Climate Financing

Subject :Environment

Section: International conventions

Context:

Remarks by the IMF Managing Director Kristalina Georgieva at the Paris Summit Closing Press Conference.

Details:

Our world is changing rapidly. It is affected by more frequent and severe shocks, and it is a world with more tensions than we need at this time.
Economic shocks include:
- Interest rates are up
- Debt burdens are rising
- The cost of living is high
- Poverty and Inequality are increasing
- Severe Consequences of the climate crisis

Three important topics of discussion include:

Debt:
- It is a top priority to ease the debt burden on countries.
- There is a mechanism of financing called the G20 Common Framework delivering for Chad, Zambia, and also for countries outside of the Common Framework such as Sri Lanka and Suriname.
- They are benefiting from bringing creditors – both public and private – together.
- The Global Sovereign Debt Roundtable brings together, for the first time in the last decades, traditional Paris Club creditors, non-Paris Club creditors – such as China, India, Saudi Arabia, Brazil – and the private sector together with the debtor countries.
- The World Bank has shown leadership on debt suspension clauses in their programs.
- The IMF has an instrument called the Catastrophe Containment and Relief Trust that allows them to directly provide debt relief to poorer countries when they’re hit by shocks.
Climate:
- The IMF has over the last few years, integrated climate considerations into everything because the climate is macro-critical.
- Focusing on Carbon Pricing Mechanism:
  - Our analysis shows that without a carbon price, there is no chance that we will meet the 1.5 degrees Celsius target by 2030.
  - We advocate for an inclusive approach that includes taxes but also trade, as well as regulatory actions.
  - Just five years ago, carbon pricing covered 17 per cent of global emissions. Now it covers around 25 per cent.

Financing:
- The IMF has created a new instrument: the Resilience and Sustainability Trust.
- It lends – for the first time in the history of the IMF – long-term affordable financing with a 20-year repayment period and a 10-and-a-half-year grace period.
- Funding mechanisms include:
  - Contributions from countries like France
- We have reached the commitment pledged in 2021 –the pledge of US$100 billion in SDR channelling. Around US$60 billion of this pledge is already working at the IMF in the Poverty Reduction and Growth Trust and in the Resilience and Sustainability Trust.

G-20 Common framework:

The G20’s “Common Framework” created to provide debt relief has shortcomings, as it failed to bring all creditors, including private and commercial creditors, on board and link debt relief with development and climate goals.

Funds set up under the IMF for Climate financing are: