's carbon tax of 30,000 Rupiah per ton of CO2 is tempered by its observation that energy subsidies and government-set prices prevent the tax from incentivizing end-users to switch to renewable energy.
• In South Africa, the IMF identified that state-owned enterprises are highly exposed to carbon-intensive activities, making them vulnerable to demand drops during the decarbonization transition.
• The IMF's advice to South Africa to reduce regulatory hurdles and tackle backlogs in mining licensing is viewed as counter-productive to a green transition and risks creating stranded assets.
• The IMF's surveillance reports for both countries are criticized for failing to adequately analyze 'spill-over' transition risks, such as the impact of carbon border taxes or the effect of China's national carbon pricing on Indonesian coal demand.

APA

Stubbs, T., & Kentikelenis, A. (2022). Cautious optimism: How IMF economic surveillance can foster the green transition. Trend Asia. https://trendasia.org/wp-content/uploads/2022/12/Cautious-Optimism_Indonesia_web.pdf

Chicago

Stubbs, Thomas, and Alexander Kentikelenis. Cautious optimism: How IMF economic surveillance can foster the green transition. Trend Asia, 2022. https://trendasia.org/wp-content/uploads/2022/12/Cautious-Optimism_Indonesia_web.pdf.

Wikipedia

{{cite report |last1=Stubbs |first1=Thomas |last2=Kentikelenis |first2=Alexander |title=Cautious optimism: How IMF economic surveillance can foster the green transition |publisher=Trend Asia |date=November 2022 |url=https://trendasia.org/wp-content/uploads/2022/12/Cautious-Optimism_Indonesia_web.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{stubbs2022cautious, author = {Stubbs, Thomas and Kentikelenis, Alexander}, title = {{Cautious optimism: How IMF economic surveillance can foster the green transition}}, institution = {Trend Asia}, year = {2022}, month = nov, url = {https://trendasia.org/wp-content/uploads/2022/12/Cautious-Optimism_Indonesia_web.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }