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

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  • Looking for more ways to use exclusive drawing rights
  • Carbon pricing should hit $85/t by 2030, up from $75/t
  • Working with the World Bank on climate-related restructuring

LONDON, Nov 28 (Reuters) – The head of the International Monetary Fund has called for an end to “business as usual” ahead of the COP28 climate talks, warning that such a path is “impossible” if the world wants it. Controlling global warming.

As the United Nations prepares to open in Dubai on Thursday, Kristalina Georgieva told Reuters that climate change must be cut by between 25% and 50% by 2030, but so far they have only pledged to reduce it to a “small” 11%. .

“The most important thing at COP28 is to make it clear that the way we are going is not viable and to define a level of ambition that will make it possible for the world to live within 1.5 to 2 degrees Celsius.” he said.

“So in my mind, the number one priority for this COP is to realize that business as usual has to end.”

In the year The 2015 Paris Climate Agreement set a goal of limiting global warming to 1.5C to 2C above pre-industrial levels.

Money for vulnerable countries

The main theme of the forum is what governments can do to overhaul the global multilateral financial system to make more money available to vulnerable countries that are already affected by extreme weather events.

Georgieva’s efforts to date – for example, the World Bank, can Increase Lending $100 billion over ten years – “It was very promising, because in the end there is a commitment to make the whole greater than the sum of the individual parts”.

One of the main efforts so far has been to encourage countries to support climate finance in developing markets by lending some of their special drawing rights, rarely used rainy day foreign exchange reserves, to development banks.

In August, the IMF said 29 members had so far agreed to lend $55 billion to the lender through the Poverty Reduction and Development Trust and $41 billion through the Resilience and Sustainability Trust.

In addition, Georgieva said, the African Development Bank and the Inter-American Development Bank have proposed to use SDRs loans as hybrid capital, which can then be used to expand their lending capacity.

“We have presented this to the board of directors. What we are doing now is looking at the legal and procedural mechanisms. And while it is not yet complete, it has some promise.”

Several countries were considering using the 2021 SDR allocation bilaterally with IMF programs, he said.

Carbon and debt

A long-time supporter of efforts to improve the price of carbon emissions, Georgieva said the “good news” was that more countries were looking to do so, with the number of jurisdictions adopting such plans now reaching more than 70.

“It’s about creating an incentive for rapid carbon emissions,” she said, adding that the IMF recently raised its forecast to $85 per tonne in the average price needed to achieve this goal by 2030, up from a previous estimate of $75 per tonne.

While the current average price is now around $5 a ton, “there’s certainly a long, long, long way to go,” she said, referring to options for carbon taxes and openness to trading systems like those seen in Europe or the US. Style standards and discounts.

In what could be a major theme at COP28, Georgieva said that whatever mechanism is used, it is important to include more energy-saving methane, and rich countries pay more, poor countries less and nothing for the weaker ones.

At a time when many countries are facing debt problems following the increase in interest rates, Georgieva said that the IMF is working with seven countries on debt restructuring, and a couple of others need help to reduce their debt burden.

The IMF has been working to integrate climate into its analysis to provide “more and deeper support” to promote debt sustainability in a world with frequent climate shocks.

“Can we have KPIs (key performance indicators)? Based on that, a country is presented with a debt restructuring process, which is an ongoing task at the fund,” she said, referring to ongoing discussions with the World Bank on how to do that. work.

“We thought we’d move quickly on this question, but it’s not an easy question to really solve.”

Additional reporting by Andrea Shallal, Mark Jones and David Lauder; Editing by Alex Richardson

Our standards: The Thomson Reuters Trust Principles.

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Simon leads a team that monitors how the financial system and companies are responding to the challenges faced by climate change, biodiversity loss and other environmental, social and governance (ESG) issues, including diversity and inclusion. Contact: +44 (0) 7795 036 759

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