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Putting Climate at the Core of IMF Governance [1]

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Date: 2022-12 

Acknowledgments

The authors thank Dan Beeton, Michael Galant, Debarati Ghosh, Brett Heinz, Alex Main, Mark Weisbrot, and Aileen Wu for helpful comments, suggestions, and editorial work. The authors also thank the participants at the International Monetary Fund Civil Society Meetings on October 13, 2022, where a previous version of this work was presented, for their valuable feedback.

Executive Summary

The formula used to determine a country’s voting power at the International Monetary Fund (IMF) rewards economic size, trade openness, and the accumulation of reserves, but ignores countries’ contributions to the climate emergency. The largest global cumulative emitters of carbon dioxide (CO2) are also the most powerful countries at the IMF in terms of their voting shares. To give more decision-making powers to the countries most impacted by climate change and incentivize all countries to cut emissions, we propose a necessary update to the IMF’s voting formula by adding a variable representing member states’ shares of cumulative CO2 emissions since 1944.

The inclusion of our climate variable would significantly reduce the voting shares of the greatest CO2 emitters, and increase those of lower emitters, located primarily in the Global South . If we assume countries fully adopt our formula proposal (i.e., with no subsequent opaque negotiations), the major winners would be Small Island Developing States (SIDS), which are among the countries most vulnerable to climate change, especially to rising sea levels. The vote share of these countries would increase from approximately 2.5 percent to nearly 21 percent, thereby significantly increasing their decision-making power within the Fund. The US vote share would decrease from 16.5 to 5.64 percent, and China’s share would drop from 6.1 to 5.36 percent. Along regional lines, the Global South countries’ vote share would increase from 37.0 to 56.4 percent, and, significantly, sub-Saharan African countries’ share would expand from 4.9 to 9.0 percent. Advanced economies would see 12 percent of their votes transferred to emerging and developing economies.

For more of the report, read the PDF.

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[1] Url: https://cepr.net/report/putting-climate-at-the-core-of-imf-governance/

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