While violence and inflation will dominate this week’s World Bank spring meetings, campaigners are calling for a reform of global financial infrastructure to assist countries in dealing with climate change.
Scientists warn developing countries are struggling to find the cash needed to phase out the use of planet-warming fossil fuels and prepare for tomorrow’s climate calamities as they deal with rising costs, skyrocketing debts, and catastrophic weather occurrences.
The dilemma is what to do about it, in the midst of international tensions caused by Russia’s invasion of Ukraine and trade disputes between the United States and China.
Enter Mia Mottley, Prime Minister of Barbados.
“We believe we have a strategy,” the leader of the Caribbean island nation, which is threatened by hurricanes and sea level rise, told world leaders in November during the COP27 climate summit in Egypt.
The Bridgetown Initiative proposes utilizing the International Monetary Fund to turn “billions to trillions” in investments to reduce carbon emissions, as well as a tax on fossil fuel revenues to cushion the economic blows of climate impacts.
While the measures are still being considered, they have gained traction among the major economies that control the World Bank and IMF, raising optimism for action in the coming months.
The World Bank is under special scrutiny following the resignation of CEO David Malpass amid suspicions about his stance on climate change.
Emmanuel Macron, the French President, has endorsed the reform push and will strive to maintain momentum with a climate finance summit in June, ahead of Bank meetings and UN climate summits later this year.
Reform ideas are gaining traction because they fill a “policy vacuum” in global climate response funding, according to Avinash Persaud, the economist running the Barbados campaign with “one and a half people and a spreadsheet.”
“I think we’ve got a chance here,” he told AFP.
‘Burning and drowning’
According to United Nations climate scientists, time is running out to invest in the adjustments required to prevent warming to 1.5 degrees Celsius above preindustrial levels.
The globe is currently off course, endangering nature, human societies, and the global economy.
“We won’t be able to address the climate catastrophe unless money is put on the table,” said Harjeet Singh, Head of Global Political Strategy at the Climate Action Network campaign group.
Heat waves, droughts, and floods have wilted crops in important global breadbaskets in recent years.
For example, Pakistan’s economy was already ailing after years of political upheaval, but a global energy price spike and disastrous floods last year pushed it over the edge.
According to Persaud, developing countries are already losing “significant portions” of their GDP due to climate consequences.
“We’re burning up and drowning in the same year,” he remarked, referring to climate change.
Following the war
The Bretton Woods financial architecture was established to aid in the reconstruction of countries devastated by World War II, as well as to stimulate global trade and prosperity.
According to Cameroonian economist Vera Songwe, the globe has reached a new tipping point.
“When you add all of these difficulties we have today, it feels like we just came out of a war,” she told AFP.
Climate change is becoming “the most critical and sustained concern,” she said, adding that it is “permeating every part of global economic development.”
Financial institutions have begun to act.
The IMF has established a new loan-based Resilience and Sustainability Trust to assist poorer or more vulnerable nations in boosting long-term growth. The first recipient was Barbados.
According to the World Bank, it delivered a record $31.7 billion last year to help nations combat climate change and has begun to design a change roadmap.
Notwithstanding the fact that wealthier nations have failed to fulfill their own aim of $100 billion per year to assist developing countries in investing in clean energy and increasing resilience to climate impacts, research has shown that the true costs already much surpass that sum.
Songwe co-chaired the United Nations’ Independent High-Level Expert Group on Climate Financing, which stated last year that they will need more than $2 trillion per year to respond to the climate catastrophe by 2030.
‘Would you like to change the world?’
The Barbados plan aims to fund those trillions by utilizing around $500 billion in IMF reserve assets known as Special Drawing Rights as collateral in a new climate trust that could borrow cheaply to invest in private sector emissions-reduction projects.
It also calls on international development banks to considerably boost their loans, while emphasizing that debt arrangements should include disaster clauses, as Barbados does, that allow a country to stop repayments for two years following a severe occurrence.
In addition, the plan calls for levies, such as on fossil fuel earnings, to assist countries in dealing with climate losses and damages.
Singh applauded the initiative, but campaigners seek debt cancellation and a broader admission of responsibility on the part of wealthy polluters.
