Rich Countries Miss Climate Finance Deadline—Time for a Fresh Look at SDRs?

Reuters reported last week that rich countries have missed a UN deadline for providing details on their pledges of some $30 billion in so-called Fast Track Finance to help developing nations deal with climate change. The failure to meet the deadline is raising doubts about whether the money will really be provided, to which countries, and how it will be used. It should also prompt policymakers to consider anew several innovative finance proposals, including use of IMF Special Drawing Rights aka SDRs. According to Reuters:

Among industrialized nations, only Russia and Ukraine sent letters to the United Nations by the May 1 deadline -- only to say they did not feel obliged to contribute under a deal to provide almost $30 billion in initial "fast-start" climate funds from 2010-12…"’Developed countries continue to teeter in honoring even their modest commitments,’ said Clifford Polycarp, of the Washington-based World Resources Institute, which tracks climate aid pledges.

In terms of broad public pledges, rich countries have nearly met the $30 billion goal. Last November, WRI reported that 20 developed countries and the European Commission had publicly announced fast-start finance pledges which totaled $29.27 billion.  But the devil is in the details: Is the money really new and additional? How much, if any, of it has been disbursed, to which countries, and for what purposes? When and how will the reminder be disbursed?This is the kind of information that was supposed to have been reported to the UN by May 1.  The failure to meet one of the first deadlines set in the Cancun Agreement is discouraging to say the least. Reuters quotes WRI’s Polycarp as saying that deadlines set by UN agencies are often flexible and rich nations are expected to submit details soon.Let’s hope that’s more than just wishful thinking. Fast Start Finance was intended as a trust-building exercise, to show developing countries that that an even bigger rich-world commitment—to provide $100 billion per year by 2020—is real.  But the three-year period for fast-start finance is almost halfway finished.Given the fiscal constraints facing the high-income countries—exacerbated in the case of Japan, a major donor, by the earthquake, tsunami, and nuclear crisis—maybe it’s time for a fresh look at one of the few proposals that could provide climate finance at little budgetary cost: mobilization of the SRDs. Find Me the Money: Financing Climate and Other Global Public Goods, a recently released CGD working paper by Nancy Birdsall and Benjamin Leo, explains how that could work.