The world can survive inflation and recession but not an “unmitigated climate crisis,” the International Monetary Fund’s Managing Director told Al Arabiya on the sidelines of the COP27 UN climate conference in Egypt.
“What we need is very massive education campaign, because if people are overtaken by current difficulties and they are not mindful of climate change being an existential risk to humanity, they would be slow to do their part for the transformation,” said IMF Managing Director Kristalina Georgieva.
“We can survive recession. It is hard, but we can survive it. We can survive inflation [but] what we cannot survive, as humanity, is an unmitigated climate crisis.”
World leaders, government officials, top decision makers and experts gathered at COP27 in Egypt’s coastal town of Sharm el-Sheikh to discuss the most pressing issues facing humanity in an effort to mitigate the climate crisis.
COP27, which kicked off on Sunday and is set to run until November 18, still has much to discuss, from financing the global transition to clean energy to protecting the world’s forests and future-proofing cities.
When asked about a macroeconomic blueprint which the IMF will put forward at the climate summit, aiming for a 25 percent reduction in global emissions by 2030, Georgieva said that first, it would need to gradually increase the price of carbon “to the level necessary to create the incentive for businesses and consumers to bring down emissions.”
“Currently, carbon price globally, on average, is $5 a ton. By 2030, it has to be at least $75 [per] ton if we want to reach the goals of the Paris Agreement,” she explained.
“We need to mobilize, on a much bigger scale; private investment in emerging markets, in developing economies. For this to happen, we need good data, and the IMF is working on that.”
The IMF head also noted that it needed taxonomies to “create comparability for investors from advanced economies, all the way to the poorest countries,” as well as “de-risking schemes.”
“At the IMF, we created the new instruments, the Resilience and Sustainability Trust, to finance this long-term structural transformation. So, we are part of the financing, but we want to use this instrument primarily to bring down perceived and real risk for private investments to move to emerging markets in developing economies.”
‘Major problems’ at hand
Georgieva said that there were currently two problems at hand: climate impact and a “mountain of debt on the shoulders of poor nations.”
“It is important to seek ways to bring a solution to these two problems that connects them,” she explained.
“What we [at the IMF] have concluded is twofold. One, there are ways in which good data for emission reductions can create a predictable revenue stream for countries and be used to service their debt. Two, there has to be a credible way to certify the emission reduction on one side and then what it means for those that are forgiving the debt – in other words, who are receiving the credits.”
If the goal is to ensure that countries credibly link ecological conservation and climate action to a financial flow, then “we have to have good data [and] standardize it, and then make it a part of the solution for the climate crisis,” said Georgieva.
“From the IMF side, we are going to engage on this.”
“I want to caution that if there is a massive problem that requires debt restructuring, that may not be a good candidate for this predictable long-term flow. But if we are talking about debt service over time, not debt restructuring at the moment, [then] yes, we can link carbon credits generated by country to debt service obligations in a way that helps solve two problems at once.”
What can be done during COP27
Georgieva believes that a lot can be achieved at this year’s climate conference.
“There are two things that can be done during COP. The first one is to lift up attention to project preparation and make access to project preparation funds easy also for private investors that are looking for opportunities in the developing world and, two, to provide platforms on a country basis for everybody in the public sector, multilateral development banks and the private sector to come together and seize opportunities that exist,” she said.
The IMF head said that despite everything, there is “some good news to celebrate”: the emergence of significant financing through climate-related bonds.
“Last year, we had $252 billion [in financing]. Only a couple of years ago, we counted them in the tens of billions, not in the hundreds of billions. So, we have to also celebrate where progress is made. Ask: how did they do it? And how we can do even more of it and replicate it elsewhere.”
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