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The head of the IMF warned Friday that Western subsidies to combat climate change and encourage the transition to clean energy sources risked hitting the economies of the developing world.
"My biggest concern is that something that in principle is very good to accelerate the transition to the green economy by using public money to step up private investment... may not serve well the emerging markets and the developing world," Kristalina Georgieva said at the World Economic Forum in Davos.
The United States under President Joe Biden has passed the Inflation Reduction Act (IRA) which contains sweeping subsidies and tax cuts worth around $370 billion for reducing greenhouse gas emissions, making it the largest-ever US programme to combat climate change.
The European Union is considering responding in kind amid fears that the IRA will encourage businesses to move factories and production to the United States at a time when it is trying to strengthen its industrial base.
Georgieva warned that the subsidies could lead to technology and production transfers from poorer emerging countries to the rich world.
"If we are to strive to get the industrialised world clean and we don't think about the emerging markets, we are all cooked," she said.