WEBVTT 00:00:01.270 --> 00:00:05.928 Will we do whatever it takes to tackle climate change? NOTE Paragraph 00:00:07.393 --> 00:00:10.366 I come at this question not as a green campaigner, 00:00:10.390 --> 00:00:12.985 in fact, I confess to be rather hopeless at recycling. 00:00:13.404 --> 00:00:18.669 I come at it as a professional observer of financial policy making 00:00:18.693 --> 00:00:23.450 and someone that wonders how history will judge us. NOTE Paragraph 00:00:24.353 --> 00:00:25.609 One day, 00:00:25.633 --> 00:00:29.498 this ring that belonged to my grandfather 00:00:29.522 --> 00:00:31.529 will pass to my son, Charlie. 00:00:32.021 --> 00:00:34.829 And I wonder what his generation 00:00:34.853 --> 00:00:37.159 and perhaps the one that follows 00:00:37.183 --> 00:00:42.021 will make of the two lives this ring has worked. NOTE Paragraph 00:00:42.995 --> 00:00:45.518 My grandfather was a coal miner. 00:00:46.500 --> 00:00:47.677 In his time, 00:00:48.616 --> 00:00:53.585 burning fossil fuels for energy and for allowing economies to develop 00:00:53.609 --> 00:00:54.766 was accepted. 00:00:55.198 --> 00:00:58.577 We know now that that is not the case 00:00:58.601 --> 00:01:01.983 because of the greenhouse gases that coal produces. 00:01:03.315 --> 00:01:04.532 But today, 00:01:04.556 --> 00:01:08.602 I fear it's the industry in which I work that will be judged more harshly 00:01:08.626 --> 00:01:10.662 because of its impact on the climate -- 00:01:11.498 --> 00:01:13.845 more harshly than my grandfather's industry, even. NOTE Paragraph 00:01:14.202 --> 00:01:16.888 I work, of course, in the banking industry, 00:01:16.912 --> 00:01:20.704 which will be remembered for its crisis in 2008 -- 00:01:21.831 --> 00:01:26.722 a crisis that diverted the attention and finances of governments 00:01:26.746 --> 00:01:32.127 away from some really, really important promises, 00:01:32.151 --> 00:01:37.291 like promises made at the Copenhagen Climate Summit in 2009 00:01:37.315 --> 00:01:40.147 to mobilize 100 billion dollars a year 00:01:40.171 --> 00:01:44.685 to help developing countries move away from burning fossil fuels 00:01:44.709 --> 00:01:47.688 and transition to using cleaner energy. 00:01:48.396 --> 00:01:51.391 That promise is already in jeopardy. 00:01:51.904 --> 00:01:53.769 And that's a real problem, 00:01:53.793 --> 00:01:56.534 because that transition to cleaner energy needs to happen 00:01:56.558 --> 00:01:58.470 sooner rather than later. NOTE Paragraph 00:01:59.184 --> 00:02:00.340 Firstly, 00:02:00.364 --> 00:02:02.342 because greenhouse gases, once released, 00:02:02.366 --> 00:02:05.059 stay in the atmosphere for decades. 00:02:05.083 --> 00:02:06.271 And secondly, 00:02:06.295 --> 00:02:12.122 if a developing economy builds its power grid around fossil fuels today, 00:02:12.146 --> 00:02:15.299 it's going to be way more costly to change later on. 00:02:16.316 --> 00:02:18.462 So for the climate, 00:02:18.486 --> 00:02:22.312 history may judge that the banking crisis happened 00:02:22.336 --> 00:02:24.315 at just the wrong time. 00:02:24.920 --> 00:02:28.608 The story need not be this gloomy, though. NOTE Paragraph 00:02:29.669 --> 00:02:31.577 Three years ago, 00:02:31.601 --> 00:02:34.497 I argued that governments could use the tools 00:02:34.521 --> 00:02:37.206 deployed to save the financial system 00:02:37.230 --> 00:02:39.118 to meet other global challenges. 00:02:39.918 --> 00:02:45.041 And these arguments are getting stronger, not weaker, with time. 00:02:46.334 --> 00:02:50.746 Let's take a brief reminder of what those tools looked like. NOTE Paragraph 00:02:51.578 --> 00:02:54.565 When the financial crisis hit in 2008, 00:02:54.589 --> 00:02:57.166 the central banks of the US and UK 00:02:57.190 --> 00:03:00.625 began buying bonds issued by their own governments 00:03:00.649 --> 00:03:02.948 in a policy known as "quantitative easing." 00:03:03.385 --> 00:03:07.095 Depending on what happens to those bonds when they mature, 00:03:07.119 --> 00:03:09.529 this is money printing by another name. 00:03:10.350 --> 00:03:12.254 And boy, did they print. 