A rebellion against the status quo of global financial architecture, which dates back to World War II, gained momentum in New York this week as developing countries and climate change leaders demanded action to help address climate change.
In closed-door meetings on the sidelines of the UN General Assembly, and the accompanying so-called Climate Week debate, wealthy nations are asking increasingly pressing questions about who will bear the devastating effects of hurricanes, floods and wildfires. faced with
Barbados Prime Minister Mia Motley has become the de facto leader of efforts by smaller and less wealthy countries to build a global coalition to secure funding to combat the damage of climate change, Friday. called for a “new internationalism”.
Post-war financial institutions, including the IMF and World Bank Group, which were created as a result of the 1944 Bretton Woods Accords, “will no longer serve in the 21st century what they served in the 20th century,” Motley said.
The multifaceted actions required of the IMF and World Bank included a $100 billion special drawing right or a redistribution of additional reserve assets. Demand that the IMF temporarily suspend additional interest if large borrowers are in need of funds. Concessional funding provided for infrastructure related to climate resilience.
The plan put forward by Mottley included the issuance of $650 billion in special drawing rights or other low-interest long-term debt instruments to finance clean energy development around the world. All major issuers of debt should “normalize” natural disaster and pandemic clauses in their debt instruments so that borrowing countries can better absorb shocks, she said.
Motley wasn’t the only leader calling for a rethink of how the world pays for the impacts of climate change. Earlier this week, Fellow Caribbean Fellow Philip Davis, prime minister of the Bahamas, said the IMF and World Bank would “re-examine borrower countries’ recommended debt-to-GDP ratios in the context of adaptation, mitigation, and loss and damage.” ” said he needed to. Especially as a result of climate change”.
Davis said that “vulnerable countries” are “well above” the debt-to-GDP ratios recommended by multilateral development banks as sustainable, but still pay for reconstruction after natural disasters. He pointed out that he had to
Simon Steele, newly appointed executive director of the United Nations Framework Convention on Climate Change, told the FT there was “a growing consensus” that the so-called Bretton Woods structure was “suitable for the post-war world” but “needs reform and adjustment.” there is,” he said. ”.
Critically, US special envoy for climate John Kerry said on Wednesday that he was also pushing for reform of international financial institutions over their failure to liquidate climate change-related funds. He said the need for an overhaul was discussed at a UN-sponsored roundtable meeting of leaders that day.
The United States is the largest shareholder in both the IMF and World Bank and is seen as a laggard in financing climate action under President David Malpass.
Kelly expressed frustration at the role of institutions seen as essential in providing loans and grants to poor countries and distributing funds to limit global warming as developing countries grow. .
This discussion is part of a broader discussion of so-called “loss and damage.” At the COP26 United Nations climate summit in Glasgow last year, the wealthy nations that account for most of the world’s greenhouse gas emissions to date announced a world-wide effort to create new facilities to help pay for the damage caused by climate change. of the poorest countries’ proposals were rejected.
Ugandan climate activist Vanessa Nakate told the Financial Times this week that more funding is available to help developing countries transition energy away from fossil fuels and adapt to climate change. should take the form of a loss and damage facility.
“International climate finance needs to help the global South, which does not have the resources to pay for the transition to clean energy,” Nakate said.
This week, Denmark became the first country in the world to provide loss and damage compensation to countries affected by climate change, pledging around $13 million in aid.
UN Secretary-General António Guterres has called on governments to impose unwarranted taxes on the profits of oil and gas companies and redistribute the proceeds to countries hit by climate change.
IMF Managing Director Kristalina Georgieva said on Tuesday that demands from developing countries and countries affected by climate change to industrialized countries for loss and damage compensation were “very just”.
“I follow the loss and damage debate very closely,” Georgieva said. “I’m afraid COP27 is only 50 days away from her and it still seems very early,” she said. [the next UN climate summit]”
Georgieva said the IMF was under “desperate pressure to replenish” the devastating Containment and Relief Trust after the Covid-19 pandemic “sucked” the trust’s funds.
“The question is how can we pay institutions like ours to create this funding capacity,” Georgieva said. “When innocent bystanders are hit by an extrinsic shock, an external shock, we can move forward and eliminate debt.”
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