Soros proposes $100bn climate fund

www.environmental-finance.com
11 December 2009

Billionaire financier George Soros has proposed that developed countries create a $100 billion climate fund, drawn down from existing currency reserves, to kick-start forestry and land-use projects in developing countries. "It is now generally agreed that the developed countries will have to make a substantial contribution to enable the developing world to deal with climate change," Soros told a press conference at the UN climate talks in Copenhagen today. "There is no similar agreement where the money will come from."

"Developed countries are labouring under the misapprehension that funding has to come from their national budgets, but that is not the case. They have it already – it is lying idle in their reserves accounts and in the vaults of the International Monetary Fund [IMF], available without adding to the national deficits of any one country. All they need to do is tap into it," he said.

Soros proposes that countries use their Special Drawing Rights (SDRs) to fund projects that generate carbon credits, which can then be sold on international markets to repay interest. SDRs are an "arcane financial instrument", he explained, an international reserve asset created by the IMF in 1969 to supplement its members' official currency reserves.

In September, the IMF issued to its members $283 billion worth of SDRs, with more than $150 billion going to the 15 largest developed economies, which "will sit largely untouched in the reserve accounts of these countries, which don't really need any additional reserves". Soros is proposing a 25-year, $100 billion 'green fund' to invest in forestry, land-use and agricultural projects which reduce emissions. "These are the areas that offer the greatest scope for reducing carbon emissions, and could produce substantial returns from carbon markets," he said.

He also suggests that the IMF guarantees the interest payments and principal repayment, using its gold reserves. Moreover, the projects it backs will only earn a return if "developed countries set up the right kind of carbon markets" which buy carbon from such projects. "Setting up a green fund would be an implicit pledge to do so by putting the gold reserves of the IMF at risk," he added.

Soros added that there is a precedent for such a fund: the UK and France recently lent $2 billion of SDRs to a special fund at the IMF to support concessionary lending to least-developed countries. "It is possible to substantially increase the amount available to fight global warming in the developing world by using the existing allocations of SDRs – and the gold reserves of the IMF are more than sufficient to pay the interest on them. All that is lacking is the political will," he said.

Soros – who made his fortune as a hedge fund manager, notoriously betting against UK efforts to defend its currency on Black Wednesday in 1992 – recently pledged to invest $1 billion in clean technology in a bid to help tackle climate change.