IMF plans $100b Green Fund to assist poor
DAVOS, Switzerland — The International Monetary Fund is planning a 100 billion dollar fund to help countries mitigate the effects of climate change, the agency’s head said.
“The new growth model will be low carbon,” Dominique Strauss-Kahn, managing director of the IMF, told political and business leaders meeting at the World Economic Forum in the Swiss ski resort of Davos this weekend.
Efforts to deal with climate change could not be blocked “just because we cannot meet the financing needs,” he said.
Developing countries do not have the funds for these adaptation measures, and developed countries’ ability to pay is also limited as they are now weighed down by debt after funds were used to deal with the financial crisis.
It was therefore necessary to “think out of the box” on the issue of funding, the IMF chief said.
“We’ll have to find innovative ways to finance it,” Strauss-Khan said on Saturday.
“We’re going to provide some ideas, built around a Green Fund devoted to finance 100 billion dollars (72 billion euros) a year which is the figure currently accepted for addressing the problem based on the capitalisation coming from central banks, backed by special drawing rights issued by the fund,” he said.
Special drawing rights are an international reserve asset created by the IMF in 1969 as a supplement to member states’ official reserves. They can be exchanged for common currencies.
The IMF said on its website that it would issue a paper detailing ideas on how the fund would be financed.
The United Nations has said that governments should invest in the green sector as they try to create new jobs in the wake of the economic crisis, as it would also help move towards a greener society.
Azim Premji, who chairs India’s Wipro corporation noted that the issues of tackling climate change and reducing poverty could be addressed together.
“To me, if you combine these two challenges, they present an opportunity. The key is to look at the very fundamental fact that the developing world has still to build most of its energy infrastructure (and) physical infrastructure, and to buy most of its consumer goods,” he said in remarks published on the WEF’s website.
“This very simple fact — that the developing world does not have these things — is the great opportunity for tackling climate change and ecological sustainability.”
Jamie Drummond, Executive Director of campaign group ONE which was co-founded by U2 singer Bono, said the IMF’s move for a green fund was a “significant and positive development which, if approved in its most positive form, could seriously help catalyse the financing of a transition to low-carbon economic growth in developing countries.”
However, the advocacy group said that large sums of financing are still needed on top of the IMF fund to help poor countries deal with the effects of climate change immediately.
“As the fund would give concessional loans this does not replace the need for significant additional grant financing to help the poorest countries adapt right now to the impacts of climate change,” said the group.
The IMF’s plans must be “urgently analysed … and then the solutions must be urgently implemented,” it said.
In an 11th-hour deal, the Copenhagen Accord emerged out of the UN’s global summit on climate change in December.
The accord calls for limiting warming to two degrees Celsius (3.6 degrees Fahrenheit), the threshold set by many climate scientists.
It also commits rich countries to paying out around 30 billion dollars in total over the next three years, and 100 billion dollars annually by 2020, to help poor nations fight climate change and cope with its consequences.
Countries are being asked to indicate by Sunday if they will endorse the deal.