CHART OF THE WEEKBlowing Hot and Cold

2021-03-16T12:03:08-04:00March 16, 2021|

By Jiaxiong Yao

When it’s cold we reach for the heater, and when it’s hot we turn on the air conditioning. A warming globe could reduce the need for heating in cold seasons and increase the demand for cooling when it’s hot. In principle, there is a sweet spot where it is neither too cold nor too hot to demand much electricity. The question is: where are we now relative to this sweet spot, and what are the implications?

My recent IMF staff working paper uses satellite data to examine the relationship between electricity demand and temperature. The study compares changes in electricity usage—approximated by nighttime lights recorded by satellites, which are highly correlated with electricity usage—with changes in temperature over time at subnational levels. Since electricity is often used more for cooling than it is for heating, I focus on places not extremely cold where the annual average temperature is above 0 degrees Celsius (32 degrees Fahrenheit).

The study finds that the relationship between electricity demand and temperature is generally U-shaped. At both low and high temperatures, electricity demand is high. The sweet spot is about 14.6 degrees Celsius (58.3 degrees Fahrenheit) for the annual average temperature. For much of the world, however, the average temperature has already increased beyond that sweet spot, and further temperature rises are set to increase electricity demand further.

The rise in global temperatures will continue to affect people differently depending on where they live. In hotter climates, electricity demand will likely surge to combat heat waves, while less electricity may be needed to keep people warm in colder climates.

Sub-Saharan Africa, being one of the hottest regions in the world, is most vulnerable to climate change. Its average temperature is already well beyond the sweet spot. We estimate that a 1 degree Celsius (1.8 degree Fahrenheit) increase in temperature will raise Sub-Saharan Africa’s electricity consumption by about 7 percent. Population growth and economic expansion will increase electricity demand even further, thereby compounding this challenge.

Access to affordable, reliable, sustainable and modern energy is one of the United Nations’ Sustainable Development Goals. Investing in basic energy infrastructure is especially urgent in the context of development needs. And if these efforts are to support and not compromise the fight against climate change, then it is vital that electricity is generated in a green and renewable way.

Three-quarters of the world’s households were electrified during the 20 th century, a tremendous achievement. We must now increase our investment in electricity generation in a way that encourages sustainable development while helping the world adapt to, and mitigate, the defining challenge of the 21st century—climate change.



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A New Vision for the US Climate Agenda

2021-03-11T16:51:15-05:00March 10, 2021|

By Ian Parry

عربي中文, Español, Français日本語, Português, Русский 

Over the next decade, global greenhouse gas emissions need to be cut by 25– 50 percent to be on track for meeting the 2015 Paris Agreement goal of containing global warming to 1.5–2°C.The United States intends to do its part. Its climate plan pledges US carbon neutrality by 2050, with a 2030 emissions target to be announced shortly.


Why Climate Change Vulnerability Is Bad for Sovereign Credit Ratings

2021-02-18T14:07:57-05:00February 17, 2021|

By Serhan Cevik and João Tovar Jalles

عربي中文, Español, Français, 日本語, Português, Русский 

Climate change has made the world a riskier place.

The destruction wrought by heatwaves, droughts, hurricanes, and coastal flooding doesn’t stop with the toll on human lives and livelihoods—it can also have deep consequences for a country’s finances. (more…)

Data PointsDenmark’s Ambitious Green Vision

2021-01-11T10:05:41-05:00January 11, 2021|

By Nicoletta Batini and Miguel Segoviano

Denmark aspires to become one of the most climate-friendly countries in the world. In June, its Parliament overwhelmingly passed a new climate law that aims to reduce greenhouse gas emissions by 70 percent below 1990 levels by 2030, with net zero emissions targeted for 2050.

This is an even more ambitious goal than the EU’s target to cut emissions by 55 percent over the same time period.


Amount by which Denmark plans to reduce greenhouse gas emissions by 2030 relative to 1990 levels


A new IMF staff paper takes a closer look at Denmark’s green strategy and proposes a few adjustments to help the country realize its ambitious goals. In line with earlier IMF recommendations, the paper proposes a comprehensive strategy with enhanced carbon pricing, reinforced by fiscal incentives across different sectors. It also urges using revenues from carbon pricing to cut labor taxes.

The package proposed in the paper would provide powerful incentives for climate mitigation, while shielding households and firms from higher energy prices. Crucially, the paper argues, spreading measures to different sectors is a good way to avoid carbon prices that are too high, capping them at half the level currently suggested by the Danish Council for Climate Change. The economic cost from this lower carbon price would be fairly low—estimated at about 0.2 percent of GDP.

“Feebates”—fees on products with high emissions combined with rebates on products with low emissions—are recommended for sectors with high emissions. They could be especially useful to curb Denmark’s large agricultural emissions from the country’s huge number of farmed animals. Because feebates raise the costs of producers who farm unsustainably but reward them as they shift to sustainable farming, this program can deliver a fair low-carbon transition that preserves profitability and jobs.

By crafting an effective climate policy that protects the majority of people, Denmark’s strategy to make large cuts in its emissions could be more attainable.

Demographics and Destiny

2020-03-02T17:22:06-05:00March 2, 2020|

By Gita Bhatt

When I visit my home country, India, I am always struck by how young it looks. From the big cities to the tiny villages, one can see the hopes and aspirations of twenty-somethings, many in search of work. In Japan, demographic trends have been moving in the opposite direction. Homes sit vacant, and villages are vanishing, as people have fewer children. In response, the Japanese are embracing technology to fill the gaps through innovations like robot chefs and automated medical services. (more…)

Assessing Climate-Change Risk by Stress Testing for Financial Resilience

2020-02-06T09:59:37-05:00February 5, 2020|

By Tobias Adrian, James Morsink, and Liliana Schumacher

عربي, 中文, Español, Français, 日本語Português, Русский

As society braces for the potential havoc a changing climate could induce, it’s vital to gauge the range of shocks that the economy may soon endure. One way to quantify the effects of the potentially systemic shocks that could ripple through the financial system is to administer “stress tests”—a well-designed analytical process that has, for decades, been used by the IMF, World Bank and financial supervisors for detailed scenario planning to prevent future financial crises. (more…)

Chart of the WeekWaste Woes in the World

2020-01-31T10:38:50-05:00January 31, 2020|

By IMFBlog

Have you thought about how much garbage you generate every day? Economists have looked at the data and it turns out that higher-income countries like the United States, Denmark, and New Zealand generate at least twice as much waste per capita than developing countries. (more…)

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