Trade Briefs

Climate Change and Fiscal Policy – Implications and Options for African countries

Climate Change and Fiscal Policy – Implications and Options for African countries

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31 Jul 2019

Author(s): Gavin van der Nest

The most severe impacts of climate change are often felt by the least developed and low-income countries. These countries are scarcely able to afford the challenges of mitigating against and adapting to climate change given their fewer financial and institutional resources, but it is developed nations that are major drivers of climate change given their historical industrial outputs, and given their financial resources are better able to pursue mitigation and adaptation actions.

This paper provides an overview of the various macroeconomic risks associated with climate change. It will discuss fiscal considerations and consequences of climate change as well as discuss some appropriate policy measures. The paper will also address issues related to minimizing competitiveness effects when policy is designed to address climate change, particularly when domestic production prices rise in relation to international prices as a result of environmental taxes. Finally, the paper offers some ideas on how governments themselves can manage their exposure to climate change risks.

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