Leading finance officials have emphasised the need for a worldwide, co-ordinated approach to tackle climate change, as economic experts plot a path towards net-zero emissions.
Venice is hosting a conference on climate change, following a meeting of G20 finance ministers and central bank chiefs on Friday and Saturday.
Kristalina Georgieva, managing director of the International Monetary Fund, told the conference that a top priority was to “make market signals work for the new climate economy, not against it”.
She said the world needed to “rid itself” of fossil fuel subsidies and improve carbon pricing.
“This will provide a critical signal for redirecting private investment and innovation to clean technologies, and to incentivise energy efficiency,” she said.
She emphasised the importance of green investment, saying that carbon pricing “alone is not enough”.
“Radically decarbonising our economies will require a substantial scaling-up of investment over the next two decades,” she said.
“The shift to renewables, new electricity networks, energy efficiency and low carbon mobility offer a huge investment opportunity.”
Ms Georgieva told the meeting that international public finance could help to reduce costs and any perceived risks.
“Governments can help provide the infrastructure to support the deployment of low-carbon technologies in response to carbon pricing. And financial sector policies, such as green taxonomies and common risk disclosures, can steer private investment towards sustainable projects,” she said.
A “just transition” that supported all countries and populations is vital, she said.
“Our miserable performance so far has given ground to an interesting joke: how can we achieve sustainability and protect our climate?
“There are two ways to do that: one is realistic and the other one is fantastic. The realistic way is extraterrestrials come from space, they take over our affairs, they do it, and the fantastic [way] is we do it ourselves,” Ms Georgieva said.
She told Italian Finance Minister Daniele Franco that it was his country's job as G20 president to “make the fantastic realistic".
“And we are here to help you do so,” she said.
“Tackling climate change is a global challenge which calls for co-ordinated policy action. It is also a challenge that requires the mobilisation of considerable resources,” Mr Franco told the meeting.
“The international financial community and private sector should actively participate to support the achievements of the Paris agreement objectives. Finally, differences across countries in terms of fiscal pace and access to financial markets should be taken into account.”
The IMF has issued a warning about a “two-track” recovery from the pandemic, in which poor countries are left behind as wealthy nations, such as those in the G20, rebuild.
Some of those fears have been attributed to the gaps in vaccination rates around the world.
But rich countries have also been urged by campaigners to give more funds to the developing world to support the green transition.
US Treasury Secretary Janet Yellen said the developing world was at particular risk from climate shocks and called for multilateral development banks (MDBs), as leading sources of official finance, to maximise their influence to confront climate change.
“I plan to shortly convene the heads of the MDBs to articulate our expectations that the MDBs align their portfolios with the Paris Agreement and net-zero goals as urgently as possible,” she said.
“We also expect them to take steps to more effectively mobilise private capital so that developing countries can increasingly benefit from private sector pledges to support climate-aligned and sustainable investments.”
Alok Sharma, president of the UN Cop26 climate conference, also spoke at the conference in Venice. Cop26 is scheduled to take place in Glasgow, Scotland, in November.
He called on developed countries to deliver on their pledge to give $100 billion a year in climate finance to poorer parts of the world. Mr Sharma described it as “a matter of trust".
“I look forward to other donors, including other G7 countries, stepping up with new or increased commitments ahead of Cop26,” he said.
Larry Fink, chief executive of the world's largest money manager BlackRock, said institutions such as the World Bank and IMF would be of more use if they focused on their role as financiers, instead of lending money.
“There is private capital that can be mobilised for the emerging markets, but we need to rethink the way the international financial institutions can support low-carbon investments at scale,” he said.
“We need a financing system that isn’t built around bank balance sheets.”