Mr Kerry gave his opinion in a discussion with Kristalina Georgieva, Head of the International Monetary Fund, at the Spring 2021 IMF and World Bank meetings.
They agreed that a “green and resilient recovery” from the COVID-19 pandemic is possible, but that global economic growth is likely to be slow and uneven.
“No bank will finance a new coal-fired power plant”
John Kerry: There are many ways we can address the climate challenge in America. President Biden has put a $ 2 trillion plan on the table that will result in the construction of 500,000 electric vehicle charging stations, thousands of electric buses, including school buses, and a goal of 100 percent carbon-free electricity in the country by 2035.
All of these measures will lead to action in the private sector. Environmental, social and governance (ESG) factors determine the decisions of some of the world’s largest financial institutions, and trillions of dollars are being invested in this new sector to avoid disaster. We’re way back, but we believe this will be the biggest economic change since the industrial revolution.
In Europe, no bank, no financial institution or no private source will finance a coal-fired power plant, but we must move away from coal more quickly. Many old coal-fired power plants operate with an efficiency of less than 50 percent. They lose money and don’t even send power to the main grid. They could leak over time. Gas will be a bridging fuel to some extent [to renewables].
The United States could help raise funding to reduce risk and then put more money on the table for a commercial investment in alternative fuel sources.
Coal-fired power plants in Nottingham, England.Kristalina Georgieva: At the IMF, we have identified three pillars for the transition to a low-carbon economy. First, set a price for all CO2 emissions. Today only 23 percent of emissions are set. The average price is $ 2 per ton. We need to be at $ 75 a ton by 2030.
Carbon prices and climate change
Carbon pricing is seen as the cheapest and most flexible way to curb greenhouse gas emissions.
The cost of carbon is calculated based on the cost to society lost from sea level rise, crop damage from changing rainfall patterns, or health care costs related to heat waves and droughts.
As part of this regulation, the responsibility for paying for climate damage is shifted from the public to the producers of greenhouse gas emissions.
This is a strong financial argument in favor of shifting investments from high-emission, fossil-fuel-based technologies to cleaner technologies.
Second, funds are required for public investments in green infrastructure. The IMF can assist countries in this regard. Five percent of the gross domestic product (GDP) invested now would generate additional growth of 0.7 percent every year. This means that the investment will pay for itself within 15 years and create at least 12 million net jobs.
The third, very important pillar is to reduce the impact on those currently employed in the high carbon economy. For example, there needs to be a just transition for miners to benefit from new job opportunities. If we increase carbon pricing revenue, some of that money needs to be used as a buffer to ease pressure on businesses to move away from carbon dependency. This is doable and needs to be done.
China and the USA
John Kerry: Right now, China is saying that they will have peak emissions by 2030 and that they may be able to reach that target sooner, maybe by 2025. The problem is that the current models show that China is peaking but then basically staying on a plateau instead of reducing emissions sufficiently.
Around 30 percent of all emissions on the planet are caused by China. So if we don’t see a decline between 2020 and 2030, we will lose the ability to keep the global temperature 1.5 degrees above pre-industrial levels and we will lose the ability to achieve net zero carbon emissions by 2050.
Every nation must work together on this. If the United States went to zero emissions tomorrow, it wouldn’t make the difference we need because we all have to reduce at the same time. This is the struggle we face.
China obviously needs to keep growing and developing. We want that and we don’t indulge ourselves. We want to work with China and other countries to make sure they don’t make the mistakes we made and that we work together to develop new technologies like hydrogen fuel and biofuels for aircraft.
To do nothing is too expensive
John Kerry: The United States is the second largest emitter in the world. We have to work better to reduce emissions faster. President Biden is committed to this. He’s hosting a virtual climate summit in April, rejoined the Paris Climate Agreement, and drafted a $ 2 trillion infrastructure bill.
Climate protection means jobs, be it in the creation of new energy sources or in the transition from existing ones, in the construction of new cars or in the retrofitting of houses. These are jobs for workers in all countries. We should accept that.
Economists have warned us again and again that doing nothing is more expensive for our citizens, our taxpayers, than reacting to the climate crisis. We spent $ 365 billion cleaning up after three storms a few years ago, but we didn’t invest the $ 100 billion in the Green Climate Fund, which built resilience and adaptation to climate change and prevented one Part of this damage is done. We’re just not making the right decisions.
Kristalina Georgieva: We have already started to offer a helping hand, especially in countries hit by natural disasters. We have taken steps to help countries better prepared for disasters. For example, we are discussing a provision with our membership that will give countries $ 650 billion to not only take the necessary measures to deal with the pandemic and its effects, but also to make the investments necessary to transform their economies .
The urgency to act is evident and alive: in the past six months, 10 million people have been displaced by floods and other forms of natural disasters. Fast forward to a world where there are more climate-related disasters and more migration.
We have the opportunity to use a transformation for growth and employment. But we are also under tremendous pressure to prevent a future that would be bleak for those we love most: our children and grandchildren.