The UB Post
USING THE ‘UNUSED’ TO FIGHT CLIMATE CHANGE
Many developing countries are trying to build new power plants to level with their rising demand of electricity. Two major coal burning plants are currently in development in Mongolia. The more fossil burning plants we build, the harder we have to work to eliminate their impact, because developing countries such as Mongolia are not willing to let go of their cheap energy resources.
This is where international organizations and developed countries should come around to help them before they start emitting more Carbon Dioxide into the atmosphere. Because it would be much easier and cheaper to prevent it from happening than to address the problems it causes afterwards. Like the old Mongolian saying goes, “There is no point in shouting after a lightning hits.” The main problem is that very small proportions are contributed to organizations such as Green Climate Fund due to restrained national budgets. One possible way out of this crisis could be the clever use of Special Drawing Rights, or SDR.
SDR is the International Monetary Fund (IMF)’s electronic unit of account that governments use to transfer funds among each other. When the financial crisis of 2008 hit, IMF agreed to issue 250 billion USD worth of SDR to boost reserves around the world. To sum it up, they printed international currency worth 250 billion USD and circulated it around the global market.
INTERNATIONAL SOURCE OF FINANCE INDEPENDENT OF DOMESTIC BUDGET
As mentioned above, major environmental organizations lack financial support because of limited national budgets. On the other hand, issuing SDR will not face that problem, because it is happening on the international level without too much restraint. Besides, climate change is a worldwide issue, with most of it having to do with human activity. It would be more than fair to try to solve it with “international” currency. No country would solely benefit from printing SDR over another, and IMF members would all be monitoring the process.
INFLATION RISK - FINANCIAL CRISIS OF 2008
Some might argue that the sudden increase of printed money might cause serious inflation on the market. However, we already took this risk when the IMF issued 250 billion USD worth of SDR in 2009. The financial crisis of 2008 brought the world economy down to its knees. We took action against this problem with SDR, so why can’t we take the same risk we already took years ago? Wouldn’t it bring the message to people that the global economy is more important than an environmental crisis? SDRs will not take over the global market, or replace USD, or any other currency for that matter, because it’s not actually a usable currency, it has to be converted in order to be used. That means independent funds would convert SDR into a national currency before it gets on the market. Thus, we are not going to flood the economy with freshly printed USD or MNT.
Around 150 billion USD worth of SDR, more than half of those that were printed in 2009 remain unused today. This extra currency could bring a massive positive change to the fight against climate change. To make sense of that number, the entire budget of the Ministry of Environment and Green Development of Mongolia is only one 60’000th of that amount. Norway is promising 300 million USD to reduce deforestation in Liberia. Imagine what we can do with the financial resource 500 times bigger than this?
Big corporations make up most of the global marketing and governments’ lack of control over them makes it harder to push them forward to fight against climate change. But international organizations such as Green Climate Fund have proven their efficiency by raising almost 10 billion USD. In 2015, the fund received the first set of 37 funding proposals for major projects valued at 1.5 billion USD from public and private sector entities. With extra funding, international organizations will be able to finance numerous projects like this. That proves we could put those extra SDRs into good use with careful planning and safe monitoring. It is not about whether or not we can afford the risk, it is about if we are willing to make a difference before climate change and environmental degradation gets out of hand.