## Our Last, Best Chance on

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### Climate risks and targets
- The 2018 IPCC special report Global Warming of 1.5°C highlights risks of warming beyond 1.5°C and the limited time to arrest it.
- Warming of 2°C instead of 1.5°C would:
  - "essentially wipe out all coral reefs on the planet, instead of 70 to 90 percent,"
  - "expose 37 percent of the population, instead of 14 percent, to extreme heat at least once every five years."
- The IPCC’s 2021 report documents rapid acceleration of climate change, "dramatically narrowing the window for limiting global warming from 2°C to 1.5°C" and underscores the imperative to reach net zero emissions by 2050.
- Unchecked climate change could displace "hundreds of millions of people, mostly in the developing world."

### Investment and innovation
- Governments and stakeholders must encourage clean energy and transportation systems, smart development, sustainable land use, wise water management, and a circular industrial economy.
- The world must "increase annual investment by 2 percent of pre-pandemic gross domestic product for this decade and beyond."
- Emerging market and developing economies (other than China) will need an even greater boost given declines in investment and the need to support growth, development goals, and structural change including rapid urbanization.
- The 2020 “Paris Effect” report finds that by 2030, low-carbon solutions could be competitive in sectors accounting for "70 percent of emissions, up from 25 percent today and none five years ago."

### COP26 objectives (as set out for Glasgow)
- Broad-based net zero targets and a credible finance package.
- A collective commitment and road map to accelerate the transition to zero-carbon power and zero-carbon transportation, with ambitious action on carbon pricing, sector policies, phaseout of coal, and support for innovation.
- Support for adaptation and resilience, especially in poor and vulnerable countries, and for protection and rebuilding of natural capital.
- Mobilization of private businesses and finance to support these objectives and channel finance to emerging market and developing economies.

### Policies to accelerate change
- The IMF managing director: by 2030, "we need an average global price of $75 per ton of CO2, way up from today’s $3 per ton."
- Governments and the private sector must:
  - Reinforce carbon pricing with sector-specific policies—regulations, energy efficiency standards, feebates—and phase out coal.
  - Boost public investment in sustainable and resilient infrastructure, including nature-based solutions—restoration of degraded lands and conservation of existing ecosystems—while mitigating the impact on the poor.
  - Promote sustainable use of natural resources with payments for ecosystem services, regulations, reform of agricultural and water subsidies, and incentives for a circular economy.
  - Deploy industrial and other policies to spur climate-friendly innovation—including in digitalization, new materials, life sciences, and production processes—with a focus on coordination and long-term policy planning.
  - Provide information and promote public discussion on social norms and behavior to reduce energy demand and carbon intensity; educate the public about climate risks and early warning and evacuation plans.
  - Align finance with climate objectives—manage financial stability risks posed by climate change; align social and private returns with green investment; mobilize resources for investment, including a major boost to international climate finance; and make monetary and supervisory policies consistent with net-zero-emissions objectives.
  - Develop insurance instruments and social safety nets to mitigate the immediate impact of climate shocks.
  - Foster a just transition with investment in and support for affected workers, businesses, and regions.
  - Integrate sustainability considerations into public financial management and corporate governance; use better models and look beyond gross domestic product when deciding policy priorities and measuring well-being and sustainability.

### Mobilizing climate finance
- Developed economies’ commitment to provide "$100 billion in climate finance by 2020" is foundational to climate action.
- Rich countries should "boost climate finance in 2021–22 and doubling it to $60 billion by 2025."
- Urgent need to improve quality of climate finance by:
  - Boosting grants from their present low level.
  - Immediately doubling finance for adaptation.
  - Ensuring that at least half of concessional climate finance supports adaptation and resilience objectives.
- Multilateral development banks must "agree[] to triple financing by 2025 from 2018 levels," requiring:
  - An accelerated replenishment this year of IDA,
  - More effective use of development banks’ balance sheets,
  - Enhanced private sector finance mobilization,
  - Accelerated alignment with the Paris Agreement,
  - Proactive capital increases.
- Establishing the Resilience and Sustainability Trust within the IMF could help bolster efforts.
- Use of country platforms promoted by the G20 is another option to increase coordination.
- Alignment efforts underway include the COP26 private finance agenda, the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures, the Network for Greening the Financial System, the Coalition of Finance Ministers for Climate Action, the European Union sustainable finance expert group, and the Group of Twenty working group on sustainable finance.

### From pledges to action: recent signals and stakes
- The UK COP26 presidency priorities: commitment to the net-zero-emissions target; stepping up adaptation and resilience; delivering on the $100 billion climate finance commitment; bolstering and transforming private finance; increasing collaboration.
- The G7 committed at Carbis Bay to:
  - Net zero emissions by 2050,
  - Halving collective emissions over 2010–30,
  - Increasing and improving climate finance by 2025,
  - Conservation or protection of at least 30 percent of the land and oceans by 2030.
- For the first time, the G20 has signaled the need for action on carbon pricing.
- The private sector: a growing number of businesses and major financial institutions have committed to net zero targets and deadlines to take portfolios to net zero.
- The decade ahead is decisive: getting policy right can "usher in a new era of sustainable development"; getting it wrong risks "a lost decade for development" and grave danger for the planet.

*Amar Bhattacharya and Nicholas Stern, FINANCE & DEVELOPMENT, September 2021.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2021/september/bhattacharya-stern-cop26-climate-issue.pdf_