Colin Hines, co-founder of Localise West Midlands and Richard Murphy, Professor of Practice in International Political Economy, City University, London, warn that the Paris Climate talks are facing an enormous funding problem to which there is only one viable solution.
In a new report published by Finance for the Future, entitled ‘Climate QE For Paree’, they suggest that the measures to be put on the table in Paris will not go far enough to halt a disastrous global temperature rises of more than 2 degrees because no one has suggested how the enormous cost of tackling this issue is to be addressed, particularly at a time of global economic slowdown.
The paper offers a solution to this problem, using a variation on the idea of People’s Quantitative Easing that has received much attention during 2015:
‘The world has or is intending to print €7 trillion of quantitative easing to keep the financial system afloat. In that case, why not use this mechanism in the form of Climate QE to save the planet?
The European Central Bank is already e-printing €60 billion a month under its QE [programme and is committed to doing so till September 2016.
If it allocated say €10 billion a month either from this QE programme, or from an additional QE commitment, it could use it to buy climate change bonds from the European Investment Bank. The EIB could then direct these funds to climate change programmes in both Europe and developing countries.
This could have a galvanising effect on other rich countries, putting pressure on them to introduce their own Climate QE initiatives and thus further bolster global funds towards the many hundreds of billions eventually needed to keep temperature rises at 2oC.
Importantly, since Climate QE involves one arm of the EU, the ECB, creating e-money and using it to buy assets from another arm of EU, the European Investment Bank (EIB), this will not increase Europe’s repayable debt levels. This would also hold true for countries like the United States and the UK, something that is crucial to making involvement in ‘Climate QE’ post Paris politically acceptable to all rich countries.
How the European Investment Bank Could Spend Climate QE
The EIB already invests around 10% of its funds in developing countries and prioritises climate change mitigation and adaptation (e.g. renewable energy, energy efficiency, urban transport and other projects that reduce CO2 emissions).
To achieve the goals likely to be set in Paris, Climate QE funding should be used by developing countries to fund low carbon emitting industrial and agricultural infrastructure and energy efficient buildings in cities. Such projects face difficulty attracting private finance, since the returns are harder to identify and the process of capturing and sharing them are more complex than normal investment programmes.
Rich Countries would benefit too
Colin Hines said:
‘Climate QE is not just for poorer countries. The economic and employment advantages of investing in energy efficiency and renewables is not only a way to generate economic activity in every city, town, canton and hamlet across Europe, but will also ensure our continent’s significant contribution to helping solve the biggest threat facing humanity, which is climate change.’
For further details contact:
Richard Murphy, Director of Finance for the Future LLP and Professor of Practice in International Political Economy, City University, London
Tel +44 (0) 1366 383500
Mobile +44 (0) 7775 521 797
Colin Hines, Convenor Green New Deal Group
Tel +44 (0) 20 8892 5051
Mobile +44 (0) 7738 164 304