Thread by @AvinashPersau15

At #COP26, @miaamormottley led the charge for the scale of climate financing we need, calling for a new allocation of $500 billion per annum in Special Drawing Rights over 20 years.

This thread explains how this fits with other 'asks', especially for developing countries.

First, we must recognise that climate mitigation, adaptation and loss + damage are 3 different things requiring 3 different funding mechanisms for 3 distinct outcomes.

1️⃣ Loss + Damage

A country that has just experienced a loss of 226% of GDP from a hurricane like Dominica in 2017 cannot take on debt to finance loss + damage. They need grants to offset loss + damage that is becoming more frequent + extreme as global warming worsens.

A 1% levy on fossil fuel consumption would finance a Loss + Damage fund initially growing by $70bn annually while further incentivising the shift to renewables. Countries that have suffered a climate-related disaster over 5% of GDP, independently verified, would access this fund

Loss + damage is about a resource transfer from those most able, to those suffering loss and damage today, and in a way that will encourage the energy transition we need. To deny loss and damage financing is to deny climate change.

2️⃣ Adaptation

The frontline of climate change lies between the Tropics of Cancer and Capricorn. That’s where temperature increases and sea levels will be the most arduous first. Countries on the frontline need separate concessionary finance for adaptation now.

The proposed $50B Resilience + Sustainability Trust from @IMFNews can be a blueprint. But the RST must be annual, offer 20 + year funding at SDR rates (near-zero today), and have climate-vulnerability as the critical eligibility. Otherwise it is not additional.

3️⃣ Mitigation

If the global community is serious about halting climate change we need a quantum-sized leap in the amount of concessionary funding available for mitigation.

$500B a year in SDRs is sized to draw in the $2.5trn of annual investment needed to halt climate change.

We propose the annual issuance of SDRs be put into a Climate Finance Trust. Investors can bid to supplement their own funds with on-lent, near-zero-cost funds from the Trust based on how efficiently they can reduce or remove GHGs.

As for the scale of SDRs, $500B is attainable and necessary for 3 reasons: (1) recall it's a mere 2% of how much wealthy countries have engaged in quantitative easing in the past 13 years - $9T of which was just in the last 18 months. We have the ambition; we need the aim.

(2) We have already allocated US$650bn of SDRs today and $290bn in 2009 without adverse consequences.
And (3), the cost of going past the tipping points of 1.5ºC when the glaciers melt will cost 5-7 times more than the investment required today to mitigate it.

This proposal will change valuations, marshalling the private economy to reduce + remove GHGs to the scale required. Existentionalist threats makes you practical. Developing countries do not have the balance sheet for this debt and waiting for grants is waiting in vain.

PM @miaamormottley's call for $500B annually is founded in the reality of the climate crisis and fiscal space on the frontline. Loss + damage, adaptation and mitigation must all be invested fully. Trying to do this with techno-optimism and loose change will not work. Please join.