George Soros – Climate Change Proposal, Copenhagen December 2009

SDRs and Climate ChangeIt is now generally agreed that the developed countries will have to make a substantialcontribution to enable the developing world to deal with climate change. There is nosimilar agreement on where the money will come from.The developed countries are reluctant to make additional financial commitments. Theyhave just experienced a significant jump in their national debts and they still need tostimulate their domestic economies. This colors their attitudes. It looks like they will beable to cobble together a "fast-start" fund of $10 billion a year for the next few years butmore does not fit into their national budgets.This is unlikely to satisfy the developing countries.I believe this amount could be at least doubled and assured for over a longer time span.Developed countries' governments are laboring under the misapprehension that fundinghas to come from their national budgets but that is not the case. They have it already. It islying 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 needto do is to tap into it.In September 2009, the IMF distributed to its members $283 billion worth of SDRs, orSpecial Drawing Rights. SDRs are an arcane financial instrument but essentially theyconstitute additional foreign exchange. They can be used only by converting them intoone of four currencies, at which point they begin to carry interest at the combinedtreasury bill rate of those currencies. At present the interest rate is less than one half of one percent. Of the $283 billion, more than $150 billion went to the 15 largest developedeconomies. These SDRs will sit largely untouched in the reserve accounts of thesecountries, which don't really need any additional reserves.I propose that the developed countries--in addition to establishing a fast start fund of $10billion a year--should band together and lend $100 billion dollars worth of these SDRsfor 25 years to a special green fund serving the developing world. The fund would jump-start forestry, land-use, and agricultural projects. These are the areas that offer thegreatest scope for reducing carbon emissions and could produce substantial returns fromcarbon markets. The returns such projects can generate go beyond reducing carbon; therewill be non-carbon related returns from land use projects, the potential to create moresustainable rural livelihoods, enable higher and more resilient agriculture yields andcreate rural employment.This is a simple and practical idea. There is a precedent for it. The United Kingdom andFrance each recently lent $2 billion worth of SDRs to a special fund at the IMF to supportconcessionary lending to the poorest countries. At that point the IMF assumed