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This paper discusses how climate change is the defining challenge of our time, and the stakes are particularly high for the Asia-Pacific region. Temperatures are rising two times faster in Asia than the global average, which is associated with the increased frequency and severity of weather-related natural disasters. In 2019 alone, India was buffeted by a severe heat wave that led to water scarcity in parts of the country. Torrential rains in South Asia caused large-scale population displacement, while water levels in the Mekong Delta fell to unprecedented lows due to intense dry weather. Australia faced historic bushfires fueled by a particularly harsh dry season. And more than 25 tropical cyclones wreaked damage on the Pacific and Indian Ocean coasts. Such climate hazards are projected to intensify in the period ahead.

Rising sea levels from global warming are eroding arable land in low-elevation coastal zones, posing a severe risk for rural incomes, food security, and commodity exports. By mid-century, rising waters will impact nearly a billion people in the Asia-Pacific region. Megacities such as Mumbai, Dhaka, Bangkok, Ho Chi Minh City, Jakarta, and Shanghai run the risk of being submerged. Indonesia is already planning to move its heavily populated capital, Jakarta, to the island of Borneo to protect its residents from dangerous flooding. For small Pacific island countries such as Kiribati, the Marshall Islands, and Tuvalu, rising sea levels pose an existential threat.

But while Asia-Pacific suffers keenly from the effects of climate change, the region is also a key source of the problem. The region produces about half of the world’s carbon dioxide (CO₂) emissions and contains five of the largest greenhouse-gas-emitting countries. In view of Asia’s substantial share of current emissions as well as its expected future emissions growth, China, India, and other large CO₂-emitting countries’ policies to curb emissions will be a critical element of the global effort.

In addition to contributing to global warming, greenhouse gas emissions from Asia’s coal-based power generation and carbon-intensive manufacturing (such as steel and cement, motor vehicles, agriculture, and domestic cooking and heating) have resulted in dangerously high levels of particulate matter in the air (McKinsey Global Institute 2020). Delhi, Dhaka, Ulaanbaatar, Kathmandu, Beijing, and Jakarta are among today’s 10 most polluted cities. The use of fossil fuels must be contained to make a serious dent in air pollution, a major contributor to mortality and respiratory diseases in developing Asia.

Climate change threatens growth, livelihoods, productivity, and well-being across all countries in the region. But fiscal policy can play a role in responding to the problem. In this recent paper, it discusses how policymakers in the Asia-Pacific region can accelerate mitigation and adaptation efforts, using fiscal policy to manage policy trade-offs and ease the transition to a low-carbon economy