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Momentum to fight the climate crisis must continue after the UAE's Cop28 scored an early win when nations agreed to put into operation the loss and damage fund and triple global renewable energy capacity by 2030, the International Monetary Fund's managing director has said.
The landmark loss and damage fund, which came into operation after a 30-year wait, and the renewables agreement will help the world to hasten decarbonisation efforts and boost financial commitments to battle climate change, Kristalina Georgieva told The National on Sunday.
Climate-related financial pledges started to pour in during the early days of the Cop28 summit in Dubai, including the UAE's $30 billion fund and the IMF's Resilience and Sustainability Trust that has received pledges for more than $40 billion to accelerate the energy transition.
Cop28 “is very successful from Day 1, it has turned the hopes of everybody here up. Why? Because of the actions that have already been taken”, she said.
“I do hope this will continue in the spirit of 'yes we can fight, successfully, the climate crisis and turn it into an opportunity to transform our economies to low-carbon and climate resilient development'.”
Countries on Thursday agreed to the historic deal of putting into operation the loss and damage fund, which is aimed at helping vulnerable countries to cope with the increasingly expensive and damaging effect of climate disasters.
Loss and damage refers to climate effects that are already happening or are inevitable, such as rising sea levels that threaten to submerge small island nations.
Countries agreed on the principle of a loss and damage fund at Cop27 in Egypt last year, but left several questions open, such as who would pay and who would oversee the payments.
The deal in Dubai means the fund can now come into operation. With some of those questions answered, governments of rich countries have been told to “take the lead” in funding, and the World Bank is envisaged as an initial host.
However, the IMF chief said challenges remained, including putting in place policies to speed up decarbonisation, eliminate fossil fuel subsidies and expand the use of carbon pricing.
“The biggest challenge is to address the policy obstacles for faster decarbonisation,” Ms Georgieva said.
Governments should eliminate fossil fuel subsidies to accelerate decarbonisation goals, she said.
Direct and indirect fossil-fuel subsidies surged to a record $7.1 trillion in 2022 as governments supported consumers and businesses, and higher fuel prices and inflation rates sparked a cost-of-living crisis.
Ms Georgieva also called for wider use of carbon pricing, which creates an incentive for the biggest polluters to decarbonise their operations quickly.
Carbon pricing determines the cost that a company needs to pay for its planet-warming emissions and is considered by the IMF as a cost-effective way to cut such pollution.
The Washington-based lender views carbon pricing as a tool that leads to more government revenue, creates incentives for changes in behaviour and is fair as companies pay for the emissions they produce.
Carbon pricing currently covers close to 25 per cent of emissions, up from 10 per cent a decade ago, according to the IMF.
Average carbon prices are also increasing in areas where they exist, reaching $20 a tonne, but that remains below the target of at least $85 a tonne by 2030.
“We have a long way to go and the private sector would actually welcome a clearer price signal on carbon because then they would know how to structure their investments and we would see a peak of investments as a result,” Ms Georgieva said.
The IMF chief's comments come as top policymakers and business leaders gather in Dubai for the UN's two-week long climate summit, which is scheduled to end on December 12.