At Copenhagen in December, nations must agree about the future of the planet's climate. The richest nations need to make radical changes – but the developing countries do too, and they will need our help if they are to deliver the emissions cuts required. Climate finance is vitally important, and something we will address at the G20 meeting of finance ministers in St Andrews this weekend.
The threat we face is as much economic as it is ecological. The worst effects of climate change could cost 20 per cent of global GDP – greater than the two world wars and the Great Depression. The UK estimates that poorer countries will need at least £100bn a year by 2020 to cut emissions and adapt to climate change. We must begin to provide, and then eventually scale up, that finance immediately. The EU is prepared to pay its fair share, and the UK will make €1bn a year available as part of EU funding. We must convince other major economies to put substantial funding on the table.
The barriers to agreement on climate finance remain substantial. Even if countries agree the levels of finance, few will want to hand over money if they lack confidence in the means of delivering it. We do not yet have the global architecture to distribute and monitor financing on this scale. The existing funds are small, poorly co-ordinated, and generally fund individual projects rather than whole sectors of the economy. The IMF and World Bank will play a major role, but are not purpose-built for the task.
What are the challenges? First, any fund must respond to green technology, so that funds are channelled towards the latest innovations. Second, it must be transparent, so funds go directly to where they're needed – green agriculture, hurricane defence, forestry and clean energy – rather than towards local political priorities. Developing countries should have a genuine say in this.
Finally, private capital must also be part of the solution. World markets must be able to support at least $50bn of investment per year in developing countries by 2020 – ambitious sector-wide investment programmes.
The challenges are daunting, but not without precedent. The creation of the Bretton Woods architecture in 1944 and the Marshall Plan that rebuilt the postwar world provided frameworks and fostered the confidence needed for investment. Then, as now, governments needed vision.
This weekend, once again, countries must come together to protect the common good.Reuse content