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:
-
Michael Metcalfe speaks at TED@State Street 2015
- 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 |