This series originally appeared on New Deal 2.0.
In honor of World Environment Day on June 5th, a day focused on action across the globe, New Deal 2.0 asked leading thinkers in climate change to describe what they see as the single most important step that can be taken right now. Here are some of their answers:
Meeting the Climate Change Challenge: Forging a New International Financial Architecture
Paul R. Epstein
Climate change will affect the lives and lifestyles of nearly every person who inhabits the planet. Today’s international institutions are incapable of managing such a complex and far-reaching problem. New funds, rules and institutions are needed to constitute the financial architecture needed to propel the clean energy transformation—the first necessary, though insufficient step toward sustainable development.
A large international fund is needed to provide the push and pull on the global economy. The International Energy Agency projects that $500 billion a year is needed for 20 years—a reasonable investment in our common future.
But its sources must be denationalized. Relying on nations—especially given the current contraction of economies in many nations—for contributions is not feasible. Among the sources available is a tax on intentional currency transactions—the Tobin Tax.
In addition, subsidies for fossil fuels (misaligned negative incentives) must be abandoned.
Rules and regulations
In order to direct funds toward healthy, sustainable development, new rules of trade and regulations are necessary. Bretton Woods (1944) established three monetary rules:
1. Fixed exchange rates,
2. Free trade in goods, but
3. Constraints on the international flow of capital.
In 1971, rules 1 and 3 were abandoned. The Washington Consensus—deregulation, privatization and liberalization—has meant the free movement of capital as well as goods.
Free trade in capital (that Adam Smith wrote would nullify healthy competition and distort comparative advantages) has contributed to unpayable national debts and has destabilized nations in the 1990s, and continues to do so today.
An international body is needed to provide support for climate mitigation and adaptation through financial incentives, regulations and assuring compliance. The Global Environmental Facility—established in 1992 as a collaborative among the United Nations Development Programme, the United Nations Environment Programme and the World Bank—makes grants, not loans and provides a guide for an institution to oversee enhanced global governance.