The global climate crisis has reached an unprecedented scale, making clear the urgent need for action by governments, multilateral organizations, and international financial institutions. Over the last four years, the Trump administration moved the U.S. backward in its approach to addressing climate while the impacts of climate change continued to mount. BIC welcomes the incoming Biden administration’s plans to prioritize climate action and emphasizes the need to deploy all available tools, so the U.S. can become a leader in addressing the climate crisis.
In the international sphere, rejoining the Paris Agreement and supporting the Green Climate Fund (GCF) are crucial steps. Less recognized in the public conversation, but no less important, is the role that the U.S. plays at multilateral development banks (MDBs) — where it has traditionally been a leader and where total spending on climate still dwarfs that of the GCF. The MDBs have often invested in projects and policies that have accelerated climate change, but they also have the capacity to make valuable contributions toward mitigation and adaptation. MDBs are uniquely suited to help countries meet and build on their climate commitments by integrating climate considerations into development projects and stimulating a green COVID-19 recovery. For this reason, the U.S. should prioritize taking action to push the development banks to become “climate banks” as well. BIC provides five steps the Biden Administration should take to lead the MDBs in a progressive climate response:
The MDBs have often invested in projects and policies that have accelerated climate change, but they also have the capacity to make valuable contributions toward mitigation and adaptation.
1. Rejoin the Paris Agreement and accelerate progress on clean energy transition. The Biden administration’s first critical step to signal to the world that the United States will reaffirm its climate commitment is by rejoining the Paris Agreement. The U.S. should then expeditiously create a plan to meet the goals of the Paris Agreement by working to halve greenhouse gas emissions by 2035, achieve net zero emissions by 2050, and provide a credible pathway for both goals. BIC recommends the Biden administration complement these domestic commitments at the international level. One way to do this is by promoting the World Bank’s efforts to help other countries develop ambitious plans to reduce their greenhouse gas emissions through trust funds and technical assistance. The U.S. should also work with allies to conclude negotiations on Article 6 of the Paris Agreement so that it achieves net reductions in emissions and increases investments by excluding double-counting. These steps will accelerate a clean energy transition, which is essential to building an equitable and green future.
2. Restore and advance the Obama administration's 2013 guidance on fossil fuel financing. In 2013, the Obama administration unveiled a Climate Action Plan, outlining steps for the U.S. to reduce its carbon footprint and lead international efforts to address climate change. Unfortunately, this policy was reversed by the Trump administration. BIC encourages the Biden administration to quickly restore this guidance and expand the 2013 policy to cover other fossil fuels not originally included and apply this to all MDBs in which the U.S. participates. This will promote the necessary global energy transition and take advantage of the steadily declining cost of renewable technologies relative to fossil fuels, even absent a global price set on greenhouse gas emissions.
3. Join and advance the goals of the Coalition of Finance Ministers for Climate Action. The six Helsinki Principles guide the Coalition, and the World Bank is the secretariat for this group, representing over 50 countries. This group of Finance Ministers focuses on the mounting economic consequences of climate change, as well as the opportunities of climate action to create jobs and lead to GDP growth. Joining and signing onto the Helsinki Principles would be a positive way for the U.S. to signal a renewed commitment to addressing climate change through multilateral cooperation.
4. Appoint Executive Directors (EDs) to the MDBs that have a demonstrated commitment to collaborative action on climate, including climate justice. The clearest way for the Biden administration to fulfill its commitment to taking a leadership role on climate and push the MDBs to set ambitious climate agendas for themselves is through the appointment and confirmation of strong, qualified EDs to these institutions. These candidates should have significant development experience and, among other attributes, a commitment to working with our allies, particularly those in Europe, to combat climate change.
5. Use the voice and vote of the U.S. at the MDBs to lead the multilateral effort to mitigate and adapt to climate change. The Biden administration should insist that U.S. EDs at the MDBs reflect the administration’s ambitious approach to climate through their vote and participation in the institutions, and use this position to advance three key objectives. First, the U.S. should promote international efforts to control short-lived and highly potent greenhouse gases by having MDBs fund country implementation of the Kigali Agreement. Second, U.S. EDs should oppose the use of budget support loans (Development Policy Finance) to finance fossil fuels and harmful impacts on the environment, which can be achieved through the establishment at each MDB of an exclusion list and screening process. Finally, the U.S. must seize the opportunity to promote sustainable land-use planning, community-led conservation and development, and clean transportation through cooperation with allies and others who will benefit from these actions at the MDBs.
Above all, BIC encourages the Biden administration to proactively set an ambitious and inclusive climate agenda and use the United States’ position at the MDBs to take meaningful steps toward implementing this agenda through multilateral cooperation.