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SHARM EL-SHEIKH, Egypt — Climate change talks have long been stymied over demands for transfers of billions of dollars — on Monday, French President Emmanuel Macron backed a new push for the conversation to be measured in trillions.
Speaking at the COP27 climate summit in Sharm El-Sheikh, Egypt, Macron gave his support to elements of a plan outlined by Barbados’ Prime Minister Mia Mottley that seeks to overhaul the way climate finance flows to the countries that most need it.
He called for a “huge shock of concessional financing,” suspension of debt for disaster-struck countries and putting the International Monetary Fund (IMF) on notice.
It was a speech that signaled a shift in tone that developing countries have been long been pushing for.
During the first day of official speeches, leader after leader from wealthy countries highlighted the need to demonstrate “solidarity” with developing countries after a year in which calamitous disasters and a bubbling debt crisis helped reshape the often contentious conversation about climate finance.
“It’s the right thing to do,” said U.K. Prime Minister Rishi Sunak.
Money is a central focus of this year’s climate talks given the widening gap between what has been pledged and what is needed. It extends from everything from clean energy transitions to hardening countries’ defenses against climate impacts to potential payments for irreparable climate damages.
In September, Barbados issued the world’s first pandemic and natural disaster bond. “The time has come for the introduction of natural disaster-pandemic clauses in our debt instruments,” Mottley said.
“God forbid, if we are hit tomorrow, we unlock 18 percent of GDP over the next two years, because what we do is effectively put a pause on all of our debt,” she said.
Macron called for the rules of the IMF, the World Bank and other major lenders to be changed to make clauses that halt debt repayments in the event of a disaster far more common.
“What you’re asking of us in terms of debt reimbursement and guarantees, when we are affected by a climate shock, when we are a victim of a climate accident, to some degree, there must be a suspension of those conditions,” said the French president.
While the need for finance to spur the transition to clean energy across the world and guard against the ravages of climate change is already stretching into trillions, the U.N. climate system remains stuck on a broken decade-old promise from rich countries. They pledged to deliver $100 billion a year in climate finance by 2020, but that’s not likely to happen until next year.
As climate impacts have grown more extreme and prolific, appeals for new and more innovative forms of finance have escalated. Ballooning debt in the wake of the pandemic has heightened those calls, with dozens of vulnerable countries threatening a debt strike in the lead-up to COP27.
Mottley has been a champion of elevating the debt crisis facing nations like her own and highlighting how it adds to climate inequities. The plan she outlined in September hinges on debt relief, increased finance, and new mechanisms for post-disaster recovery, like bonds.
The Barbados leader’s call to arms and Macron’s heavyweight backing brought a new reality and scale to the financial discussion.
Mottley has pushed for the IMF’s special drawing rights to be put toward helping climate-vulnerable nations recover and respond to climate impacts. That could be used to help unlock far more money from the private sector — $500 billion from the IMF could result in $5 trillion in investments, she said Monday.
The challenge is getting shareholders in those financial institutions to agree to reforms.
Officials in the U.S., Germany and other major economies have pushed for an overhaul of the way multilateral development banks lend to allow them to extend more climate finance. U.S. Treasury Secretary Janet Yellen has called on the World Bank to draft a roadmap by the end of the year that could then be used to drive reform efforts at other development banks.
On Monday, Macron went further, saying that by next spring, global financial institutions would need to devise ways to “come up with concrete solutions to activate these innovative financing solutions and to help us to provide access to new liquidities.”
He paid tribute to Mottley’s “force of character” and said the two leaders — one who commands an economy 600 times larger than the other — had agreed to form a group of “wise minds” to develop suggestions for the overhaul of the international financial system.
But one Mottley suggestion that Macron swerved was her call for fossil fuel companies to pay a levy on their profits into a fund for disaster-hit countries.
“How do companies make $200 billion in profits in the last three months and not expect to contribute at least 10 cents on every dollar of profit to a loss and damage fund?” she asked.