IMF chief demands end to ‘business as usual’ ahead of COP28

Image credit: IMF

The head of the International Monetary Fund (IMF) has called for an end to “business as usual” ahead of the start of the COP28 climate talks and warned such a route was “not viable” if the world wanted to manage global warming.

Speaking to Reuters as the annual UN event prepares to open in Dubai on Thursday, Kristalina Georgieva said climate-damaging carbon emissions needed to fall between 25 per cent and 50 per cent by 2030 but pledges so far would only lead to a “meagre” 11 per cent cut.

“The most important thing in COP28 is to be clear that the way we are going is not viable and define a level of ambition that is likely to keep a chance for the world to live with temperatures not exceeding 1.5 to 2 degrees Celsius,” she said.

“So that is to my mind the number one priority for this COP, is to recognise that business as usual has to be dropped.”

The 2015 Paris climate accord set a goal of limiting global warming to 1.5 degrees C to 2 degrees C above pre-industrial levels.

Money for vulnerable countries

A key theme of the talks will be what more governments can do to overhaul the world’s multilateral financial system to ensure more money is made available to vulnerable countries already feeling the impacts of more extreme weather events.

Georgieva said efforts to-date – the World Bank, for example, could boost lending by $100bn over a decade – were “very promising, because there is finally a determination to make the whole bigger than the sum of the individual parts”.

One of the flagship efforts so far has been encouraging countries to allow some of their Special Drawing Rights, rainy day foreign exchange reserves that are rarely used, to be on-lent to development banks to help bolster climate finance in developing markets.

In August, the IMF said 29 members had agreed so far, helping provide $55bn for on-lending through its Poverty Reduction and Growth Trust, and $41bn through its Resilience and Sustainability Trust.

In addition, Georgieva said the African Development Bank and the Inter-American Development Bank had proposed using SDRs on-lent to them as hybrid capital that could then be leveraged to expand their landing capacity.

“We have presented this to our board of directors. What we are doing now is to look into the legal and operational modalities. And while it is not yet done, it has some promise.”

Several countries were also considering using their 2021 SDR allocation on a bilateral basis alongside IMF programmes, she added.

IMF pushes for carbon markets and debt

A long time proponent of efforts to better price carbon emissions, Georgieva said the “good news” was more countries were looking at doing so, with the number of jurisdictions adopting such schemes now standing at more than 70.

“It is about creating the incentive for rapid decarbonisation,” she said, adding that the IMF had recently raised its forecast for the average price needed to do this to $85 a ton by 2030, from a previous forecast of $75 a ton.

While the current average price was now around $5 a ton, “clearly there is a long, long, long way to go”, she said, citing a preference for carbon taxes but openness to trading systems, as seen in Europe, or US-style standards and rebates.

In a nod to what is likely to be a major theme at COP28, Georgieva said it was important that whichever method was used included the more-potent methane, and that rich countries paid more, poorer countries less and fragile ones nothing.

With more nations facing debt distress in the wake of rising interest rates, Georgieva said the IMF was working with seven countries on debt restructurings, while a couple more would need help to reduce their debt burden.

To help promote debt sustainability in a world of more frequent climate shocks, the IMF was working to provide “much, much deeper support”, integrating climate into its analysis.

“Can we have KPIs (key performance indicators), on the basis of which a country has a debt restructuring process presented to it. This is ongoing work at the fund,” she said, citing ongoing talks with the World Bank on how it would work.

“We thought that we would move faster on this question, but it’s not actually an easy question to address.”