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SHARM EL-SHEIKH, Egypt — Climate change talks have long been stalled over demands for billions of dollars in transfers — on Monday French President Emmanuel Macron backed a new effort to measure the conversation in trillions.
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 change the way climate finance flows to the countries that need it most , to review.
He called for a “big shock of concessional financing,” debt suspension for disaster-stricken countries and to notify the International Monetary Fund (IMF).
It was a speech that signaled a shift in tone that developing countries have long been pushing for.
During the first day of official speeches, leader after leader of rich countries stressed 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’s the right thing to do,” British Prime Minister Rishi Sunak said.
Money is a central focus of this year’s climate talks given the widening gap between what is promised and what is needed. These range from clean energy transitions to hardening countries’ defenses against climate impacts to potential payments for irreversible climate damage.
In September, Barbados issued the world’s first pandemic and natural disaster bond. “The time has come for the introduction of natural disaster pandemic clauses in our debt instruments,” Mottley said.
“God forbid, if we get hit tomorrow, we unlock 18 percent of GDP over the next two years because what we’re doing is taking a break on all our debt,” she said.
Macron called for the rules of the IMF, the World Bank and other big lenders to be changed to make clauses that stop debt repayments in the event of a much more common disaster.
“What you ask of us in terms of debt repayment and guarantees, when we are affected by a climate shock, when we are a victim of a climate accident, to a certain extent, there must be a suspension of those conditions,” said the French president.
While the need for financing to spur the transition to clean energy around the world and guard against the ravages of climate change already runs into the trillions, the UN climate system remains stuck on a broken decades-old promise from rich countries. They have promised to deliver $100 billion a year in climate finance by 2020, but that is unlikely to happen until next year.
As climate impacts have become more extreme and productive, calls for new and more innovative forms of finance have escalated. Ballooning debt in the wake of the pandemic has intensified these calls, with dozens of vulnerable countries threatening a debt default in the run-up to COP27.
Mottley has been a campaigner to raise the debt crisis facing nations like her own and highlight how it contributes to climate inequalities. The plan she outlined in September hinges on debt relief, increased financing and new mechanisms for post-disaster recovery, such as bonds.
The Barbadian leader’s call to arms and Macron’s heavyweight support brought a new reality and scale to the financial discussion.
Mottley insisted that the IMF’s special drawing rights be used to help climate-vulnerable countries recover and respond to climate impacts. That could be used to help unlock much more money from the private sector — $500 billion from the IMF could lead to $5 trillion in investments, she said Monday.
The challenge is to get shareholders in those 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 called on the World Bank to draw up a road map by the end of the year that could then be used to drive reform efforts at other development banks.
Macron went further on Monday, saying that by next spring global financial institutions will have to come up with ways to “come up with concrete solutions to activate these innovative financing solutions and to help us provide access to new liquidity.”
He paid tribute to 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 “wise minds” to come up with proposals for overhauling the develop international financial system.
But one Mottley proposal that Macron waved off was her call for fossil fuel companies to pay a levy on their profits into a fund for disaster-stricken countries.
“How do companies make $200 billion in profit in the last three months and not expect to contribute at least 10 cents on every dollar of profit to a loss and damage fund?” she asked.