As prepared for delivery.
Thank you, Ministers Sri Mulyani and Saarikko.
I’m very pleased to join Ministers and partners at this gathering of the Coalition of Finance Ministers for Climate Action. I want to focus on climate and then I’ll give our view on the global outlook, where we share Kristalina’s concerns.
It’s clear that climate change presents major challenges. The World Bank Group (WBG) can help in many ways – and we are working closely with the IMF and with other multilateral development banks (MDBs).
We are implementing our Climate Change Action Plan with clear, intense, and focused measures to help our client countries fully integrate climate and development. They require diagnostics, impactful projects, WBG resources, and large-scale financing. A principal goal of our action plan is to build the financing mechanisms to help the global community support global public goods, such as climate action in developing countries.
As you know, we are spending over 35% of our growing resources on climate-related efforts, of which half is for adaptation. Your subscriptions to the recent capital increases for IBRD and IFC, plus your generous contributions to IDA, are being leveraged into sustainable development. We’re achieving development leveraging ratios that are by far the highest among MDBs and we are working with you and bond markets to leverage more in sustainable ways.
To help increase the financing flows to climate from the global community, we are proposing SCALE, which stands for Scaling Climate Action by Lowering Emissions. Integrated within our climate change operations, this new umbrella trust fund will provide grant payments to developing countries for achieving verified emissions reductions. Governments could use the funding for just transition, low carbon development, or for blended finance to cover part of the interest payments of projects.
We have also been working intensely on coal decommissioning projects, for example the Komati coal-fired power plant in South Africa. These are complex and challenging projects that deal with all aspects of the just transition. We are looking to bring a demonstration project to our Board for approval in the next few weeks.
On methane emissions, one of the most potent greenhouse gases, we are deepening our engagement with a fast mitigation sprint. We need our clients to work more systematically on these issues, such as reduced gas flaring and methane leakage. We are providing analytical and financial support to methane emission reduction projects, and engaging with other partners and the private sector to increase our impact.
Investments in adaptation and mitigation are needed across the world, many of which come from the public budgets you manage.
Our Country Climate and Development Reports (CCDRs) are also looking carefully at the level of investments needed. For example, we published the CCDR for China this morning, and it shows that China needs $14 trillion of additional investments in the power and transport sectors alone for the transition from now until 2060, equivalent to 1% of GDP. We see that in Vietnam additional investments of 6.8% of GDP per year will be needed until 2040. So you can see the need for initiatives such as SCALE to channel large amounts of funding from the global community to address these issues.
Our CCDRs also illustrate that the transition requires a shift in technologies, stimulating innovation and driving down cost curves. We welcome the recent announcement from the U.S. of a nearly $1 billion loan to the Clean Technology Fund, which will help scale up low carbon technologies in developing countries.
We’re also working to help countries build country platforms to engage with a wide range of development actors in an efficient and tangible way. We will be inviting countries to organize investor conferences to bring development partners and the private sector together around the policy and financing findings of the CCDRs.
Turning to the global outlook, I recognize that many of you are still dealing with the impacts of the pandemic while responding to and preparing for new challenges. The negative effects of Russia’s invasion of Ukraine continue to reverberate. Our forecasts show that stagflation and recession may deepen into 2023. For developing countries, the outlook is grim, with the challenges of currency depreciation, capital outflows, high costs of energy, food and fertilizer, and unsustainable debt. My concern is that these issues may persist.
These challenges are making essential spending more expensive and difficult. I would like to offer three suggestions on this front. First, governments can enhance the efficiency of public spending while taking measures to broaden the tax base. We can help from the Bank side with our Public Expenditure Reviews. Second, regressive and expensive subsidies should be gradually phased out with clearly communicated reforms while protecting the vulnerable with targeted transfers. Finally, enabling private capital is essential, and governments can reorient policies to support competition and open trade to accelarate the transition. Our private sector arm IFC has supported the development of green taxonomies for Bangladesh, Colombia, South Africa and others, which helps to guide the flow of capital to the most impactful projects.
As the WBG, we are engaged across all of these areas and we look forward to working with you. Thank you.
