The managing director of the International Monetary Fund has announced that his staff are working on a ‘Green Fund’ that has the potential to raise $100bn per year by 2020.
During a speech in Nairobi, Kenya, which focused on Africa’s need to rebuild following the global economic crisis, Dominique Strauss-Kahn said the fund would help with climate change adaptation and mitigation in developing countries.
Mr Strauss-Kahn called upon the international community to marshal the resources needed to help low-income countries to tackle climate change – an issue he called “the shock to end all shocks.”
“Without action, Africa will suffer more from drought, flooding, food shortages, and disease, possibly provoking further instability and conflict,” he said.
“[While] some may rightly argue that climate change is not in the mandate of the IMF…the amount of resources needed has clear macroeconomic implications, sustainable growth in developing countries will require large-scale, long-term investments for climate change adaptation and mitigation.”
He emphasised that while the IMF did not intend to manage such a fund, it aimed to offer something that “can make a significant contribution to the global debate and for consideration by the international community.”
He acknowledged that launching such a scheme would entail a major political effort but he also said that the “potential pay-off is enormous–for Africa and the world.”
Nicholas Stern, author of what is perhaps the most influential report on the economics of climate change, welcomed MR Strauss-Kahn’s speech.
Lord Stern, chair of the Grantham Research Institute on Climate Change and the Environment at London School of Economics and Political Science, said: “The ‘Green Fund’ is a creative and constructive idea which shows that the International Monetary Fund recognises clearly the very serious risks that climate change creates for future global economic growth and development.
“Both the risks and the necessary response have major macroeconomic implications. As serious as the current economic crisis is, climate change poses an even more profound and fundamental threat to the world if we do not tackle it; as Mr Strauss-Kahn said: “This could well be the shock to end all shocks”.
“As the world attempts in this decade to manage the build-up of debt in many countries and global saving-investment imbalances, we must at the same time embark on a path of radical reductions in global greenhouse gas emissions, and with this new idea, the IMF is rising to a huge and urgent challenge.
“The two great challenges facing the world this century are managing climate change and overcoming poverty. If we fail on one, we will fail on the other.
“Developing countries need significant financial support for their plans to make the transition to low-carbon economic development, and to help them adapt to those impacts of climate change that cannot now be avoided. All countries of the world must both reduce emissions and adapt, but Africa will be hit earliest and hardest.
“A ‘Green Fund’ could raise resources for developing countries quickly and effectively; speed is of the essence as there are great dangers in delay as concentrations of greenhouse gases continue to rise in the atmosphere.”