Speech

Remarks by the Managing Director at the First High-Level Ministerial Dialogue on the New Collective Quantified Goal on Climate Finance

November 9, 2022

Dear Colleagues and Friends,

It was the physicist Lord Kelvin who did so much to advance our understanding of heat and energy who said:

“If you cannot measure it, you cannot improve it.”

This applies to climate change, and it applies to climate finance.

Let me make three points.

First, we know the investment needs for climate adaptation and mitigation are very large – far exceeding the $100 billion that advanced economies have committed to provide to developing counties.

But if we don’t know much will be required, we cannot gauge our progress towards delivering it. So, we need better measures of net investment needs, for both mitigation and adaptation.

For mitigation, we need to take account of estimated energy savings and the avoided need for fossil fuel technologies. It would also be useful to come to an agreement on how to measure mitigation efforts across countries and progress towards NDCs.

For adaptation, we need to agree on a shared definition of what constitutes an adaptation measure versus a business-as-usual investment, and we need to agree on how we estimate investment needs.

For example—do we base estimates on ex-ante land management measures to minimize the impact of sea level rise? Or do we use the larger cost associated with ex-post coastal defenses?

Shared standards would make the discussion of adaptation finance more productive and meaningful, without double­-counting or under-counting.

Second, we need a common definition—or at least a shared understanding—of what we consider climate finance, together with an agreed methodology for calculating climate finance provided, mobilized and received.

On this point, I would like to express my full support for the attention recently brought by the co-chairs of the New Collective Quantified Goal on Climate Finance ad hoc work program.

We echo your call for efforts to ensure not only the quantity, but also quality of climate finance, and improved access, predictability, and transparency.

Third, as the international community agrees on a common set of definitions and standards, each country must do their part to accelerate climate finance.

Here, a key step is to implement strong climate policies and frameworks that create an investment environment that directs capital towards low carbon opportunities.

Think of public investments in green infrastructure that facilitate investments by firms and households – such as power grids that accommodate renewables or charging stations for electric vehicles.

Better still are measures that price carbon directly or policies that achieve equivalent outcomes, like feebates or regulations.

As well as reducing emissions, this type of policy can create important revenues to ease the transition – in fact can our analysis shows that $100 billion climate finance would be approximately equal to 15 percent of the revenues generated by a $75 carbon tax in advanced economies.

Let me conclude.

Just like the climate change challenge itself, the underlying issue of measuring climate finance can only be solved by collective action.

No country or institution can do it alone—and you can count on the IMF to step up and play its part. 

As well as putting climate into our surveillance, data and capacity development, we have now launched a lending tool that will aim to  mobilize climate finance.

The Resilience and Sustainability Trust offers financing to support national reforms, particularly those that help cut emissions and boost resilience. Alongside robust macro-fiscal policies, we aim for the RST to help catalyze climate financing from other public sources as well as from the private sector.

This brings me back to our discussion today.

It is through initiatives such as this that we will clearly define climate finance that we will ensure this money is properly counted.

Through fora like the one today, I hope we can promote an informed debate, and through that accelerate climate action.

Thank you.