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Climate change crisis and COP27

COP27 – 27th Conference of the Parties to the United Nations Framework Convention on Climate Change – which will be held from November 6-18, in Sharm el-Sheikh (Egypt), could not have come at a much more urgent time for tackling climate change crisis as developing countries like Pakistan – that perhaps is going through the gravest manifestation of this crisis in the shape of catastrophic floods – need appropriate level of climate finance, and more forthcoming policies on reducing fossil fuel usage by developed countries.

COP26 meetings held around a year ago in Glasgow (the United Kingdom) were well short in terms of commitments by significant contributing countries against the pace needed to move towards a net-zero carbon usage milestone, in turn, necessary for limiting the average global temperatures below the much-needed level of 1.5 degrees centigrade so as to avoid the situation of irreversible impact of climate change crisis.

An important challenge in this regard remains over the years, and that is for developed countries to at least come true on their $100 billion annual commitment as climate finance to developing countries. Having said that, in the wake of the pandemic, global commodity supply shock, tight monetary policy overall globally, and extreme climate events in many climate-vulnerable countries, developing countries have little fiscal space to make needed productive investments for a more resilient, and disaster-prepared economies, and therefore need much more support.

In this regard, while a release of enhanced special drawing rights (SDRs) allocation of $650 billion by International Monetary Fund (IMF) is urgently needed – and with more appropriate distribution formula than just relying on ‘quota’ – it is also important that an appropriate level of climate-related SDR allocation is provided annually to developing countries that are most vulnerable to climate change crisis.

Similarly, policies that encourage austerity, rather than providing a plan to arrange greater finances, including adopting a non-neoliberal policy agenda that discourages adopting overly-hawkish monetary policy tightening, especially when global inflation currently has significant supply-side imprint. Such reining-in of monetary tightening is also important to check the otherwise fast-appreciating consequences of US dollar, especially in terms of capital flight, debt distress, high cost of borrowing and imported inflation.

Hence, in addition to having a discussion on other thematic areas of climate change crisis, an important agenda item should be how to bring the necessary shift in economic policy mindset, including multilateral institutions like the IMF and World Bank, away from neoliberal and austerity mindset, and in funds’ allocation that support better climate outcomes.

A recent Guardian published article ‘Global health at mercy of fossil fuel addiction, warn scientists’ pointed out a situation contrary to what is being desired in the following words: ‘The analysis reports an increase in heat deaths, hunger and infectious disease as the climate crisis intensifies, while governments continue to give more in subsidies to fossil fuels than to the poorer countries experiencing the impacts of global heating.’

Moreover, on one hand, the IMF continues to emphasize austerity for developing countries when what is actually needed is better financial support to support countries in making much-needed spending to reduce, otherwise fast-rising level of vulnerability, poverty, and inequality, and to allow developing countries to make significant contribution in terms of climate change mitigation and adaptation. On the other hand, however, the record of the World Bank on providing funding that allows better effort in dealing with climate change crisis, has also come into question. A recent article ‘World Bank criticised over climate crisis spending’ published by Guardian pointed out: ‘The World Bank has come under fire for failing to show that its claimed spending on the climate crisis is real, in a report suggesting up to 40% of its reported climate-related spending is impossible to account for. Of $17.2bn that the World Bank reported it spent on climate finance in 2020, up to $7bn cannot be independently verified, according to research by Oxfam.’

Sustainable and green global economy significantly requires bringing in greater regulation and putting in place a trading environment that exhibits greater understanding of the grievances of developing countries and provides them a level playing field. Overall, there is the need to move away from the neoliberal mindset. This shift is also important for much-needed resilient global and local supply chains in the face of climate change crisis, and geo-political tensions like the war in Ukraine. Hence, in addition to focusing on bringing the main contributors to climate change towards a much more aggressive timeline in terms of reducing reliance on fossil fuel usage, and in pushing developed countries to show better performance on their climate finance-related commitments, policymakers should chart out a strategy that reduces policy emphasis on austerity, and neoliberal framework.

A clear ‘strategy’ with challenging ‘missions’ to reach climate change-related objectives, and for reducing vulnerability needs to be the approach that the fast-unfolding climate change crisis requires. This year saw extreme weather events, from heatwaves to floods to hurricanes, among others, and this is on top of the ongoing pandemic, which in turn has strong roots in climate change crisis itself. And all of this is happening while global temperatures are at 1.2 degrees centigrade over the pre-industrial age level—a level which is still below the targeted 1.5 degree centigrade. In addition, an important agenda item should be to create financial support for Pakistan, which has suffered catastrophic flooding that has affected around 33 million people, and has still not received any significant support from rich countries and multilateral institutions.

Hence, given the immense global challenges at hand, not to mention that the war in Ukraine is still going on, to say COP27 holds immense importance would be an understatement. A quick and meaningful policy action needs to emanate from these meetings, given the fact that in addition to other challenges, many parts of the world are under serious threat of famine while a large number of countries are going through a severe energy crisis.

Dr Omer Javed, "Climate change crisis and COP27," Business recorder. 2022-10-28.
Keywords: Economics , Monetary fund , World Bank , Monetary policy , Global health , Sharm-El-Sheikh , Pakistan , United Kingdom , United Nations , Ukraine , IMF , UN , COP

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