A provocative way to finance the fight against climate change
-
0:01 - 0:06Will we do whatever it takes
to tackle climate change? -
0:07 - 0:10I come at this question
not as a green campaigner, -
0:10 - 0:13in fact, I confess to be rather
hopeless at recycling. -
0:13 - 0:19I come at it as a professional observer
of financial policy making -
0:19 - 0:23and someone that wonders
how history will judge us. -
0:24 - 0:26One day,
-
0:26 - 0:29this ring that belonged to my grandfather
-
0:30 - 0:32will pass to my son, Charlie.
-
0:32 - 0:35And I wonder what his generation
-
0:35 - 0:37and perhaps the one that follows
-
0:37 - 0:42will make of the two lives
this ring has worked. -
0:43 - 0:46My grandfather was a coal miner.
-
0:46 - 0:48In his time,
-
0:49 - 0:54burning fossil fuels for energy
and for allowing economies to develop -
0:54 - 0:55was accepted.
-
0:55 - 0:59We know now that that is not the case
-
0:59 - 1:02because of the greenhouse
gases that coal produces. -
1:03 - 1:05But today,
-
1:05 - 1:09I fear it's the industry in which I work
that will be judged more harshly -
1:09 - 1:11because of its impact on the climate --
-
1:11 - 1:14more harshly than
my grandfather's industry, even. -
1:14 - 1:17I work, of course,
in the banking industry, -
1:17 - 1:21which will be remembered
for its crisis in 2008 -- -
1:22 - 1:27a crisis that diverted the attention
and finances of governments -
1:27 - 1:32away from some really, really
important promises, -
1:32 - 1:37like promises made at the Copenhagen
Climate Summit in 2009 -
1:37 - 1:40to mobilize 100 billion dollars a year
-
1:40 - 1:45to help developing countries
move away from burning fossil fuels -
1:45 - 1:48and transition to using cleaner energy.
-
1:48 - 1:51That promise is already in jeopardy.
-
1:52 - 1:54And that's a real problem,
-
1:54 - 1:57because that transition
to cleaner energy needs to happen -
1:57 - 1:58sooner rather than later.
-
1:59 - 2:00Firstly,
-
2:00 - 2:02because greenhouse gases, once released,
-
2:02 - 2:05stay in the atmosphere for decades.
-
2:05 - 2:06And secondly,
-
2:06 - 2:12if a developing economy builds
its power grid around fossil fuels today, -
2:12 - 2:15it's going to be way more costly
to change later on. -
2:16 - 2:18So for the climate,
-
2:18 - 2:22history may judge
that the banking crisis happened -
2:22 - 2:24at just the wrong time.
-
2:25 - 2:29The story need not be this gloomy, though.
-
2:30 - 2:32Three years ago,
-
2:32 - 2:34I argued that governments
could use the tools -
2:35 - 2:37deployed to save the financial system
-
2:37 - 2:39to meet other global challenges.
-
2:40 - 2:45And these arguments are getting
stronger, not weaker, with time. -
2:46 - 2:51Let's take a brief reminder
of what those tools looked like. -
2:52 - 2:55When the financial crisis hit in 2008,
-
2:55 - 2:57the central banks of the US and UK
-
2:57 - 3:01began buying bonds issued
by their own governments -
3:01 - 3:03in a policy known
as "quantitative easing." -
3:03 - 3:07Depending on what happens
to those bonds when they mature, -
3:07 - 3:10this is money printing by another name.
-
3:10 - 3:12And boy, did they print.
-
3:13 - 3:17The US alone created four trillion
dollars' worth of its own currency. -
3:17 - 3:19This was not done in isolation.
-
3:19 - 3:22In a remarkable act of cooperation,
-
3:22 - 3:27the 188 countries that make up
the International Monetary Fund, the IMF, -
3:27 - 3:31agreed to issue 250 billion
dollars' worth of their own currency -- -
3:31 - 3:33the Special Drawing Right --
-
3:33 - 3:35to boost reserves around the world.
-
3:36 - 3:38When the financial crisis moved to Europe,
-
3:40 - 3:43the European Central Bank
President, Mario Draghi, -
3:43 - 3:46promised "to do whatever it takes."
-
3:48 - 3:49And they did.
-
3:50 - 3:54The Bank of Japan repeated those words --
that exact same commitment -- -
3:54 - 3:58to do "whatever it takes"
to reflate their economy. -
3:59 - 4:01In both cases,
-
4:01 - 4:06"whatever it takes" meant
trillions of dollars more -
4:06 - 4:09in money-printing policies
that continue today. -
4:09 - 4:11What this shows
-
4:11 - 4:15is that when faced
with some global challenges, -
4:16 - 4:21policy makers are able to act
collectively, with urgency, -
4:21 - 4:27and run the risks of unconventional
policies like money printing. -
4:28 - 4:32So, let's go back
to that original question: -
4:34 - 4:36Can we print money for climate finance?
