will we do whatever it takes to tackle
climate change I come at this question
not as a green campaigner in fact I
confess to being rather hopeless at
recycling I committed as a professional
observer of financial policymaking and
someone that wonders how history will
judge us one day this ring that belonged
to my grandfather will pass to my son
Charlie and I wonder what his generation
and perhaps the one that follows will
make of the two lives this ring has
worked my grandfather was a coal miner
in his time burning fossil fuels for
energy and for allowing economies to
develop was accepted we know now that
that is not the case because of the
greenhouse gases that coal produces but
today I fear it's the industry in which
I work in that will be judged more
harshly because of its impact on the
climate more harshly than my
grandfather's industry even I workhorse
in the banking industry which will be
remembered for its crisis in 2008 a
crisis that diverted the attention and
finances of governments away from some
really really important promises like
promises made at the Copenhagen climate
summit in 2009 to mobilize a hundred
billion dollars a year to help
developing countries move away from
burning fossil fuels and transition to
using cleaner energy that promise is
already in jeopardy and that's a real
problem because that transition to
cleaner energy needs to happen sooner
rather than later firstly because
greenhouse gases once released stay in
the atmosphere for decades
and secondly if a developing economy
builds its power grid around fossil
fuels today it's going to be way more
costly to change later on so for the
climate history may judge that the
banking crisis happened at just the
wrong time the story need not be this
gloomy though three years ago I argued
that governments could use the tools
deployed to save the financial system to
meet other global challenges and these
arguments are getting stronger not
weaker with time let's take a brief
reminder of what those tools look like
when the financial crisis hit in 2008
the central banks of the US and UK began
buying bonds issued by their own
governments and a policy known as
quantitive easing depending on what
happens to those bonds when they mature
this is money printing by another name
and boy did they print the US alone
created four trillion dollars worth of
its own currency this was not done in
isolation in a remarkable act of
cooperation 188 countries that make up
the International Monetary Fund the IMF
agreed to issue two hundred and fifty
billion dollars worth of their own
currency the Special Drawing right to
boost reserves around the world when the
financial crisis moved to Europe the
European Central Bank President Mario
Draghi promised to do whatever it takes
and they did the Bank of Japan repeated
those words that exact same commitment
to do whatever it takes to reflect their
economy in both cases whatever it takes
meant trillions of dollars more in money
printing policies that continue today
what this shows is that when faced with
some
global challenges policymakers are able
to act collectively with urgency and run
the risks of unconventional policies
like money printing so let's go back to
that original question can we print
money for climate finance so three years
ago the idea of using money in this way
was something of a taboo once you break
down and dismantle the idea that money
is a finite resource governments can
quickly get overwhelmed by demands from
their people to print more and more
money for other causes education health
care welfare even defense and there are
some truly terrible historical examples
of money printing uncontrolled money
printing leading to hyperinflation think
Weimar Republic in 1930 same bar way
more recently in 2008 when the prices of
basic goods like bread are doubling
every day but but but but but but not
every money printing policy is the same
each day there is stronger and stronger
counterpoint examples to those bad
outcomes namely that central bank's
printing money but operating within
their mandated rules the policy can work
six years on since the financial crisis
inflation in those countries that did
the printing it isn't just absent it's
laughing and the fact that a
conservative institution like the
European Central Bank which was
originally sceptical of the policy has
actually begun to implement it this year
in 2015 shows the policy's growing
acceptance all of this is moving the
public debate forward so much so that
money printing for the people
is now discussed openly in the financial
media and even in some political
manifestos but it's important the debate
doesn't stop here with printing national
currencies because climate change is a
shared global problem there are some
really compelling reasons why we should
be printing that international currency
that's issued by the IMF to fund it the
Special Drawing right or SDR is the IMS
electronic unit of account that
governments use to transfer funds
amongst each other think of it as a
peer-to-peer payment network like
Bitcoin but for governments and it's
truly global each of the hundred and
eighty-eight members of the IMF hold SDR
quotas as part of their foreign exchange
reserves these are national stores of
wealth that countries keep to protect
themselves against currency crises and
that global nature is why at the height
of the financial crisis in 2009 the IMF
issued those extra two hundred and fifty
billion dollars because it served as a
collective global action that
safeguarded countries large and small in
one fell swoop but here here's the
intriguing part more than half of those
extra SDR that were printed in two
thousand nine hundred and fifty billion
dollars worth went to developed market
countries who for the most part have a
modest need for these foreign exchange
reserves because they have flexible
exchange rates so those extra reserves
that were printed in 2009 in the end for
developed market countries at least
weren't really needed and they remain
unused today so here's an idea there's a
first step
why don't we start spending those unused
those extra STRs that were printed in
2009 to combat climate change they could
for example be used to buy bonds issued
by the UN's Green Climate Fund this was
a fund designed to channel funds towards
developing countries to meet their
climate projects it's been one of the
most successful funds of its type
raising almost ten billion dollars but
if we use those extra STRs that were
issued it helps governments get back on
track to meet that promise of a hundred
billion dollars a year that was derailed
by the financial crisis it could also
can also serve as a test case if the
inflationary consequences of using scr's
in this way are benign it could be used
to justify the additional extra issuance
vest yars say every five years again
with the commitment that developed
market countries would direct their
share of the new reserves to the Green
Climate Fund printing in the
International money in this way has
several advantages over printing
national currencies the first is it's
really easy to argue that spending money
to mitigate climate change benefits
everyone
no one section of society benefits from
the printing press over another that
problem of competing claims is mitigated
it's also fair to say but because it
takes so many countries to agree to
issue these extra STRs it's highly
unlikely that money printing would get
out of control what you end up with is a
collective global action aimed and it's
a controlled global action aimed at a
global good and as we've learned with
the money printing schemes whatever
concerns we have can be allayed by rules
so for example the issuance of these
extra sdrs every five years
could be capped such that this
international currency is never more
than five percent of global foreign
exchange reserves that's important
because it would relay let's say that
ridiculous concerns that the u.s. might
have that the SDR could ever challenge
the dollars dominant role in the
international finance and in fact I
think the only thing that the SDR would
likely steal from the dollar under this
scheme as its nicknamed the greenback
because even with that cap in place the
IMF could have followed up its issuance
its massive issuance of STRs in 2009
with a further 200 billion dollars of
STRs in 2014 so hypothetically that
would mean that developed countries
could have contributed up to 300 billion
dollars worth of SDR so the Green
Climate Fund that's 30 times what it has
today and you know what as spectacular
as that sounds it's only just beginning
to look like whatever it takes and just
to think what amazing things could be
done with that money consider this in
2009 Norway promised 1 billion dollars
of its reserves to Brazil if they
followed through on their goals on
deforestation that program has since
delivered a 70% reduction in
deforestation in the past decade that's
saving 3.2 billion tons of carbon
dioxide emissions which is the
equivalent of taking all American cars
off the roads to three whole years so
what could we do with 300 other
pay-for-performance
climate projects like that organized on
a global scale we could take cars off
the roads for a generation so
let's not quibble about whether we can
afford to fund climate change the real
question is do we care enough about
future generations
to take the very same policy risks we
took to save the financial system after
all we could do it we did do it and we
are doing it today
we must must must do whatever it takes