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‘A perennial question hanging over UN climate conferences is how developing countries will finance their domestic climate mitigation and adaptation efforts. Rich countries currently provide them with a little less than $100 billion per year in a combination of grants and loans for this purpose, but their annual need is widely understood to be in the trillions of dollars.

Developing countries have contributed far less to climate change than wealthy ones—but disproportionally bear the brunt of its effects.’ – An excerpt from a recently Financial Policy (FP) published article ‘The Barbadian proposal turning heads at COP27’.

The fundamental question facing COP27 meetings that are currently underway in Egypt is how to ‘foster a global partnership’ among countries, multilateral institutions, and companies/private sector so that the existential threat of climate change, and its main consequences in the shape of global warming, and the still-ongoing Covid pandemic, including the high likelihood of more in the near future, could be appropriately dealt with, and the fast-narrowing time window to deal with the climate change threat.

The three main components of climate change crisis, in the shape of mitigation, adaptation, and loss and damage compensation, all require a ‘financial plan’ to invest in not just built-up of institutions, organisations and markets, both at country- and international levels that can deliver the ‘green new deal’ like mission-oriented, purpose-driven, and quick outcomes to deal with this existential threat.

While both global South and relatively developed North need such a financial plan, and the accompanying ‘policy framework’ to create that financial base, it is the developing countries, especially the most vulnerable ones in terms of climate change consequences – frequent and more intense disasters like the recent catastrophic floods in Pakistan – that require the most financial support, and in particular case quick and meaningful loss and damage related compensation.

Among many of the plans that are being presented, the one presented under the able leadership of Barbadian Prime Minister, Mia Mottley, and close to her proposal called the ‘Bridgetown Initiative’ that she presented this summer, has received the most traction at the COP 27 meetings.

The same FP published article (indicated above) pointed towards its popularity at the COP27 meetings as ‘But perhaps no other initiative from the region could have as much of a global impact as Barbados’s proposed climate finance plan.

The Bridgetown Initiative, as it is known, was devised by a group steered by Barbadian Prime Minister Mia Mottley and her climate finance envoy, Avinash Persaud. While developing countries have long called for similar measures, Mottley’s plan earned public praise this week from figures such as French President Emmanuel Macron and Kristalina Georgieva, the managing director of the International Monetary Fund (IMF).’

About the ‘Bridgetown Initiative’, Avinash Persaud in an article ‘Opinion: The Bridgetown Initiative’, published recently, pointed out: ‘The Bridgetown Initiative contains five specific proposals that individually are achievable within 18 months and collectively will meaningfully redraw the global financial system to better respond to the climate and development crises.’

Moreover, the article indicated about those ‘five specific proposals’ as ‘[1] Drawing in $5trn of private savings for climate mitigation, [2] widening access to concessional finance for the climate-vulnerable, [3] expanding MDB [multilateral development bank] lending for climate and SDGs [sustainable development goals] by $1trn, [4] funding Loss and Damage, [5] making the financial system more shock absorbent.’

Last year, the two financial plans that came up in the COP26 meetings in Scotland, about which the same FP published article pointed out: ‘One was a pledge by a group of private sector financiers to green their portfolios and back climate-friendly projects in the developing world.

The other was a plan by several rich countries to support South Africa’s transition away from coal through an $8.5 billion mix of grants and loans that was seen as a potential pilot program for other countries. A year later, however, the former has faltered amid concerns about the strictness of its climate targets, and the latter has been slow to scale.’

Having said that, the Bridgetown Initiative presents a larger scope of action. The same FP article pointed out the main features of the initiative as it evolved since the COP26 as ‘Mottley and Persaud spent the past year developing their Glasgow pitch into a more solid proposal and workshopped it at a July meeting in the Barbadian capital of Bridgetown with academics, IMF executives, and the U.N. deputy secretary-general.

The document that emerged from these discussions – dubbed the Bridgetown Initiative – made a one-time $650 billion request of the IMF (a departure from Mottley’s original suggestion that this amount be paid annually) and called for development banks to issue $1 trillion in low-interest loans for climate spending in developing countries. …An updated version of the Bridgetown Initiative that Persaud published this week also advocates for a tax on oil companies to finance reconstruction grants that would be dispensed to developing countries after climate disasters, though it did not specify how exactly this would work. Persaud also wrote that countries’ outstanding loan repayments should be temporarily paused after such disasters.’

In addition to the Bridgetown Initiative, the success of any financial plan to successfully deal with the climate change crisis would require the neoliberal thinking at the Bretton Woods institutions, including the World Trade Organisation, in addition to the International Monetary Fund (IMF) and World Bank.

Hence, primarily, overboard- austerity, procyclical policy, risk-based financing, and intellectual property rights, on one hand, and continuing with the ‘surcharge policy’ on late repay ments by the IMF and suboptimal climate related funding by World Bank, on the other, would indeed be a revisit that is urgently required to make any climate change-related financial plan work.

A recent New York Times (NYT) published article ‘Poor countries need climate funding. These plans could unlock trillions’ pointed out in this regard: ‘The World Bank and the International Monetary Fund were created 80 years ago to rebuild countries devastated by World War II and to stabilize the global economy. But an expanding group of world leaders now say the two powerful institutions need a 21st century overhaul to handle a new destructive force: global warming.

There is growing momentum behind a set of ideas that would fundamentally overhaul the two powerful financial institutions, which frequently loan or grant money from rich, industrialised nations to developing countries.

The proposals are rapidly gaining traction among heads of state, finance ministers and even leaders of the bank and the fund, who are all meeting now at the United Nations climate summit known as COP27. …The proposals are broadly in line with what is known as the Bridgetown Initiative, put forward this summer by Mia Mottley, the prime minister of Barbados, a heavily indebted Caribbean nation that is highly vulnerable to climate disasters.’

Moreover, the same NYT article highlighted the support from many leaders, including the managing director of the IMF herself, with regard to reforming the Bretton Woods institutions, and the ‘Bridgetown Initiative’ as follows: ‘“The world has changed dramatically,” Kristalina Georgieva, the managing director of the I.M.F. said in an interview on the sidelines of the summit on Wednesday, adding that she was broadly supportive of the Bridgetown Initiative.

“When our institutions were set, there was no common global challenges like climate change. Now we have to mobilize to address them.” In addition, in terms of the roadmap to further evolve efforts in this regard, the same article pointed out ‘President Emmanuel Macron of France said on Monday that he supported Mottley’s plans and joined her in calling for the formation of a task force that would make recommendations for new climate financing programs before the annual spring meetings of the World Bank and IMF in Washington.’

Copyright Business Recorder, 2022

Dr Omer Javed

The writer holds a PhD in Economics degree from the University of Barcelona, and has previously worked at the International Monetary Fund. His contact on ‘X’ (formerly ‘Twitter’) is @omerjaved7

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