-
4:37 - 4:39Three years ago,
-
4:39 - 4:43the idea of using money in this way
was something of a taboo. -
4:43 - 4:46Once you break down and dismantle the idea
-
4:46 - 4:48that money is a finite resource,
-
4:49 - 4:53governments can quickly get overwhelmed
by demands from their people -
4:53 - 4:56to print more and more
money for other causes: -
4:56 - 4:58education, health care, welfare --
-
4:58 - 5:00even defense.
-
5:00 - 5:06And there are some truly terrible
historical examples of money printing -- -
5:06 - 5:08uncontrolled money printing --
-
5:08 - 5:10leading to hyperinflation.
-
5:11 - 5:14Think: Weimar Republic in 1930;
-
5:14 - 5:17Zimbabwe more recently, in 2008,
-
5:17 - 5:22when the prices of basic goods
like bread are doubling every day. -
5:23 - 5:28But all of this is moving
the public debate forward, -
5:28 - 5:33so much so, that money printing
for the people is now discussed openly -
5:33 - 5:37in the financial media, and even
in some political manifestos. -
5:38 - 5:41But it's important the debate
doesn't stop here, -
5:41 - 5:43with printing national currencies.
-
5:46 - 5:50Because climate change
is a shared global problem, -
5:50 - 5:53there are some really compelling reasons
-
5:53 - 5:56why we should be printing
that international currency -
5:56 - 5:58that's issued by the IMF,
-
5:58 - 6:00to fund it.
-
6:00 - 6:03The Special Drawing Right, or SDR,
-
6:03 - 6:07is the IMF's electronic unit of account
-
6:07 - 6:11that governments use to transfer
funds amongst each other. -
6:12 - 6:15Think of it as a peer-to-peer
payment network, -
6:15 - 6:17like Bitcoin, but for governments.
-
6:19 - 6:20And it's truly global.
-
6:21 - 6:26Each of the 188 members
of the IMF hold SDR quotas -
6:26 - 6:29as part of their foreign
exchange reserves. -
6:30 - 6:32These are national stores of wealth
-
6:32 - 6:36that countries keep to protect
themselves against currency crises. -
6:37 - 6:39And that global nature is why,
-
6:39 - 6:42at the height of the financial
crisis in 2009, -
6:43 - 6:47the IMF issued those extra
250 billion dollars -- -
6:47 - 6:51because it served
as a collective global action -
6:51 - 6:56that safeguarded countries
large and small in one fell swoop. -
6:57 - 6:58But here --
-
6:58 - 7:00here's the intriguing part.
-
7:01 - 7:06More than half of those extra SDRs
that were printed in 2009 -- -
7:06 - 7:08150 billion dollars' worth --
-
7:08 - 7:13went to developed market countries
who, for the most part, -
7:13 - 7:15have a modest need
for these foreign exchange reserves, -
7:16 - 7:18because they have flexible exchange rates.
-
7:18 - 7:23So those extra reserves
that were printed in 2009, -
7:23 - 7:26in the end, for developed
market countries at least, -
7:26 - 7:28weren't really needed.
-
7:29 - 7:31And they remain unused today.
-
7:32 - 7:33So here's an idea.
-
7:33 - 7:34As a first step,
-
7:35 - 7:38why don't we start
spending those unused, -
7:38 - 7:42those extra SDRs
that were printed in 2009, -
7:42 - 7:43to combat climate change?
-
7:44 - 7:45They could, for example,
-
7:45 - 7:50be used to buy bonds issued
by the UN's Green Climate Fund. -
7:51 - 7:54This was a fund created in 2009,
-
7:54 - 7:57following that climate
agreement in Copenhagen. -
7:58 - 8:02And it was designed to channel funds
towards developing countries -
8:02 - 8:04to meet their climate projects.
-
8:04 - 8:07It's been one of the most
successful funds of its type, -
8:07 - 8:10raising almost 10 billion dollars.
-
8:10 - 8:13But if we use those extra
SDRs that were issued, -
8:13 - 8:16it helps governments get back on track,
-
8:16 - 8:19to meet that promise
of 100 billion dollars a year -
8:19 - 8:22that was derailed by the financial crisis.
-
8:24 - 8:26It could also --
-
8:26 - 8:28it could also serve as a test case.
-
8:30 - 8:35If the inflationary consequences
of using SDRs in this way are benign, -
8:36 - 8:38it could be used to justify
-
8:38 - 8:43the additional, extra issuance
of SDRs, say, every five years, -
8:43 - 8:46again, with the commitment
-
8:46 - 8:50that developed-market countries
would direct their share -
8:50 - 8:52of the new reserves
-
8:52 - 8:53to the Green Climate Fund.
-
8:55 - 8:59Printing international money
in this way has several advantages -
8:59 - 9:01over printing national currencies.
