President Emmanuel Macron’s Summit for a New Global Financial Pact ended with a downcast response from climate and poverty activists. In the words of one observer, two days of talks in Paris failed to “commit to concrete and ambitious action to make the fossil fuel industry pay”.
In his opening remarks, Macron told delegates: “Policymakers and countries shouldn’t ever have to choose between reducing poverty and protecting the planet.” The summit had aimed to tie down a roadmap for easing the debt burdens for low-income countries while freeing up additional funds for climate financing.
However, climate advocates felt progress made at the gathering fell short of its goals. At least 52 countries are currently in debt distress and activists had hoped for more action at the summit.
Tracy Carty, climate politics expert at Greenpeace International said: “The summit ended with mild recognition of the need for new taxes to pay for climate action and identified a role for the G20 and Cop28 to take them forward. Taxing big polluters should be top of the agenda for these global moments, but rich country governments don’t have to wait to act – they already can and must introduce taxes on big polluters, above all the fossil fuel industry, to pay for loss and damage now.”
There had been hopes for a global tax on the greenhouse gas emissions produced from international shipping, but the French president suggested that not all countries supported the idea. US Treasury Secretary Janet Yellen stopped short of endorsing the tax, but called it “a very constructive suggestion”. The International Maritime Organisation will meet this week to discuss the tax’s potential, but the decision is in the balance.
In the build-up to the summit, the IMF head, Kristalina Georgieva, called for debt-for-climate swaps to help countries restructure their sovereign debt while addressing climate issues. Speaking later at the summit, Georgieva underlined that “without a carbon price, we will be nowhere near the 1.5ºC target”. Reforming the IMF and the World Bank “is at the heart of the Paris summit”, said Macron, and an open letter from world leaders called for delivering a consensus on financial commitments.
The urgency of reforms has picked up momentum since the launch of the Bridgetown Initiative last summer in Barbados. Mia Mottley, prime minister of Barbados, has been the leading voice of the initiative which calls for maximising investments to prevent and respond to climate-related events and pandemics. The initiative proposes measures such as temporarily suspending IMF interest rate surcharges to help reform the international financial architecture.
The summit has delivered on certain aspects of the Bridgetown demands by announcing a pause on poor countries’ debt repayments if hit by climate disaster. The pause is limited exclusively to new loans, however. The UK will also do the same for its existing loans but directed towards only 12 countries in Africa and the Caribbean.
One concrete announcement was made in relation to special drawing rights. The US$100bn target from 2021’s summit was met, while France announced that it would reallocate 40% of its own special drawing rights (SDRs) to strengthen its commitment to international solidarity.
Other commitments made at the summit included Zambia reaching a deal with various creditors such as China to restructure $6.3bn in loans. Senegal also secured an agreement with the EU to support efforts in improving energy access and increasing its share of renewable energy to 40% by 2030.
The Resilience and Sustainability Trust, a mechanism introduced by the IMF to support environmentally-friendly initiatives in developing nations, has surpassed its initial funding objective of $35bn. A sum of $41bn is now accessible, with a significant portion derived from the redistribution of SDRs. In light of this, the IMF has established a fresh target of expanding the trust’s funds to $60bn.
Kenyan president William Ruto proposed a 10-15 year grace period for the country’s US$5bn multilateral debt and an extended loan term of 50 years after noting that many countries in Africa or the global south are paying eight times the interest rate as others, creating a vicious circle. Mottley called for debt cancellation for climate-vulnerable countries, noting that it is necessary for the context of the multiple crises.
At the same time, Macron announced another pledge to create a follow-up mechanism with the African Union for all commitments taken, with a report to be published every six months plus a follow-up meeting in Paris in 2025 to take stock of progress.
Youth activist Greta Thurberg stressed that attention must remain on fossil fuels, saying: “Polluters must pay, and we need to stop fossil financing and rapidly scale up renewable energy. We need to fund losses and damages for those affected by the climate crisis and cancel the debt crisis for countries in the global south, as reparations for historic exploitation and to make a sustainable transition possible for everyone”.
On the sidelines of the summit was the gathering of the Coalition of Finance Ministers for Climate Action. The coalition of the Capacity Creation for Climate Action programme met for a roundtable discussing leveraging capacities for finance ministries, featuring Masyita Crystallin, senior advisor to Indonesia’s Ministry of Finance, and vice president of the World Bank Juergen Voegele. The 15 transformative actions include “building capacities to act, reforming core fiscal and financial policies, and working with others”.
This page was last updated June 27, 2023
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