2023-09-07-IMF-Cross-Border_Risks_of_a_Global_Economy_in_Mid-Transition_57页_1mb

Cross-Border Risks of a Global Economy in Mid-Transition

Overview

• The paper analyzes cross-border risks arising from the global energy transition to decarbonization, particularly during the "mid-transition" period where fossil and low-carbon energy systems coexist and transform rapidly.
• These risks include financial (stranded assets), trade (sectors like fossil fuel and cleantech imports/exports), and geopolitical impacts, exacerbated by policy fragmentation.
• The study uses a model to show how countries like China, India, and Japan benefit from the transition, while major fossil exporters like Russia and the U.S. may suffer significant losses.

Key Findings:

1. Country Archetypes: Cross-border risks are structured around five archetypes (fossil exporter/importer, cleantech producer, critical mineral producer/importer, etc.), shaping economic exposures.
2. Trade and Investment Impacts: Mid-transition is expected to reduce fossil trade but may increase low-carbon technology trade. Fossil exporters could experience trade balance deterioration, while energy importers might benefit.
3. Financial Risks: Stranded fossil assets risk causing significant losses in financial systems, supported by cross-border equity holdings, potentially triggering contagion.
4. Geoeconomic Fragmentation: Rising trade rivalries and supply chain resilience policies could amplify cross-border risks, affecting commodity prices and global financial stability.
5. Policy Recommendations: Strengthened international coordination on climate policies, finance, and resource mobilization is critical to mitigate risks and stabilize the transition.

Conclusion

• The transition is destabilizing without coordinated policies, leading to potential "mid-transition traps." Greater attention to cross-border linkages is needed among policymakers, climate COPs, and economic institutions.