EU in Last-Ditch Move to Bridge COP26 Climate Finance Gap

(Bloomberg) -- The European Union and Italy are rushing to draft a last-minute climate finance proposal to make good on rich countries’ failed funding promises, and rescue COP26 negotiations.

The plan is to help rich countries deliver next year on their long-missed target of sending $100 billion to developing nations, according to people familiar with the situation. 

The lack of funding has cast a shadow over talks in Glasgow, Scotland and threatens to derail efforts to get an accord to slow global warming. Talks are limping into extra time, with negotiators stuck on the issue of how to tackle the financial injustice that’s at the heart of climate diplomacy.

The idea is to use special drawing rights, an international reserve asset, according to the people, who declined to be named as the plan is still private. SDRs are allocated by the International Monetary Fund and recipient nations can hold them as part of their foreign currency reserves. 

Italian Prime Minister Mario Draghi said earlier this month that in order to boost climate finance, negotiators must “bring together the public and the private sector in new ways” and make sure that all multilateral development banks co-share the risks that the private sector alone cannot bear. 

Draghi and U.K. Prime Minister Boris Johnson, whose countries co-host the climate talks, spoke on Friday, according to a U.K. spokesperson. The leaders agreed that progress is needed on finance, particularly on the $100 billion target, and on more ambitious pledges on emissions, the spokesperson said.

The IMF is also planning a new trust for middle-income and fragile island economies that would provide long-term funding at low interest rates to help weather both the pandemic and climate crises. It could start with about $30 billion and be in place by the time of the fund’s annual meetings next October, Managing Director Kristalina Georgieva said earlier on Friday. 

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