00:03:12.784 --> 00:03:17.352 The US alone created four trillion dollars' worth of its own currency. 00:03:17.376 --> 00:03:19.465 This was not done in isolation. 00:03:19.489 --> 00:03:22.163 In a remarkable act of cooperation, 00:03:22.187 --> 00:03:26.760 the 188 countries that make up the International Monetary Fund, the IMF, 00:03:26.784 --> 00:03:30.953 agreed to issue 250 billion dollars' worth of their own currency -- 00:03:30.977 --> 00:03:33.049 the Special Drawing Right -- 00:03:33.073 --> 00:03:35.046 to boost reserves around the world. NOTE Paragraph 00:03:35.712 --> 00:03:38.263 When the financial crisis moved to Europe, 00:03:39.626 --> 00:03:43.067 the European Central Bank President, Mario Draghi, 00:03:43.091 --> 00:03:45.855 promised "to do whatever it takes." 00:03:47.516 --> 00:03:48.768 And they did. 00:03:49.696 --> 00:03:54.050 The Bank of Japan repeated those words -- that exact same commitment -- 00:03:54.074 --> 00:03:58.185 to do "whatever it takes" to reflate their economy. 00:03:59.484 --> 00:04:01.376 In both cases, 00:04:01.400 --> 00:04:05.639 "whatever it takes" meant trillions of dollars more 00:04:05.663 --> 00:04:08.891 in money-printing policies that continue today. 00:04:09.334 --> 00:04:11.122 What this shows 00:04:11.146 --> 00:04:14.912 is that when faced with some global challenges, 00:04:16.062 --> 00:04:20.707 policy makers are able to act collectively, with urgency, 00:04:20.731 --> 00:04:26.861 and run the risks of unconventional policies like money printing. NOTE Paragraph 00:04:27.509 --> 00:04:31.560 So, let's go back to that original question: 00:04:33.511 --> 00:04:36.355 Can we print money for climate finance? 00:04:37.201 --> 00:04:38.931 Three years ago, 00:04:38.955 --> 00:04:42.690 the idea of using money in this way was something of a taboo. 00:04:42.714 --> 00:04:45.890 Once you break down and dismantle the idea 00:04:45.914 --> 00:04:47.953 that money is a finite resource, 00:04:48.580 --> 00:04:53.063 governments can quickly get overwhelmed by demands from their people 00:04:53.087 --> 00:04:56.313 to print more and more money for other causes: 00:04:56.337 --> 00:04:58.337 education, health care, welfare -- 00:04:58.361 --> 00:04:59.591 even defense. NOTE Paragraph 00:05:00.384 --> 00:05:05.822 And there are some truly terrible historical examples of money printing -- 00:05:05.846 --> 00:05:08.169 uncontrolled money printing -- 00:05:08.193 --> 00:05:09.938 leading to hyperinflation. 00:05:10.764 --> 00:05:14.350 Think: Weimar Republic in 1930; 00:05:14.374 --> 00:05:17.447 Zimbabwe more recently, in 2008, 00:05:17.471 --> 00:05:21.535 when the prices of basic goods like bread are doubling every day. 00:05:22.892 --> 00:05:27.896 But all of this is moving the public debate forward, 00:05:27.920 --> 00:05:33.248 so much so, that money printing for the people is now discussed openly 00:05:33.272 --> 00:05:37.486 in the financial media, and even in some political manifestos. NOTE Paragraph 00:05:38.203 --> 00:05:40.742 But it's important the debate doesn't stop here, 00:05:40.766 --> 00:05:42.949 with printing national currencies. 00:05:45.912 --> 00:05:49.851 Because climate change is a shared global problem, 00:05:49.875 --> 00:05:52.945 there are some really compelling reasons 00:05:52.969 --> 00:05:56.398 why we should be printing that international currency 00:05:56.422 --> 00:05:58.280 that's issued by the IMF, 00:05:58.304 --> 00:05:59.535 to fund it. 00:05:59.944 --> 00:06:03.149 The Special Drawing Right, or SDR, 00:06:03.173 --> 00:06:06.529 is the IMF's electronic unit of account 00:06:06.553 --> 00:06:11.105 that governments use to transfer funds amongst each other. 00:06:11.933 --> 00:06:14.674 Think of it as a peer-to-peer payment network, 00:06:14.698 --> 00:06:17.474 like Bitcoin, but for governments. NOTE Paragraph 00:06:18.572 --> 00:06:20.220 And it's truly global. 