A Global Accord for Sustainable Finance
With national climate commitments and a renewal of multilateralism both gaining momentum, there is a unique opportunity to forge a global consensus on issues such as carbon pricing, the green transition, and sustainable finance. In each case, the European Union offers a promising model for others.
FRANKFURT – The COVID-19 pandemic has caused the largest decrease in global economic activity on record. But the drop in carbon dioxide emissions has been only temporary. Although global CO2 emissions fell by 6.4% overall in 2020, they had already begun to increase in the second half of the year and have now returned to pre-crisis levels.
The fact that last year’s extraordinary circumstances still did not bring global emissions into line with the targets set by the 2015 Paris climate agreement is a stark reminder of the scale of the challenge we face. As the Nobel laureate economist William Nordhaus reminds us, climate change is the quintessential global externality. Its effects are spread around the world and no country has sufficient incentives or capacity to solve the problem on its own. International coordination is therefore essential.
Fortunately, a return to multilateral cooperation through the G7, the G20, and the Financial Stability Board offers a unique window of opportunity. Following US President Joe Biden’s decision to rejoin the Paris agreement, the European Union’s commitment to reach carbon neutrality by 2050, and China’s pledge to do the same by 2060, we may now be at a turning point for global climate action.