Why climate change should be on G20 finance agenda
- 26 October 2010
Damian Ryan, Senior Policy Manager at The Climate Group, discusses the relationship between global financial regulation and climate change in light of last week's G20 finance ministers' meeting in Korea.
Should we be concerned that climate change was not on the agenda of last week’s G20 finance ministers’ meeting in Korea? On the face of it, the question seems indulgent. After all, in the midst of a fragile global recovery, shouldn’t the attention of ministers be focused on ‘here and now’ issues, such as exchange rates, trade imbalances and sovereign debt?
At first glance, global financial regulation and climate change may seem like very different issues. But closer inspection shows that they are both part of the larger question of assuring sustainable economic growth. While it is self evident that finance ministers should focus on finance issues, there are at least four good reasons why the world’s most powerful financial policy makers should also be concerned with climate change.
The first is one of mandate. The very reason for the G20’s existence is to ensure the global economy is kept on an even keel. Set up in the aftermath of the 1998 Asian financial crisis, the G20 proved its worth through its coordinated response to the recent crisis in global financial markets. If market stability is the priority for the G20, then surely “the greatest market failure ever”, as Lord Stern famously characterized it, with the potential to knock 20% off global GDP, should be at the top of the group’s to-do list?
The second is one of leadership. Although established principally to focus on financial matters, the group is increasingly seen as the world’s premier political forum as well. Whereas the international community once looked to the G8 for leadership, attention and expectations are now focused increasingly on the G20. Its larger and more inclusive membership makes it the obvious forum outside of the UN for grappling with uniquely international issues such as climate change.
Third is the issue of control. Finance ministers and their departments sit at the top of the government food chain. They hold the purse strings and craft the macro policy that determines a country’s economic direction. Their influence over the extent to which other departments can pursue and achieve their objectives is therefore substantial. If finance ministries aren’t engaged on climate change then chances are that neither is the government or country as a whole. And what holds for individual countries also holds for the world.
Forth is the question of timing. Finance has moved to the top of the climate agenda this year. Questions about how both short and long-term funding will be raised and disbursed are at the centre of UNFCCC negotiations. Progress on finance could potentially address deadlocks in other areas. Substantive decisions on finance at COP16 in Cancun could do much to rebuild the trust and confidence that has been missing from negotiations over the last year. G20 finance ministers are uniquely placed to oil the wheels of this critical area.
The lack then of any direct reference to climate change in the minister’s communiqué should be a cause for concern. With finance so central to addressing climate change, the absence of thought leadership from the world’s most powerful financial policymakers is worrying. While climate change should not define the agenda of G20 finance ministers, it does deserve a place in any long-term programme of work. Failure to do so would amount to an abdication of both responsibility and leadership.