PublicDebtDynamicsduringtheClimateTransitionDanielGarcia-Macia,W.RaphaelLam,andAnhDinhMinhNguyenWP/24/71IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement.2024MAR©2024InternationalMonetaryFundWP/24/71IMFWorkingPaperFiscalAffairsDepartmentPublicDebtDynamicsDuringtheClimateTransitionPreparedbyDanielGarcia-Macia,W.RaphaelLam,andAnhDinhMinhNguyen1AuthorizedfordistributionbyW.RaphaelLamMarch2024IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement.ABSTRACT:Managingtheclimatetransitionpresentspolicymakerswithatradeoffbetweenachievingclimategoals,fiscalsustainability,andpoliticalfeasibility,whichcallsforafiscalbalancingactwiththerightmixofpolicies.Thispaperdevelopsatractabledynamicgeneralequilibriummodeltoquantifythefiscalimpactsofvariousclimatepolicypackagesaimedatreachingnetzeroemissionsbymid-century.Oursimulationsshowthatrelyingprimarilyonspendingmeasurestodeliveronclimateambitionswillbecostly,possiblyraisingdebtby45-50percentofGDPby205...
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