Good policies can contain climate change costs: IMF

By Lesley Wroughton

WASHINGTON (Reuters) - Economic costs of damages caused by climate change can be contained by implementing well designed policies that are adopted by a large group of countries, the International Monetary Fund said on Thursday.

In new analysis, the IMF said those costs can be reduced through long-term, flexible policies that can avert further climate changes, including a carbon pricing system that is credible to both people and businesses.

For example, higher carbon prices would spur shifts in investments and consumption away from products and technologies that increase greenhouse gases that cause global warming.

The IMF's research, the first ever that looks at the effects of climate change on economies, cautioned that climate policies could also have wide-ranging economic consequences.

It pointed to the increase in global food prices and inflation caused by biofuels production, which is draining maize stocks and pushing up prices of staples.

The IMF's research comes as countries begin to flesh out a global agreement on addressing climate change to extend or replace the existing Kyoto Protocol, which expires in 2012.

U.N. climate experts want the new pact to cut greenhouse gases in all countries, although there is wide disagreement about how to share the burden between rich nations led by the United States and emerging countries such as China and India.

Nearly 200 countries agreed in talks in Bali, Indonesia, in December to try and clinch a new climate deal by the end of 2009.