In a packed theatre in the middle of Lima at the 2015 International Monetary Fund (IMF) and World Bank Group (WBG) Annual Meetings in Peru, Christine Lagarde, Managing Director of the IMF, declares, “The threat is real!” at the flagship conversation on climate change. What does this mean for the global debate on climate change and sustainable finance? According to Lagarde, the days of talking about next steps are numbered. Finance ministers need to go home to their respective countries, set-up a national carbon tax, and eliminate fossil fuel subsidies. The directions were heard loud and clear in the theatre,but will they be heard by the finance ministers deciding these policies?
The financing of sustainable development and global climate governance is an indisputable focus of the meetings this year with numerous IMF/WBG panels tackling the topic. It is unsurprising with the unveiling of the Sustainable Development Goals (SDGs) by the United Nations (UN) that this has moved to the top of the agenda. The SDGs aim to include all elements of development, beyond the traditional international aid commitments, to build sustainable societies through the financing of innovative infrastructure and ultimately a sustainable world. This lofty goal is not without its challenges, yet the urgency of the problems facing the global community and national public safety can no longer be overlooked in the policy development process.
The scale of the threat facing global societies does not appear to be equal to the urgency that policy makers are placing on these financing challenges. Moderator of the panel, Martin Wolf (Chief Economics Reporter for the Financial Times) pressed Lagarde and Jim Yong Kim (President of the WBG) further asking if a $100 billion is enough to finance sustainable infrastructure and mitigate climate change. Kim supported Lagarde’s prescription with a heavy focus on the ambitious national strategies of emerging countries and the importance of sustainable infrastructure. The simplistic model of a national carbon tax feeding revenue into sustainable infrastructure leading to a zero carbon economy was not lost on the audience. Christina Figueres, Executive Secretary of the United Nations Framework on Convention on Climate Change (UNFCCC), tackled some of the unaddressed variables by using the analogy of a multilane highway to explain progress — some countries will be in the fast lane by innovating their cities and infrastructure at a quicker pace due to access to finance and political leadership, while others will be in the slow lane because they lack the financing for their ambitious plans or lack ambitious plans altogether; yet all are heading in the same direction ideally: a zero carbon economy.
So where does this leave us for the 21stConference of Parties (COP21) of the UNFCCC in Paris later this year? Figueres is optimistic that with 146 countries submitting ambitious national strategies to reduce carbon emissions that COP21 will be able to move beyond a conversation on what ought to be done by 2020 and be a forum for action to finance sustainable development. Nicholas Stern, Patel Professor of Economics and Government at LSE, maintained the optimism about COP21; however, emphasized the importance of the next 20 years. Stern argues that carbon taxation is a crucial first step and that building sustainable cities is essential as population in urban centres increases over the next half century. National governments need to move beyond the cycle of panic after a major environmental shock (i.e. Hurricane Sandy) and periods of neglect when no major public safety incident threatens civil society. All panelists agreed national strategies that feed into an overarching global goal of a zero carbon economy is the path forward and all developed and emerging countries will have their own unique path fraught with challenges.
In the case of Canada, the path to a zero carbon economy is beginning at lower levels of governance in place of a national strategy on the financing of sustainable development. CIGI Fellow, Sarah Burch discusses the governance challenges that Canada faces in this area in her most recent policy brief ‘Global Treaty or Subnational Innovation? Canada’s Path Forward on Climate Policy’. Instead of a national strategy on climate policy, subnational innovation and carbon taxation fill the policy gap left in Canada. Through provincial carbon taxation strategies, movement has begun to include sustainable finance in the policy making dialougue. Further steps towards sustainable growth, as addressed by CIGI Senior Fellow, Celine Bak in ‘Growth, Innovation and Trade in Environmental Goods’, will include reporting on global trade in environmental goods. Canada has an opportunity to lead through this inclusion that will be needed for the transition to a low-carbon economy, to help benchmark the shorter- and longer-term impact of policies such as regulation and fiscal stimulus targeted at green growth, as well as innovation, to address climate change.
Whether Canada and other countries at the IMF Annual Meetings listen to Lagarde’s warning and economic prescription is yet to be seen. It remains encouraging that financing sustainable development was a focus at the meetings and will continue to be a focus at the upcoming G20 Antalya summit and at COP21. However, national leadership is a key element to moving these urgent policy issues from discussion to action over the coming months.