Last week, the Coalition of Finance Ministers for Climate Action, issued a report, “Better Recovery, Better World”. This report, drafted by the LSE Grantham Institute and the Brookings Institution, with contributions by Coalition members and international organizations spells out how and why finance ministers must align COVID-19 recovery packages with the Paris Agreement and make investments that align with updated climate targets.
While CAN welcomes this report and its recommendations, a disclaimer that “the views expressed, are those of the authors and do not necessarily reflect those of the Coalition or its members” renders it - if not backed by meaningful measures - as yet another example of empty words. CAN calls on Coalition members to subscribe to the principles and actions proposed by the Report by taking concrete actions to address the multiple crises the world is facing. Finance Ministers need to take full ownership of it and investigate how to implement the recommendations in their national context, honoring their responsibility to ensure a safe and healthy future for their societies.
CAN stands with the proposal of making the NDCs a guiding script for injecting financial resources and, at the same time, stepping up ambition in the NDCs in line with the additional financial resources that are to be made available through the global fiscal effort for the recovery.
In the current economic emergency, when lives and jobs are being lost at speed, bailouts of fossil fuel-related industries and high carbon emitters will occur. However, in all cases, these bailouts should come with strings attached to ensure environmental and social benefits are realized. As mentioned in the Report: “Bailout conditions are also timely and helpful in times of crisis when significant numbers of jobs are at stake. They can save jobs and accelerate low-carbon restructuring in ‘brown’ firms/industries'' (p. 32). They should become just transition tools. Preparing the smooth transition that Mark Carney mentions1 to lower the financial stability risk from stranded assets.
The Report makes a clear case for designing a wise investment strategy with a long-term perspective that CAN welcomes:
- Prioritize COVID-19 heavily hit communities.
- Following the NDCs and addressing neglected historical needs on social & human capital, ecosystem conservation among other issues.
- It makes a key point on the need to enhance investment management and governance.
- Focus on green and decent job creation, and small scale and local economy solutions.
- Align budgets – and public policies – with agreed long term SDGs and Paris Agreement goals.
Nobody challenges the report statement: “Action on private finance mobilization, alignment and shifting the financial system will also be key; it will be particularly important to prepare now for ways to unlock private finance” (p.12). Transparency and accountability of financial flows coming to the economic system are of the utmost importance. The undue transfer of public money to the private domain makes up a considerable share of the income inequality issues that prevent societies from developing in an environmentally sustainable, just, fair, and equitable direction.
Global solidarity needs to be at the core of the recovery. COVID-19 has impacted harder on those already the most vulnerable. As the Report mentions “the amount of support that will be needed is potentially huge, with big implications for debt and fiscal positions” (p. 11).
Within societies, the poorest are the most exposed. Most earn their income on a daily basis and need to go to work daily for a living. The majority of developing country governments already face sovereign debt issues and they don’t have the fiscal space to face the looming financial needs the recovery will require.
The Coalition should lead on showing solidarity among its members. A way forward is to work together for debt relief schemes in line with the Paris Agreement prioritizing support for workers and the most vulnerable segments of society. Another aspect of global solidarity is to definitively align MDBs operations with the Paris Agreement in the framework of the SDG, particularly with the original MDB mandate to fight poverty. In this regard, the Report acknowledges the key role that Ministers of Finance play “…as shareholders of the MDBs and the international DFIs, the Coalition can help give impetus to the changes needed to make the overall system more effective” (p.44), a demand the Big Shift2 has been making for some years, as many MDBs still undermine3 the Paris Agreement objectives’ achievement.
A critical topic that is in the Report, but with not the detailed approach it deserves, is to properly assess who will pay the recovery bill. The whole fiscal effort to inject large amounts of financial resources into the economic system will need to be paid at some moment. Financial stability resilience needs to have a clear set of measures on extracting the resources from where they are. In the Report, there are several references to the need for the recovery to address the rising inequality. The link between the source for financing the recovery and fighting inequality makes the case for taxing the richest of the utmost importance. There are many voices4 asking for it and there is an economic case for it. The current income accumulation in a few hands is unsustainable for the economic system's resilience and for the wellbeing of our societies.
Building resilient societies is not only about health – most certainly in the current times, it is also about many other threats that most people are already facing. We need to make a just reboot. The economic system must work for all and for the planet.
CAN couldn’t agree more with the Report statement on page 27: “A key imperative is therefore to strengthen societal resilience in a way that integrates people’s well-being and climate goals”, as we – as a climate CSO movement - have been increasingly sharing objectives with many other social movements. The ultimate objective of climate action is human wellbeing – for all – with full respect to nature, our home.
We note with disappointment, that many Coalition members were part of the G20 Ministers of Finance and Central Banks’ Governors during their Summit, last July 18 & 19 and didn’t raise the need for a green and just recovery, neither made any statement on the imperative for decisive climate action.
Therefore, CAN International, the largest climate NGO network, advocating for climate action, representing more than 1300 members in more than 120 countries calls on the Coalition to:
- Start a collective process for its membership to subscribe to the findings and proposals presented by the Report.
- Engage national stakeholders in national policy processes on enhancing climate ambition in their nationally determined contributions (NDCs) and using NDCs as guidelines for fiscal investments.
- To be transparent and accountable in how public money (taxpayer money) is being used in the economic recovery.
- Take into account gender, indigenous communities, racism, and other critical social issues in building a better world.
- Ministers need to work to ensure that the recovery is beneficial across all dimensions of sustainability and realizes co-benefits where possible. This will use up-front resources most efficiently and may reduce debt burdens going forward.
- Push for a multilateral concerted and applied action for putting the burden of the recovery cost in the wealthier percentile of society, including closing tax havens.
- Make a soundly progressive fiscal reform at the national level. Individual members of the Coalition can benefit from mutual support and sharing of peer experiences.
Background on the Minister of Climate Finance Coalition Report
- The Coalition of Finance Ministers for Climate Action (“the Coalition”) is a group of fifty-two finance ministers, engaged in efforts to address climate change through economic and financial policies according to the six Helsinki Principles. Peer learning and knowledge exchange plays a fundamental part in the Coalition’s success.
- The Coalition published a report with the title: Better Recovery, Better World: Resetting climate action in the aftermath of the COVID-19 pandemic on the 14th of July 2020.
- The report examines the implications of the COVID-19 pandemic crisis on climate policies from the angle of economic policies and offers a set of policy options for Finance Ministers.
- The paper was prepared at the request of the co-chairs of the Coalition of Finance Ministers for Climate Action (‘the Coalition’). The co-chairs “invited Nicholas Stern and Amar Bhattacharya, advisors of the co-chairs, with input from the IMF, the OECD, the WB and WRI, to prepare a paper on the implications of the Coronavirus on recovery and long-term growth strategies from the finance ministers angle.” The paper has benefitted from feedback from Coalition members and other institutional partners. The views expressed, however, are those of the authors and do not necessarily reflect those of the Coalition or its members.