An innovative G20 interpretation of the rules of the International Monetary Fund (IMF) may be required to finance global environmental public goods, according to a new commentary by Barry Carin, a senior fellow at The Centre for International Governance Innovation (CIGI), which is an independent, non-partisan think tank on international governance.
In Financing Climate Change – Untying the Gordian Knot, Carin suggests the G20 promote the use of Special Drawing Rights (SDRs) — an international reserve asset created by the IMF — for financing measures to mitigate climate change or create other global public goods. Barry Carin is a senior fellow at CIGI and adjunct professor and former associate director of the Centre for Global Studies at the University of Victoria in the School of Public Administration. From 2006 through 2009, he was editor of the journal Global Governance. Prior to joining CIGI, Barry served as high commissioner of Canada to Singapore and as assistant deputy minister of trade and economic policy in the Department of Foreign Affairs and International Trade.
“The G20 could lead the way and promote the use of SDRs for financing climate change…and encourage the IMF to do so,” Carin writes. “If the members holding 85 percent of the IMF’s shares agree, then an allocation designated for climate funds could be agreed to be consistent with a long-term global need to supplement existing reserve assets. The G20 themselves account for over 75 percent of the voting shares, and, if agreed amongst themselves, would have little difficulty marshaling the necessary support.”
Carin cites a 2010 IMF staff position note, Financing the Response to Climate Change, suggesting that SDRs could be “invested” as equity stakes in a climate fund, with an arrangement among shareholders to liquidate equity stakes only when needed. The SDRs could then “be deemed to be an exchange of reserve assets without an upfront budgetary cost for the contributors.”
Article appearing courtesy Celsias.