IMF Proposes "Green Fund" for Climate Change Financing

To help finance this shift in the global economy, the IMF is working on a set of proposals to create a multi-billion dollar "Green Fund" that would provide the huge sums-which could climb to $100 billion a year in a few years-needed for countries to confront the challenges posed by climate change.

During a panel discussion on the future of the world economy, Strauss-Kahn said it was obvious that developing countries don’t have the cash to finance the measures needed to tackle climate change while developed countries were saddled with enormous debts from combating the global economic crisis.

There was a need to think outside the box and come up with innovative ways to provide the money. "I can’t believe we don’t have the solution to this huge problem," he told the audience in Davos

Taking it forward

The IMF will start discussions with central banks and finance ministers on the feasibility of creating this Green Fund, possibly partly financed through the issuance of additional Special Drawing Rights (SDRs), a reserve asset created by the IMF.

Strauss-Kahn said that climate change financing was such a big issue that "it cannot be seen as a problem that cannot be solved." But because of the debt overhang from the global crisis it clearly needed alternative solutions. The IMF will release a paper in a few weeks setting out ideas on how the proposal can be financed.

Earlier during the session, chaired by Martin Wolf of the Financial Times, Strauss-Kahn told...