Soros urges IMF to create $100bn ‘green’ fund

Posted on December 11, 2009. Filed under: Advanced Biofuel | Tags: , , , , , |

Soros urges IMF to create $100bn ‘green’ fund

By Fiona Harvey in Copenhagen

The Financial Times

December 10, 2009

George Soros, the billionaire financier, unveiled a plan on Thursday to give poor countries access to $100bn in financial assistance to deal with the threat of climate change.

The money would come from the International Monetary Fund, from financial instruments known as special drawing rights, or SDRs.

These instruments are used to create liquidity. The IMF has distributed hundreds of billions of dollars worth of SDRs to its members, which lie in the reserve accounts of the countries concerned.

Speaking at the United Nations climate summit in Copenhagen, Mr Soros argued that these reserves are unnecessary, and that the SDRs could be lent to developing countries, through a “green fund” set up for the purpose.

“It is possible to substantially increase the amount available to fight global warming in the developing world by using the existing allocations of SDRs,” he said. “All that is lacking is the political will… Yet it could make the difference between success and failure at Copenhagen.”

Listen to Fiona Harvey’s audio dispatch on the latest discussions at Copenhagen

The talks in Copenhagen have become stalled on the question of financing. Poor countries are demanding $100bn a year by 2020 from rich countries, in order to deal with climate change, and $10bn a year for the next three years to tide them over before the long-term funding begins.

Rich countries have come up with some financing commitments, but they do not come near the scale of funding being asked for.

Mr Soros’s green fund would finance projects that reduced emissions in developing countries, such as forestry and agricultural projects.

In Mr Soros’ vision, the fund would become self-financing as the projects would turn a profit.

SDRs can be used only by converting them into one of four currencies, at which point they carry interest at the combined treasury bill rate of those currencies.

At present, the rate of such interest is about 0.5 per cent.

Mr Soros suggests that the IMF should also pay the interest on the SDRs, by using its gold reserves.

The IMF has more than 100m ounces of gold. Owing to the rise in bullion prices, this gold is now worth about $100bn more than its book value, Mr Soros estimates.

He said this money, which has already been designated for the use of the poorest countries, could best be spent in this way.

But Mr Soros explicitly ruled out China benefitting from the new green fund he proposes. China has called for funding from developed countries to help cut its emissions, but the US on Wednesday rebuffed the idea in strong terms.

Mr Soros appeared to lean towards the US point of view: “I see China more as a contributor than a recipient. This would be for the poorest countries. Fortunately China is no longer [one].”

There are several obstacles to Mr Soros’ plan, however, One is that for the US to participate it would require Congressional approval, which will be hard to achieve.

Other developed countries gave a lukewarm response to the plan. Artur Runge-Metzger, the chief negotiator for the European Union, said: “Sometimes these very interesting proposals sound like perpetual movement – how you can create money and dish it out very quickly.”

He added: “There is no way we can just print money to makes sure finance is on the table.”

But the plan was welcomed by the G77 of developing countries.

Mr Soros’ ideas are unlikely to be decided upon at the Copenhagen conference, but they could receive more attention in the coming months as rich countries struggle to work out in detail how they can finance any pledges they make in the coming days.


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