End fossil fuel subsidies and reset the economy for a better world - IMF head

Now is the time to end fossil fuel subsidies and create a greener, fairer economy for the future, argued Kristalina Georgieva, Managing Director of the IMF, at a World Economic Forum virtual meeting.

Speaking at the launch of the "Great Reset", the Forum's global initiative to build a better world in the wake of COVID-19, she threw the weight of her institution behind the transition.

"We now have to step up, use all the strength we have, which in the case of the IMF is $1 trillion," to ensure that history looks back at "the great reset, not the great reversal," Georgieva said.

This means putting the right investments and incentives in place - and breaking with unsustainable ones.

"I’m particularly keen to take advantage of low oil prices to eliminate harmful subsidies," she said.

A working paper published by the IMF last year estimated annual fossil fuel subsidies at $5.2 trillion in 2017, or 6.5% of the global economy, illustrating the scale of the challenge.

But leaders on the call agreed that this moment of crisis was also a moment of opportunity to chart a different course. The head of the IMF drew a parallel with the way the Second World War prompted the foundation of the National Health Service in the UK.

"The best memorial we can build for those who lost their lives in the pandemic is a greener, smarter, fairer world," Georgieva said.

Voicing agreement was Bernard Looney, the CEO of BP. Also in the virtual meeting, he said that he backed an end to fossil fuel subsidies and supported the green investment policies that organizations including the EU were beginning to put into place. BP's alternative energy portfolio includes wind power, solar power and biofuels.

"We all know there is a carbon budget. It is finite, it is running out," he said.

Looney described talking to a refinery worker who thanked him for leading the transition to renewables, on the basis that: "Given the choice, I would choose my grandchildren every time."

Unless things change, the outlook for that generation is bleak. Without action, catastrophic warming of over 4 degrees is predicted by the end of the century, with current policies putting us on a course for around 3 degrees of warming - enough to drown major cities, bring mass extinctions and make large parts of the world uninhabitable.

The United States and China are currently the world's largest polluters. While the COVID-19 lockdown caused a lull in CO2 emissions and dirty air, air pollution has already rebounded to previous levels in China.

Ma Jun, Chairman of China Green Finance Committee, also argued for a "Great Reset" to change this pattern.

This must be "greener than any of the previous recoveries," he said, urging measures including tighter reporting and regulation for companies, consumption incentives such as coupons for energy efficient goods, green infrastructure development and the use of green bonds to channel investment.