Speech

Remarks by the Managing Director at COP27's Finance Day Opening Ceremony

November 9, 2022

Ministers, colleagues, and friends.

How many of us were in Glasgow for COP26?

It was just a short year ago.

The weather was gloomy, but the economic outlook was bright: in 2021, we were recovering from COVID, and we finished the year with 6.1 percent global GDP growth.

And then the world changed with dramatic crisis, after crisis. As a result—today—while we have beautiful weather here in Sharm-el-Sheik, the economic outlook is dark.

We must recognize the tremendous suffering of people that is a result of this darkness. We have widespread hunger. We see poverty going up. Energy prices are soaring. And most significantly, we are living through geopolitical fragmentation. At a time when we need each other the most—particularly to address the climate crisis—it is harder to work together.

So, what should we do in this environment?

First, face reality and embrace change.

What is reality? You hear people sharing that we will cut emissions between now and 2030 by 11 percent.

Except that our research shows that to keep the dream of the Paris Agreement alive, we've need to cut emissions by somewhere between 25 and 50 percent.

So, we are falling short.

But we can change—and we do have some wind in our sails due to the renewed focus on energy security. As decision makers – we must be determined to do what it takes. And what it takes is not that expensive.

We ran the numbers, and it would cost between half and one percent of 2030 GDP to make the substantial investments that are required.

And that percentage of 2030 GDP global GDP is a lot – but it is not unaffordable. The alternative is we put humanity at risk.

And we must also be brave and do what is hard. That means recognizing that behavior doesn't change with saying please and having discussions—it changes with incentives.

The best incentive we have for shifting to low emissions activities is to price carbon.

Today, the average global price of carbon is around $5 a ton. If we are to have the incentive that changes investment and consumer behavior, this price must go up to at least $75 a ton by 2030.

I want to praise those who have moved: we now have around 25 percent of emissions covered by a carbon price, and I urge us all to work towards a more extensive coverage.

Adam Smith, the father of economics, said the butcher and the baker don't feed you out of the generosity of their hearts; they feed you out of self-interest. So, we must create a self-interest for decarbonization.

Second, we must work together.

That means public money must work with private money, to make it possible for organizations like those that are represented here – business and financial institutions– to invest. And it means civil society must be a partner to help us do the right thing.

And of course, it is critical is to put the right mechanisms in place for private finance to reach scale.

We have great examples of this can be done—such as de-risking equity investments or compensating private sector for more short-term risk. But we don't yet see it being done at scale.

For example, many investors see currency exchange as a serious obstacle an while there are mechanisms to bring this risk down, the task is to go to scale.

My last point is that we must be efficient in promises and disciplined in delivery. We must all be more disciplined – and that applies to all of us, including the IMF.

At COP last year the Fund promised two things.

We promised to integrate climate mitigation and climate adaptation in our policy discussion with countries – we have done it.

We promised to create a long-term instrument that provides financing on concessional terms to low-income and vulnerable middle-income countries – we have done it.

Soon, $40 billion will be available through the Resilience and Sustainability Trust. Three countries have already crossed the finish line, and more are poised to cross soon.

We are going to hold ourselves accountable on how our funding unlocks the potential for private finance, and how improving the investment planning environment translates into an increase in financing.

And again, I call on you to hold us accountable. This is a critical moment in history.

I want to finish with a thought to all of us decision makers.

I'm sure we all have pictures of our children, our grandchildren.

When you when you feel pressure to not to what is right: please take this picture. Look at that.

This is who we are accountable to. Do the right thing.