Macron Backs Trillions in Climate Cash – POLITICO

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SHARM EL-SHEIKH, Egypt — Climate change talks long stymied by demands for billions of dollars in transfers — French President Emmanuel Macron on Monday backed a new push for the talk to be measured in trillions.

Speaking at the COP27 climate summit in Sharm El-Sheikh, Egypt, Macron threw his support behind elements of a plan outlined by Barbados Prime Minister Mia Mottley that seeks to overhaul the way climate finance flows to the countries most in need that.

He called for a “huge shock of concessional financing”, the suspension of debt to disaster-stricken countries and notice of the International Monetary Fund (IMF).

It was a speech that signaled a change in tone that developing countries have long been pushing for.

During the first day of official speeches, leader after leader from wealthy countries highlighted the need to demonstrate “solidarity” with developing countries after a year in which catastrophic disasters and a bubbling debt crisis helped reshape the often contentious conversation on climate finance.

“It is the right thing to do,” said British Prime Minister Rishi Sunak.

Money is a key focus of this year’s climate talks, given the widening gap between what has been promised and what is needed. It ranges from everything from clean energy transitions to hardening countries’ defenses against climate impacts to potential payments for irreparable climate damage.

In September, Barbados issued the world’s first pandemic and natural disaster bond. “The time has come to introduce natural disaster-pandemic clauses into our debt instruments,” Mottley said.

“God forbid, if we get hit tomorrow, we’ll unlock 18 percent of GDP over the next two years, because what we’re doing is actually putting a break on all our debt,” she said.

Macron called for the rules for the IMF, the World Bank and other major lenders to be changed to make far more common clauses that stop debt repayment in the event of a disaster.

“What you are asking us in terms of repayment of debt and guarantees, when we are hit by a climate shock, when we are victims of a climate accident, to some extent, there must be a suspension of these conditions,” said the French president.

Broken promises

While the need for funding to spur the world’s clean energy transition and protect against the ravages of climate change already runs into the trillions, the UN climate system remains stuck on a broken decade-old promise from rich countries. They pledged to deliver $100 billion a year in climate finance by 2020, but that likely won’t happen until next year.

As climate impacts have become more extreme and productive, appeals for new and more innovative forms of financing have escalated. Ballooning debt in the wake of the pandemic has heightened these calls, with dozens of vulnerable countries threatening a debt strike in the run-up to COP27.

Mottley has been a champion for highlighting the debt crisis facing nations like her own and highlighting how it contributes to climate inequalities. The plan she outlined in September hinges on debt relief, increased funding and new mechanisms for disaster recovery, such as bonds.

The Barbadian leader’s call to arms and Macron’s heavy backing brought a new reality and scale to the economic discussion.

Mottley has pushed for the IMF’s special drawing rights to be used to help climate-vulnerable nations recover and respond to climate impacts. That could be used to help unlock far more money from the private sector — $500 billion from the IMF could result in $5 trillion in investment, she said Monday.

The challenge is to get the shareholders of these financial institutions to agree to reforms.

Officials in the US, Germany and other major economies have pushed for an overhaul of the way multilateral development banks lend to allow them to extend more climate finance. US Treasury Secretary Janet Yellen has called on the World Bank to produce a roadmap before the end of the year, which can then be used to drive reform efforts at other development banks.

On Monday, Macron went further, saying that by next spring global financial institutions would have to devise ways to “come up with concrete solutions to activate these innovative financing solutions and help us provide access to new liquidity.”

He hailed Mottley’s “strength of character” and said the two leaders – one who controls an economy 600 times the size of the other – had agreed to form a group of “bright minds” to develop proposals for the overhaul of the international financial system.

But one suggestion from Mottley that Macron rejected was her call for fossil fuel companies to pay a tax on their profits to a fund for disaster-stricken countries.

“How do companies make $200 billion in profits in the last three months and not expect to contribute at least 10 cents on every dollar of profits to a loss and damage fund?” she asked.

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