It is now generally agreed that developed countries will have to make a substantial financial contribution to enable the developing world to deal with climate change. Funds are needed to invest in new low-carbon energy sources, reforestation and protection of rain forests, land-use changes and adaptation and mitigation. But there is no similar agreement on where the money will come from.
The developed countries are reluctant to make additional financial commitments. They have just experienced a significant jump in their national debts, and they still need to stimulate their domestic economies. This colors their attitudes. It looks like they will be able to cobble together a “fast-start” fund of US$10 billion a year for the next few years, but more does not fit into their national budgets. This is unlikely to satisfy the developing countries.
I believe that this amount could be at least doubled and assured for a longer time span. Developed countries’ governments are laboring under the misapprehension that funding must come from their national budgets. But that is not the case. They have the money already. It is lying idle in their reserve accounts at the IMF. Spending it would not add to any country’s fiscal deficit. All they need to do is to tap into it.
In September, the IMF distributed to its members US$283 billion in Special Drawing Rights (SDRs), an arcane financial instrument but one that essentially constitutes additional foreign exchange. They can be used only by converting them into one of four currencies, at which point they begin to carry interest at those currencies’ combined treasury-bill rate. At present, the interest rate is less than 0.5 percent.
Of the US$283 billion in recently distributed SDRs, more than US$150 billion went to the 15 largest developed economies. These SDRs will sit largely untouched in the reserve accounts of these countries, which don’t really need any additional reserves.
I propose that the developed countries — in addition to establishing a fast-start fund of US$10 billion a year — band together and lend US$100 billion worth of these SDRs for 25 years to a special green fund serving the developing world. The fund would jump-start forestry, land-use and agricultural projects — areas that offer the greatest scope for reducing or mitigating carbon emissions and that could produce substantial returns from carbon markets.
The returns such projects could generate go beyond addressing carbon emissions. Returns from land-use projects, for example, could also include the potential to create more sustainable rural livelihoods, enable higher and more resilient agricultural yields and generate rural employment.
This is a simple and practical idea, and there is a precedent for it. The UK and France each recently lent US$2 billion in SDRs to a special fund at the IMF to support concessionary lending to the poorest countries. At that point, the IMF assumed responsibility for the principal and interest on the SDRs. The same could be done in this case.
I further propose that member countries agree to use the IMF’s gold reserves to guarantee the interest payments and repayment of the principal. The IMF owns a lot of gold — more than 100 million ounces — and it is on the books at historical cost. Thus, at current market prices, it is worth more than US$100 billion over its book value. It has already been designated to be used for the benefit of the least developed countries. The proposed green fund would meet this requirement.
This means that the developed countries that lend the SDRs would incur no interest expense and no responsibility for repayment. There are some serious technical problems involved in offsetting the interest income against the interest expense, particularly in the US, but the net effect would be a wash. These technical difficulties stood in the way of previous attempts to put the SDRs to practical use, but they do not apply to the proposed green fund.
There are three powerful arguments in favor of this proposal. First, the green fund could be self-financing or even profitable; very little of the IMF’s gold, if any, would actually be used.
Second, the projects will earn a return only if developed countries cooperate in setting up the right type of carbon markets. Establishing a green fund would be an implicit pledge to do so by putting the gold reserves of the IMF at risk.
Finally, this money would be available now, jump-starting carbon-saving projects.
For all these reasons, the developing countries ought to embrace my proposal. The key point is that it is possible to increase substantially the amount available to fight global warming in the developing world by using the existing allocations of SDRs, with interest payments on them guaranteed by the IMF’s gold reserves.
All that is lacking is the political will. The mere fact that tapping SDRs requires congressional approval in the US ensures that nothing will happen without public pressure — including pressure from developing countries. Yet it could make the difference between success and failure in Copenhagen.
George Soros is chairman of Soros Fund Management and of the Open Society Institute.
COPYRIGHT: PROJECT SYNDICATE
There are moments in history when America has turned its back on its principles and withdrawn from past commitments in service of higher goals. For example, US-Soviet Cold War competition compelled America to make a range of deals with unsavory and undemocratic figures across Latin America and Africa in service of geostrategic aims. The United States overlooked mass atrocities against the Bengali population in modern-day Bangladesh in the early 1970s in service of its tilt toward Pakistan, a relationship the Nixon administration deemed critical to its larger aims in developing relations with China. Then, of course, America switched diplomatic recognition
The international women’s soccer match between Taiwan and New Zealand at the Kaohsiung Nanzih Football Stadium, scheduled for Tuesday last week, was canceled at the last minute amid safety concerns over poor field conditions raised by the visiting team. The Football Ferns, as New Zealand’s women’s soccer team are known, had arrived in Taiwan one week earlier to prepare and soon raised their concerns. Efforts were made to improve the field, but the replacement patches of grass could not grow fast enough. The Football Ferns canceled the closed-door training match and then days later, the main event against Team Taiwan. The safety
The National Immigration Agency on Tuesday said it had notified some naturalized citizens from China that they still had to renounce their People’s Republic of China (PRC) citizenship. They must provide proof that they have canceled their household registration in China within three months of the receipt of the notice. If they do not, the agency said it would cancel their household registration in Taiwan. Chinese are required to give up their PRC citizenship and household registration to become Republic of China (ROC) nationals, Mainland Affairs Council Minister Chiu Chui-cheng (邱垂正) said. He was referring to Article 9-1 of the Act
Strategic thinker Carl von Clausewitz has said that “war is politics by other means,” while investment guru Warren Buffett has said that “tariffs are an act of war.” Both aphorisms apply to China, which has long been engaged in a multifront political, economic and informational war against the US and the rest of the West. Kinetically also, China has launched the early stages of actual global conflict with its threats and aggressive moves against Taiwan, the Philippines and Japan, and its support for North Korea’s reckless actions against South Korea that could reignite the Korean War. Former US presidents Barack Obama
RSS