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SHARM EL-SHEIKH, Egypt – Climate change talks have long been bogged down by demands to transfer billions of dollars – on Monday, French President Emmanuel Macron backed a new push for talks that will be measured in trillions.
Speaking at the COP27 Climate Summit in Sharm El Sheikh, Egypt, Macron gave his support to elements of a plan outlined by Barbados Prime Minister Mia Motley that seeks to reform the way climate finance flows to countries that need it most.
He called for a “huge concessional shock”, suspended the debts of distressed countries, and put the International Monetary Fund under observation.
The speech signaled a shift in tone that developing countries had long been pushing for.
During the first day of official speeches, leader after leader from rich countries highlighted the need to show “solidarity” with developing countries after a year in which catastrophic disasters and a deepening debt crisis helped reshape the often contentious conversation about climate finance.
“It’s the right thing to do,” said British Prime Minister Rishi Sunak.
Money is the main focus of this year’s climate talks given the widening gap between what has been pledged and what is needed. It spans everything from clean energy transitions to toughening countries’ defenses against climate impacts to potential payments for irreversible climate damage.
In September, Barbados issued the world’s first bond on epidemics and natural disasters. “It is time to introduce the pandemic pandemic-related natural disaster provisions into our debt instruments,” Motley said.
“God forbid, if we hit tomorrow, we unlock 18 percent of GDP over the next two years, because what we’re doing is actually stopping all of our debt,” she said.
Macron called for a change in the rules of the International Monetary Fund, the World Bank and other major lenders Items that stop paying debts in the event of a disaster are more common.
“What you ask of us in terms of debt repayment and guarantees, when we are affected by a climate shock, when we are victims of a climate accident, to some extent, there should be a suspension of those terms,” the French president said.
While the need for financing to spur the transition to clean energy around the world and protect against the scourge of climate change has already stretched into trillions of dollars, the UN climate system is still stuck with a decade-old promise from rich countries. They have pledged $100 billion a year in climate finance by 2020, but that’s not the case likely to It will happen until next year.
As climate impacts become more severe and pervasive, calls have mounted for new and more innovative forms of financing. Debt inflation in the wake of the pandemic has escalated those calls, with dozens of vulnerable countries A threat Debt strike in the run-up to COP27.
Motley has long been a champion of escalating the debt crisis facing countries like hers, highlighting how it adds to climate inequality. The plan I outlined in September hinges on debt forgiveness, increased financing and new mechanisms for disaster recovery, such as bonds.
The Barbados leader’s call to arms and Macron’s support for the heavyweight brought a new reality and a new volume to the financial debate.
Mottley pushed for the establishment of the International Monetary Fund’s Special Drawing Rights to help countries vulnerable to climate change recover and respond to climate impacts. That could be used to help free up more money from the private sector — $500 billion from the International Monetary Fund could result in $5 trillion in investments, she said Monday.
The challenge is to persuade the shareholders of these financial institutions to agree to the reforms.
Officials in the United States, Germany, and other major economies have pushed for an overhaul of the way multilateral development banks lend to allow them to expand more climate finance. US Treasury Secretary Janet Yellen called on the World Bank to draft a roadmap by the end of the year that could then be used to advance reform efforts at other development banks.
On Monday, Macron went further, saying that by next spring global financial institutions will need to devise ways “to come up with concrete solutions to operationalize these innovative financing solutions and to help us provide access to new liquidity.”
He praised Motley’s “personal strength” and said the two leaders – one running an economy 600 times larger than the other – had agreed to form a group of “wise minds” to develop proposals for reforming the international financial system.
But one of Mottley’s suggestions that Macron has veered is her call for fossil fuel companies to pay a tax on their profits into a fund for disaster-stricken countries.
“How do companies generate $200 billion in profit in the past three months and not expect to contribute at least 10 cents on every dollar of profit to the loss and damage fund?” She asked.