CREDIT: (AP Photo/Stephen Jaffe, IMF)
It may be difficult to sort out what the IMF, OECD, U.N., and World Bank actually are, but they do agree on one thing. Reducing carbon emissions can be good for the financial sector.
The International Monetary Fund (IMF) helps stabilize currencies. The OECD is the Organisation for Economic Co-operation and Development, an international economic development organization. The U.N. provides an international forum to solve disputes and address problems, while the World Bank provides loans to developing countries.
On Wednesday, OECD Secretary-General Angel Gurría made the case that ignoring the risks posed by climate change is even more dangerous than the risks posed by a breakdown in the financial sector: “In parallel, over these same years, governments have also been grappling with how to cope with the risk of climate change. Here the time frames are much longer but, unlike the financial crisis, we do not have a ‘climate bailout option’ up our sleeves.”
He warned against “stranding” further assets in fossil fuels at the risk of doing the same to the planet:
It is worth recalling that the investors are in so many cases people like you and me. The Asset Owners Disclosure Project estimates an average of over 55 per cent of pension funds’ portfolios is being invested in high carbon assets or sectors greatly exposed to climate change physical impacts and climate change-related regulation. The looming choice may be either stranding those assets or stranding the planet.
The fact is that any new fossil resources brought to market — conventional or unconventional — risk taking us further away from the trajectory we need to be on, unless there is a firm CCS requirement in place or governments are prepared to risk writing off large amounts of invested capital.
His solution is to completely halt fossil fuel emissions by the end of the century, stating that “whatever policy mix we cook up, it has to be one that leads to the complete elimination of emissions to the atmosphere from the combustion of fossil fuels in the second half of the century.” The whole speech is worth reading.
On Tuesday, the heads of the World Bank and the International Monetary Fund spoke in public for the first time about climate change and why the world’s top financial titans should act on cutting carbon pollution now, before any global accord.
International Monetary Fund Managing Director Christine Legarde said that financial institutions had to make climate change a central priority: “We have got to think about it every day.”
“It is important that our two institutions always have climate change, environmental issues and price setting at the forefront of our agenda,” she said.
World Bank President Jim Yong Kim made clear that there are good financial incentives for dealing with climate change: “Don’t assume that tackling climate costs will make all your costs go up and that there are no good options.”
“The innovations that are happening in other parts of the world are not always apparent to ministers of finance,” he continued. “We would be very happy to play the role of bringing those options to the table and letting them see that they can create a better world for their grandchildren, but that it makes economic sense as well.”
The IMF released a study last week demonstrating how the annual $485 billion in global fossil fuel subsidies could be cut to introduce a new revenue stream for education, health, and lowering greenhouse gas emissions. Leaders pointed to examples such as Zambia and the Philippines where the vulnerability to climate impacts has prompted real investment in addressing climate change.
International financial and political leadership is on board, providing a potential framework for these policy options. Powerful financial actors making the case for serious action can’t hurt the prospects. In September, at the opening of the U.N. General Assembly meeting, Secretary-General Ban Ki-Moon invited leaders around the world to a climate summit in 2014 “aimed at catalyzing action by governments, business, finance, industry, and civil society in areas for new commitments” toward a low-carbon economy.
He urged “concrete action that will close the emissions gap” and outlined a vision for how this action will benefit the human race: “There is opportunity amid this peril — a chance to change the way we do business, plan our cities, fuel our homes and factories, and move our goods and ourselves. A low-carbon path beckons — a path that can create jobs and improve public health while safeguarding the environment.”
It’s not just international financial institutions, it’s also international military institutions: NATO has also been concerned about the impacts of climate change for years.