-
9:02 - 9:04The first is it's really easy to argue
-
9:04 - 9:09that spending money to mitigate
climate change benefits everyone. -
9:09 - 9:13No one section of society benefits
from the printing press over another. -
9:13 - 9:17That problem of competing
claims is mitigated. -
9:17 - 9:19It's also fair to say
-
9:19 - 9:24that because it takes so many countries
to agree to issue these extra SDRs, -
9:24 - 9:28it's highly unlikely that money printing
would get out of control. -
9:29 - 9:34What you end up with
is a collective, global action -
9:35 - 9:38aimed -- and it's controlled
global action -- -
9:38 - 9:41aimed at a global good.
-
9:42 - 9:43And,
-
9:43 - 9:45as we've learned
with the money-printing schemes, -
9:45 - 9:48whatever concerns we have
can be allayed by rules. -
9:49 - 9:51So, for example,
-
9:51 - 9:56the issuance of these extra SDRs
every five years could be capped, -
9:56 - 10:01such that this international currency
is never more than five percent -
10:01 - 10:03of global foreign exchange reserves.
-
10:04 - 10:06That's important because it would allay
-
10:06 - 10:10well, let's say, the ridiculous
concerns that the US might have -
10:10 - 10:14that the SDR could ever challenge
the dollar's dominant role -
10:14 - 10:16in international finance.
-
10:16 - 10:18And in fact,
-
10:18 - 10:21I think the only thing that the SDR
would likely steal from the dollar -
10:21 - 10:23under this scheme
-
10:23 - 10:26is its nickname, the "greenback."
-
10:26 - 10:30Because even with that cap in place,
-
10:30 - 10:34the IMF could have
followed up its issuance -- -
10:34 - 10:37its massive issuance of SDRs in 2009 --
-
10:37 - 10:42with a further 200 billion
dollars of SDRs in 2014. -
10:43 - 10:45So hypothetically,
-
10:46 - 10:49that would mean that developed countries
could have contributed -
10:49 - 10:54up to 300 billion dollars' worth of SDRs
-
10:54 - 10:55to the Green Climate Fund.
-
10:56 - 11:00That's 30 times what it has today.
-
11:00 - 11:01And you know,
-
11:01 - 11:03as spectacular as that sounds,
-
11:04 - 11:08it's only just beginning to look
like "whatever it takes." -
11:09 - 11:12And just to think what amazing things
could be done with that money, -
11:12 - 11:14consider this:
-
11:15 - 11:16in 2009,
-
11:16 - 11:21Norway promised one billion dollars
of its reserves to Brazil -
11:21 - 11:26if they followed through
on their goals on deforestation. -
11:27 - 11:33That program has since delivered
a 70 percent reduction in deforestation -
11:33 - 11:34in the past decade.
-
11:35 - 11:39That's saving 3.2 billion tons
of carbon dioxide emissions, -
11:39 - 11:44which is the equivalent of taking
all American cars off the roads -
11:44 - 11:46for three whole years.
-
11:48 - 11:49So what could we do
-
11:49 - 11:54with 300 other pay-for-performance
climate projects like that, -
11:54 - 11:57organized on a global scale?
-
11:58 - 12:01We could take cars off the roads
for a generation. -
12:01 - 12:03So,
-
12:03 - 12:08let's not quibble about whether we can
afford to fund climate change. -
12:09 - 12:11The real question is:
-
12:11 - 12:15Do we care enough about future generations
-
12:15 - 12:20to take the very same policy risks
we took to save the financial system? -
12:20 - 12:21After all,
-
12:22 - 12:23we could do it,
-
12:24 - 12:25we did do it
-
12:25 - 12:27and we are doing it today.
-
12:28 - 12:32We must, must, must do
"whatever it takes." -
12:33 - 12:35Thank you.
-
12:35 - 12:39(Applause)
- Title:
- A provocative way to finance the fight against climate change
- Speaker:
- Michael Metcalfe
- Description:
-
Will we do whatever it takes to fight climate change? Back in 2008, following the global financial crisis, governments across the world adopted a "whatever it takes" commitment to monetary recovery, issuing $250 billion worth of international currency to stem the collapse of the economy. In this delightfully wonky talk, financial expert Michael Metcalfe suggests we can use that very same unconventional monetary tool to fund a global commitment to a green future.
- Video Language:
- English
- Team:
- closed TED
- Project:
- TEDTalks
- Duration:
- 12:52
Brian Greene edited English subtitles for A provocative way to finance the fight against climate change | ||
Brian Greene edited English subtitles for A provocative way to finance the fight against climate change | ||
Brian Greene edited English subtitles for A provocative way to finance the fight against climate change | ||
Brian Greene edited English subtitles for A provocative way to finance the fight against climate change | ||
Brian Greene approved English subtitles for A provocative way to finance the fight against climate change | ||
Brian Greene edited English subtitles for A provocative way to finance the fight against climate change | ||
Brian Greene edited English subtitles for A provocative way to finance the fight against climate change | ||
Brian Greene edited English subtitles for A provocative way to finance the fight against climate change |