Each sub-module allows projections over a 30-year horizon under two scenarios: an“extended standardised baseline” scenario based on the default costs in the template, and a customised scenario, where users can adjust the costs to country-specific characteristics. The customised scenario also allows users to adjust the financing terms of the climate-related investments, providing scope for example to show the difference between financing with non-concessional or concessional debt. It also allows users to adjust the long-term GDP growth path, which in principle would provide space to incorporate the results of the positive growth impact of any just green transition spending. Each is also based on a clear costings methodology applicable across all countries, reflecting the“currently best set of estimates” by the IMF for individual country costs of adaptation(ranging between 0.3 per cent and 2.4 per cent of GDP for different regions and types of countries – see IMF 2022a) and mitigation(between 1 per cent and 4 per cent of GDP). 6 To facilitate the task of integrating climate adaptation into the DSF, the adaptation module is“pre-populated” with these estimates, making it easy to use while giving the user plenty of flexibility to change the default assumptions. There is also a clear definition of which countries to analyse: • For countries which request financing from the Resilience and Sustainability Facility(RSF) of the IMF, both submodules have to be analysed. • Use of one or both of the modules is also compulsory in pre-defined groups of countries in which the fiscal costs and risks of adaptation or mitigation are expected to be significant. ⁻ The adaptation submodule is compulsory in(1) the set of countries for which the natural disasters stress test is triggered 7 and(2) the top 25 per cent of countries at highest risk from climate change, as judged by an IMF-calculated Adaptation Ranking Index. 8 ⁻ The mitigation submodule is compulsory for all countries with an ambitious zero net carbon emission target(targeting zero net carbon emissions before 2050), as well as for the 25 largest CO2 emitters per unit of output, who have yet to set a target. • Use of the adaptation module is also compulsory in debt-restructuring cases, to provide guidance to teams who need to formulate realistic debt restructuring envelopes – though there is no evidence that as a result more emphasis is placed on restructuring, helping to raise climate spend. For the remaining IMF member states, use of either module remains optional, based on the views of the authorities and the IMF mission as to the likelihood of high climate risk. However, according to IMF staff interviewed for this study, no country for which the module is not mandated has chosen it as an option. Furthermore, based on the IMF’s own estimates, the fiscal costs of climate adaptation could be sizeable for many developing countries. If costs are high, this can be supplemented with a second step, the building of a customised country-specific scenario which looks at how these costs can be funded while maintaining debt sustainability. Here, missions are encouraged to look for other sources as estimates of costs. These include studies by the IMF, World Bank, or regional development banks(RDBs); Nationally Determined Contribution 6 These are based on costs for European countries with ambitious mitigation targets as reported to the European Commission. 7 The SRDSF also contains a“natural disaster stress test” – which, interestingly, is triggered for all small state MACs(unlike the LIC-DSF test), as well as MACs with evidence of frequent or severe disasters. This is not discussed here in detail because it is not seen as an adaptation to climate change, but rather an adaptation to natural disasters which could have multiple causes; and because the climate change modules are much better adaptations. For details of the LIC-DSF stress test, see section 3.1.2 below. 8 This in turn combines information on(i) propensity to natural disasters, from EM-DAT;(ii) climate-related adaptation cost estimates, from IMF 2022a; and(iii) climate-related adaptation risk, measured by a Composite Index calculated with data from the Notre Dame University ND-GAIN Index, the IMF-INFORM index and the United Nations Institute for Environment and Human Security’s World Risk Index(WRI). Series: Debt Sustainability Assessments& Their Role in the International Financial Architecture 6