Across a wide range of meetings on the many aspects of financing the transition to low-carbon, resilient growth, three points made this IMF/World Bank Group Spring Meetings different: They were standing room only, they reflected the growing sense of purpose and urgency, and they brought together voices from all areas of the economy – governments, central banks, development institutions, businesses, investors, and communities.
The climate ministerial reflected all three as 42 ministers of finance and development met with the heads of the World Bank, IMF, and United Nations and business and investment leaders to discuss meeting the world’s climate finance needs and how carbon pricing can lower emission and raise public funds for clean, resilient development.
Other meetings peeled back the ways central banks could encourage low-carbon investment and discussed how long-term targets for renewable energy and energy efficiency and policy packages, including fossil fuel subsidy reform, can direct investment to cleaner sources. All pointed to the need for clean, low-carbon growth and ways to lower emissions and increase climate finance.
“In less than nine months, climate negotiators will be in Paris to finalize an international agreement to reduce greenhouse gas emissions and begin slowing the impacts of climate change. Their success will depend heavily on how leaders, many of them here for the Spring Meetings, shape economic policies and catalyze climate finance to respond to the risks of our rapidly warming planet,” World Bank Group President Jim Yong Kim told the public and private sector guests at a meeting on climate finance co-hosted with the European Investment Bank.
The magnitude of the challenge
Over the next 15 years, the global economy will require an estimated $89 trillion in infrastructure investments across cities, energy, and land-use systems, and $4.1 trillion in incremental investment for the low-carbon transition to keep within the internationally agreed limit of a 2 degree Celsius temperature rise.
In addition, developed countries are working to meet a commitment made in 2010 to mobilize $100 billion a year from public and private sources by 2020 for climate mitigation and adaptation in developing countries. Showing the pathways to that $100 billion commitment will be important for building trust and confidence around the Paris climate negotiations that are expected to produce a new international agreement later this year.
Carbon pricing and fossil fuels
Putting a price on carbon and phasing out fossil fuel subsidies are two ways governments can free up and increase public funds. With a small percentage of the money that saved by ending subsidies or of the revenue raised from a carbon tax or permit sale going to climate finance, governments could help meet the $100 billion climate finance commitment and other mitigation and adaptation needs.
In the climate ministerial, led by World Bank Group President Kim, IMF Managing Director Christine Lagarde and United Nations Secretary-General Ban Ki-moon, U.S. Treasury Secretary Jacob Lew and ministers from China, India, Brazil, South Africa and other countries heard from CEOs, who explained how a stable carbon price can incentivize cleaner decisions and innovation, and from British Columbia Premier Christy Clark, whose province has a revenue-neutral carbon tax that has lowered income and businesses taxes and has a credit to help offset costs for the poor.
Several of the ministers raised concerns about the need to get finance flowing. Others discussed the value of carbon pricing in fueling innovation and lowering greenhouse gas emissions.