Some key discussions and announcements around climate issues are likely at the 2-day summit on financing solutions for global crises, which begins tomorrow
The Summit for a New Global Financing Pact will be hosted in Paris this week from June 22 to June 23. In attendance, there will be 100 heads of state, policymakers, international organisations and members of civil society to evaluate potential financial solutions to the global climate, biodiversity and development crises. The Bridgetown agenda, drawn up by Mia Mottley, the Prime Minister of Barbados, forms the ideological foundation of the summit. It is buttressed by proposals formulated by the Vulnerable Twenty (V20) Group of Ministers of Finance of the Climate Vulnerable Forum and the African group of finance ministers that aim to universalise the global financial system.
At the core of this summit lies the salient objective of “build[ing] a new contract with the North and the South”, as articulated by the French government. Notably, the Global South is well represented in this event, with leaders such as Kenya’s President Ruto and Brazil’s President Lula expected to participate. A pressing issue is whether Global North leaders should prioritise the struggles faced by developing countries caused by factors beyond their control. Despite this, Global South leaders are appearing as serious competitors to spearhead the upcoming negotiations.
In the spotlight are decisions to be made by developed and developing countries on five crucial proposals.
1. Reaching the Special Drawing Rights (SDRs) recycling target
Meeting the $100 billion in SDRs pledged to developing countries is one hopeful possibility. If it is achieved, it will be entirely without the help of the US, which holds the largest share of SDRs. However, fulfilling this commitment is just a minor improvement in the laborious path towards a sustainable future. It raises questions about the forgotten $100 billion climate finance promise, which wealthy countries have repeatedly failed to achieve time after time. Furthermore, a swift step must be immediately taken towards composing a successful plan for fairly redistributing present and future SDR funds.
2. Incentivising private sector investment in a just transition
In developing countries, high cost of capital hinders the private sector from investing in just transition solutions given the high interest rates on investments. In response to this, Avinash Persaud – advisor to the Prime Minister of Barbados and mastermind behind the Bridgetown agenda – proposes the establishment of a foreign exchange guarantee agency involving the collaborative efforts of multilateral development banks (MDBs) and the International Monetary Fund (IMF). This agency can persuade investors by mitigating currency risks and providing the necessary protection for future foreign exchange transactions.
3. Imposing the shipping levy
The proposal to force a universal obligatory levy on greenhouse gas emissions from international shipping, led by the Solomon Islands and Marshall Islands, has been a focal point of recent discussions. While there are indications that the US may resist supporting a mandatory levy – as it did in 2018 – the outcome could still be positively influenced by the strong stance taken by other world leaders, especially considering the summit is being held two weeks before a crucial meeting of the International Maritime Organisation (IMO).
4. Implementing the Debt Pause Clauses
World leaders are poised to endorse the special debt clauses of the Bridgetown agenda, which automatically halt loan repayments for up to two years when a country is struck by a natural disaster or pandemic. While some may argue that this is merely a temporary solution, it has the power to release trillions of dollars for reconstruction and recovery during times of crisis. The UK deserves recognition for being the first developed country to incorporate these clauses into its bonds. It will be revealed later this week whether other countries will follow its footsteps.
5. Reforming processes at World Bank and MDBs
The World Bank and other MDBs have experienced building pressure to reform their practices. With the Paris summit marking Ajay Banga’s inaugural engagement as a US-appointed World Bank president, the summit may witness further progress in the MDB reform process. The MDBs are expected to release their vision statement.
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