How Biden Can Help Make Global Climate Action More Equitable

(Bloomberg) --  

Joe Biden is making a strong push for climate justice at home. It's less clear how much of that commitment he’ll take to the international stage.

The U.S. president has invited 40 world leaders, including China’s Xi Jinping and Russia’s Vladimir Putin, to the White House later this month to discuss how they can work together to slow global warming. Bloomberg reported that the Biden administration may double its Paris Agreement commitment ahead of the meeting. 

America’s contribution to the global climate agenda goes far beyond its domestic goals, and even beyond the new promises it can coax out of other big emitters. Its influence on the world stage gives it an unparalleled ability to steer the conversation.

Biden committed to delivering environmental justice in the U.S. and overseas in a January executive order. His jobs-and-infrastructure blueprint includes grants and activities to help communities disproportionately burdened by pollution. The U.S. has also reached out to other countries to address making corporate taxes more fair.

In the same way, Biden’s administration needs to pursue big, systemic measures to help poorer countries raise their climate ambitions. This means supporting developing countries by enabling immediate economic relief from Covid-19, improving support for sustainable development, and making the financial architecture more equitable for debtor countries.

There are promising signs of progress on the first count. Treasury Secretary Janet Yellen has expressed support for a new allocation of Special Drawing Rights – the unit of currency at the International Monetary Fund. This would directly boost the balance sheets of many developing countries that were badly hit by the pandemic but can’t access the same financing as wealthy nations. Since then the other G-7 countries have joined Yellen in suggesting that richer countries reallocate their SDRs to emerging countries, and at this week’s Spring Meetings IMF head Kristalina Georgieva said they could be directed not just to the poorest countries, but also to middle income countries that are excluded from emergency relief.

Financial support from developed countries has always been critical to the planet's climate fight, and for some, SDRs won't be enough. The poorest countries have contributed least to global warming, yet they tend to be the most vulnerable to its effects. In 2010, rich countries promised to contribute $100 billion a year to climate finance by 2020. They missed the deadline.

Those funds are more crucial than ever as many poorer nations contend with coronavirus-induced economic shocks. Grenada, the tourism-reliant Caribbean state, said in its November climate pledge that it will require “grants and other concessional finance” to implement the policies. 

Biden’s January executive order also instructs U.S. agencies and top officials to deliver a “climate finance plan." World Resources Institute’s Joe Thwaites has written that this should include resuming and doubling the U.S. contribution to the Green Climate Fund and commencing funding for new multilateral initiatives such as the Adaptation Fund and Least Developed Countries Fund. Ending support for fossil fuel projects via export credit agencies would also be a powerful move, adding to U.K. and European Union commitments and increasing pressure on the few other major financers, such as Japan, to follow suit.

The outlook is bleak for the dozens of countries that have fallen into debt distress since Covid. G-20 finance ministers said Wednesday that a program to provide some relief on debt repayments would end this year, despite developing countries asking for an extension through 2022. A request to include middle-income countries, home to tens of millions of people who’ve fallen out of the middle class and below the poverty line, was also denied. 

The U.S. can’t single-handedly set policies at multilateral forums. There are two particular areas, however, where it can make a difference, along with other major Western powers such as the U.K.

Both were among a handful of countries that opposed the adoption of sovereign debt restructuring principles in 2015. Covid is a perfect demonstration of why such a system is necessary—an unforeseen disaster that wiped out many nations’ abilities to make payments without eating into their social protection and healthcare budgets. 

The second is to bring private creditors to the table in debt relief negotiations. The U.S. and U.K. are home to most of the world’s biggest emerging market debt managers, and to the courts where most sovereign bond contracts are litigated, often to the detriment of debtor countries. The two nations could have some agency in setting more favorable terms. Such reforms are hardly radical; they are supported by officials from the IMF and World Bank, academics, and developing countries themselves.

These measures might require upsetting some local constituencies, but if the world’s biggest economy is back truly in the game, the climate crisis demands it take bolder action.

Kate Mackenzie writes the Stranded Assets column for Bloomberg Green. She advises organizations working to limit climate change to the Paris Agreement goals. Follow her on Twitter: @kmac. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

©2021 Bloomberg L.P.