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CHARLESHEICH, Egypt — Climate change talks have long been stalled by demands to transfer billions of dollars — French President Emmanuel Macron on Monday backed a new initiative to scale the talks to trillions.
Speaking at the COP27 climate summit in Sharm el-Sheikh, Egypt, Macron voiced support for elements of a plan outlined by Barbados Prime Minister Mia Mottley to overhaul the way climate finance goes to the countries most in need.
He called for a “massive shock of concessional financing”, a freeze on debt to disaster-stricken countries and a warning to the International Monetary Fund (IMF).
It was a speech that signaled a shift in tone that developing countries have long sought.
In the first day of official speeches, leader after leader from rich nations stressed the need to show “solidarity” with developing countries after a year in which devastating disasters and a bubbling debt crisis helped reshape the often contentious climate change conversation.
“It’s the right thing to do,” said UK Prime Minister Rishi Sunak.
Money is a key focus of this year’s climate change talks, given the widening gap between what is promised and what is needed. This applies to everything from the transition to clean energy, to strengthening 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 and pandemic clauses into our debt instruments,” Motley said.
“God forbid, if we get hit tomorrow, we’ll be shutting down 18 percent of GDP over the next two years, because what we’re doing is effectively stopping all of our debt,” she said.
Macron called for changes to the rules of the IMF, the World Bank and other major lenders to make clauses that suspend repayment of debts in the event of a disaster are much more common.
“What you ask of us in terms of debt repayment and guarantees when we are affected by a climate shock, when we are victims of a climate accident, must to some extent stop the fulfillment of these conditions,” said the French president.
While funding needs to fuel the global clean energy transition and protect against the ravages of climate change already run into the trillions, the UN climate system remains stuck on a decade-old pledge by rich nations. They committed to $100 billion in funding a year by 2020, but that likely won’t happen until next year.
As climate impacts have become more extreme and fruitful, calls for new and more innovative forms of financing have grown. Rising debt due to the pandemic has intensified these calls, with dozens of vulnerable countries facing a debt strike ahead of COP27.
Motley has been a champion of raising the debt crisis facing countries like hers and highlighting how it is increasing climate inequality. The plan she outlined in September is based on debt relief, increased funding and new mechanisms for post-disaster recovery, such as bonds.
The Barbadian leader’s call to arms and Macron’s heavyweight backing brought new reality and dimension to the financial debate.
Motley has pushed for the IMF’s special drawing rights to be used to help climate-vulnerable countries recover and respond to climate impacts. It could be used to help bring in much more money from the private sector — $500 billion of the $5 trillion could be invested by the IMF, she said Monday.
The challenge is to get the shareholders of these financial institutions to agree to the reforms.
Officials in the US, Germany and other major economies have pushed for a review of multilateral development bank lending to allow them to increase climate finance. US Treasury Secretary Janet Yellen has called on the World Bank to develop a roadmap by the end of the year, which could then be used to guide reforms at other development banks.
On Monday, Macron went further, saying that by next spring, the world’s financial institutions will have to figure out ways to “come up with concrete solutions to activate these innovative financing solutions and help us to have access to new liquidity.”
He paid tribute to Motley’s “strength of character” and said the two leaders, one of whom presides over an economy 600 times the size of the other, had agreed to form a group of “smart minds” to come up with proposals for overhauling the international financial system. .
But one of Motley’s suggestions that Macron rejected was her call for fossil fuel companies to pay a levy of profits into a fund for disaster-stricken countries.
“How do companies make $200 billion in profits over the last three months and not set aside at least 10 cents for every dollar of profit in the loss and damage fund?” she asked.