IMF on Climate Change: We want to Play

The International Monetary Fund (IMF) is attempting to do what couldn't be done at the international climate change conference in Copenhagen last December: Transfer large sums of wealth from developed countries to developing ones in the name of climate change, says the Heritage Foundation.

Dominique Strauss-Kahn, head of the IMF, said the organisation is helping to set up a "green fund" that would raise $100 billion a year by 2020 to mitigate the effects of climate change in developing countries:

  • Strauss-Kahn indicated the fund may use its quotas, which reflect member countries' financial capacity and obligations within the IMF, to raise initial funding; the IMF would not manage the money raised.
  • Last year, an increase in quotas allowed the institution to boost global liquidity by more than $250 billion at the request of the Group of 20 leaders.

    There are prudent ways to help developing countries protect against natural disasters but more foreign aid isn't one of them, says Heritage. Ben Lieberman, a senior policy analyst with Heritage who witnessed many of the developing countries' pleas for handouts, lists several problems with foreign aid: "In many cases only a fraction of the funds were well spent, and aid can encourage the perpetuation of the very reasons (and regimes) that gave rise to the need for assistance in the first place. Foreign aid doled out to fight global warming has another big drawback – the problem it addresses is an overstated one."

    More economic freedom will allow developing countries to actually develop and build houses and buildings more resistant to natural disasters, says Heritage. Instead of establishing green funds, we should be working to open up markets to help countries improve both their economy and their environment. Engaging in freer trade is a fundamental part of a strategy to better promote the evolution of sensible environmental regulations by empowering countries with the economic opportunity to develop and raise living standards.

    Source: Nick Loris, IMF on Climate Change: We Want to Play, Heritage Foundation, March 8, 2010.

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    First published by the National Center for Policy Analysis, Dallas and Washington, USA

    FMF Policy Bulletin/ 16 March 2010
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