00:06:21.005 --> 00:06:26.277 Each of the 188 members of the IMF hold SDR quotas 00:06:26.301 --> 00:06:29.043 as part of their foreign exchange reserves. 00:06:29.935 --> 00:06:32.223 These are national stores of wealth 00:06:32.247 --> 00:06:35.678 that countries keep to protect themselves against currency crises. 00:06:36.764 --> 00:06:39.059 And that global nature is why, 00:06:39.083 --> 00:06:42.011 at the height of the financial crisis in 2009, 00:06:43.410 --> 00:06:47.128 the IMF issued those extra 250 billion dollars -- 00:06:47.152 --> 00:06:50.723 because it served as a collective global action 00:06:50.747 --> 00:06:55.554 that safeguarded countries large and small in one fell swoop. NOTE Paragraph 00:06:57.043 --> 00:06:58.339 But here -- 00:06:58.363 --> 00:07:00.029 here's the intriguing part. 00:07:01.083 --> 00:07:06.285 More than half of those extra SDRs that were printed in 2009 -- 00:07:06.309 --> 00:07:08.295 150 billion dollars' worth -- 00:07:08.319 --> 00:07:12.634 went to developed market countries who, for the most part, 00:07:12.658 --> 00:07:15.495 have a modest need for these foreign exchange reserves, 00:07:15.519 --> 00:07:17.950 because they have flexible exchange rates. 00:07:18.427 --> 00:07:22.808 So those extra reserves that were printed in 2009, 00:07:22.832 --> 00:07:26.303 in the end, for developed market countries at least, 00:07:26.327 --> 00:07:27.953 weren't really needed. 00:07:28.508 --> 00:07:30.781 And they remain unused today. NOTE Paragraph 00:07:31.642 --> 00:07:33.002 So here's an idea. 00:07:33.026 --> 00:07:34.398 As a first step, 00:07:35.046 --> 00:07:38.112 why don't we start spending those unused, 00:07:38.136 --> 00:07:41.603 those extra SDRs that were printed in 2009, 00:07:41.627 --> 00:07:43.174 to combat climate change? NOTE Paragraph 00:07:43.948 --> 00:07:45.461 They could, for example, 00:07:45.485 --> 00:07:50.185 be used to buy bonds issued by the UN's Green Climate Fund. 00:07:50.901 --> 00:07:53.797 This was a fund created in 2009, 00:07:53.821 --> 00:07:57.095 following that climate agreement in Copenhagen. 00:07:57.906 --> 00:08:02.262 And it was designed to channel funds towards developing countries 00:08:02.286 --> 00:08:04.353 to meet their climate projects. 00:08:04.377 --> 00:08:07.236 It's been one of the most successful funds of its type, 00:08:07.260 --> 00:08:09.564 raising almost 10 billion dollars. 00:08:09.588 --> 00:08:13.026 But if we use those extra SDRs that were issued, 00:08:13.050 --> 00:08:16.362 it helps governments get back on track, 00:08:16.386 --> 00:08:19.209 to meet that promise of 100 billion dollars a year 00:08:19.233 --> 00:08:21.823 that was derailed by the financial crisis. NOTE Paragraph 00:08:23.766 --> 00:08:25.674 It could also -- 00:08:25.698 --> 00:08:28.344 it could also serve as a test case. 00:08:30.096 --> 00:08:35.455 If the inflationary consequences of using SDRs in this way are benign, 00:08:36.474 --> 00:08:38.429 it could be used to justify 00:08:38.453 --> 00:08:43.187 the additional, extra issuance of SDRs, say, every five years, 00:08:43.211 --> 00:08:45.606 again, with the commitment 00:08:45.630 --> 00:08:50.060 that developed-market countries would direct their share 00:08:50.084 --> 00:08:51.545 of the new reserves 00:08:51.569 --> 00:08:53.362 to the Green Climate Fund. NOTE Paragraph 00:08:55.076 --> 00:08:58.800 Printing international money in this way has several advantages 00:08:58.824 --> 00:09:00.885 over printing national currencies. 00:09:01.500 --> 00:09:04.315 The first is it's really easy to argue 00:09:04.339 --> 00:09:08.756 that spending money to mitigate climate change benefits everyone. 00:09:09.366 --> 00:09:13.225 No one section of society benefits from the printing press over another. 00:09:13.249 --> 00:09:17.033 That problem of competing claims is mitigated. 00:09:17.463 --> 00:09:18.803 It's also fair to say 00:09:18.827 --> 00:09:23.954 that because it takes so many countries to agree to issue these extra SDRs, 00:09:23.978 --> 00:09:28.181 it's highly unlikely that money printing would get out of control. 