IMF staff float ‘Green Fund’ to help poor countries tackle climate change

A new International Monetary Fund paper proposes a global “Green Fund” to help meet broad climate aid pledges stemming from last year’s Copenhagen climate summit.

The nonbinding accord struck at the summit calls for rich nations to jointly mobilize $100 billion annually in climate aid for developing nations by 2020.

The paper suggests a multinational Green Fund that is initially capitalized with developed countries’ IMF reserve assets called “special drawing rights.” The Green Fund would then issue “green bonds” in capital markets to raise money to help nations battle global warming and adapt to changes.

“By providing a unified resource mobilization framework, with up-front agreement on burden-sharing and the capacity to meet the financing needs identified at Copenhagen, the Green Fund could facilitate progress toward a binding global agreement on reducing greenhouse gas emissions and allow developing countries to begin scaling up their climate change responses without delay,” the paper states.

The staff paper circulated Thursday says a new global mechanism is needed because the traditional avenues of raising aid for developing nations – such as donor conferences – have a “checkered history.” Meanwhile, prospects for raising money through various carbon taxation and trading schemes are uncertain and could take years to scale-up, the paper notes.

But the prospects for the Green Fund seem highly uncertain too – Reuters reports that IMF member countries have thus far rejected the Green Fund framework that IMF Managing Director Dominique Strauss-Kahn has been seeking. That’s why the proposal was released only as a “staff paper," Reuters said. The paper has a disclaimer stating that it doesn't represent the formal view of the IMF or its executive board.