00:09:28.998 --> 00:09:34.025 What you end up with is a collective, global action 00:09:34.881 --> 00:09:38.212 aimed -- and it's controlled global action -- 00:09:38.236 --> 00:09:40.825 aimed at a global good. 00:09:41.637 --> 00:09:42.845 And, 00:09:42.869 --> 00:09:45.436 as we've learned with the money-printing schemes, 00:09:45.460 --> 00:09:48.292 whatever concerns we have can be allayed by rules. NOTE Paragraph 00:09:48.757 --> 00:09:50.639 So, for example, 00:09:50.663 --> 00:09:55.636 the issuance of these extra SDRs every five years could be capped, 00:09:55.660 --> 00:10:01.255 such that this international currency is never more than five percent 00:10:01.279 --> 00:10:03.241 of global foreign exchange reserves. 00:10:03.781 --> 00:10:05.806 That's important because it would allay 00:10:05.830 --> 00:10:09.726 well, let's say, the ridiculous concerns that the US might have 00:10:09.750 --> 00:10:14.272 that the SDR could ever challenge the dollar's dominant role 00:10:14.296 --> 00:10:15.892 in international finance. 00:10:16.214 --> 00:10:17.997 And in fact, 00:10:18.021 --> 00:10:21.415 I think the only thing that the SDR would likely steal from the dollar 00:10:21.439 --> 00:10:22.908 under this scheme 00:10:22.932 --> 00:10:26.403 is its nickname, the "greenback." 00:10:26.427 --> 00:10:30.343 Because even with that cap in place, 00:10:30.367 --> 00:10:33.831 the IMF could have followed up its issuance -- 00:10:33.855 --> 00:10:36.903 its massive issuance of SDRs in 2009 -- 00:10:36.927 --> 00:10:41.919 with a further 200 billion dollars of SDRs in 2014. NOTE Paragraph 00:10:42.716 --> 00:10:45.050 So hypothetically, 00:10:46.052 --> 00:10:49.170 that would mean that developed countries could have contributed 00:10:49.194 --> 00:10:53.715 up to 300 billion dollars' worth of SDRs 00:10:53.739 --> 00:10:55.389 to the Green Climate Fund. 00:10:56.186 --> 00:10:59.646 That's 30 times what it has today. 00:10:59.670 --> 00:11:00.826 And you know, 00:11:00.850 --> 00:11:02.691 as spectacular as that sounds, 00:11:03.580 --> 00:11:07.770 it's only just beginning to look like "whatever it takes." NOTE Paragraph 00:11:09.129 --> 00:11:12.447 And just to think what amazing things could be done with that money, 00:11:12.471 --> 00:11:13.682 consider this: 00:11:14.618 --> 00:11:16.246 in 2009, 00:11:16.270 --> 00:11:21.008 Norway promised one billion dollars of its reserves to Brazil 00:11:21.032 --> 00:11:25.695 if they followed through on their goals on deforestation. 00:11:26.593 --> 00:11:32.892 That program has since delivered a 70 percent reduction in deforestation 00:11:32.916 --> 00:11:34.327 in the past decade. 00:11:34.926 --> 00:11:39.264 That's saving 3.2 billion tons of carbon dioxide emissions, 00:11:39.288 --> 00:11:43.819 which is the equivalent of taking all American cars off the roads 00:11:43.843 --> 00:11:46.129 for three whole years. 00:11:47.704 --> 00:11:49.006 So what could we do 00:11:49.030 --> 00:11:54.074 with 300 other pay-for-performance climate projects like that, 00:11:54.098 --> 00:11:56.977 organized on a global scale? 00:11:57.937 --> 00:12:00.804 We could take cars off the roads for a generation. NOTE Paragraph 00:12:01.384 --> 00:12:02.534 So, 00:12:03.000 --> 00:12:08.283 let's not quibble about whether we can afford to fund climate change. 00:12:08.877 --> 00:12:11.125 The real question is: 00:12:11.149 --> 00:12:14.546 Do we care enough about future generations 00:12:14.570 --> 00:12:19.611 to take the very same policy risks we took to save the financial system? 00:12:20.223 --> 00:12:21.421 After all, 00:12:22.249 --> 00:12:23.468 we could do it, 00:12:24.284 --> 00:12:25.435 we did do it 00:12:25.459 --> 00:12:27.190 and we are doing it today. NOTE Paragraph 00:12:27.808 --> 00:12:32.126 We must, must, must do "whatever it takes." NOTE Paragraph 00:12:33.426 --> 00:12:34.577 Thank you. NOTE Paragraph 00:12:34.601 --> 00:12:38.967 (Applause)