Speech by President von der Leyen at the Summit for a New Global Financing Pact
First of all, I really want to commend you for inviting and starting this Summit for a New Global Financing Pact. It is absolutely time that we do that. Many very fascinating initiatives are around this Summit here. But I want to contribute with three points.
Indeed, the first one has already been mentioned, this is Global Gateway. This is our EUR 300 billion investment programme from the European Union for investment abroad. And we have been speaking a lot about it. Of course, one of the prime projects is the JETP in South Africa. We have JETPs in Indonesia, in Vietnam, as of today in Senegal. These JETPs are for the transition to renewable energy. But we also have Forest Partnerships, as you said, in Zambia, Uganda, Congo, for example. And we have the partnerships and the Global Gateway investments, for example in green hydrogen, that we just signed at COP27 in Sharm el-Sheikh. What is important here is that this is funding from the European level. But as you heard from the different projects, this is a Team Europe approach, so the Member States are also contributing. And it is not only about funding. What is very important is also the knowledge transfer, for example, as you mentioned, the skilling and upskilling of the workforce; or, when it comes to vaccines, the knowledge about mRNA vaccines for example – I will stick here to climate because that is the topic of the Summit, but this is just an example. Another very important factor is that Global Gateway is of course a de-risking for private capital, and this is creating a conducive environment for private investors. We need the private capital. This, I think, is one of the main themes of this Summit.
Therefore, my second element is looking at the question: How can we attract more private investment in climate finance for the emerging markets and developing economies? That is the core subject that we have to deal with today. I would like to present here my second point, our new Global Green Bond Initiative. Because as I said, the problem for emerging markets and developing economies is to have access to capital markets. Without this access to the capital markets, without this access to the pension funds and the assets managers, emerging markets and developing economies will not get the funding needed to make this transition. And public money alone will not be able to come up with the solution. Therefore, we have looked at what the attractive capital markets elements are. And of course, green bonds are vital to help any kind of country to push forward the green transition and to invest in the infrastructure needs.
But if we look at the emerging markets and developing economies, then we see that there are some stumbling blocks. Basically, on the side of the countries that want to issue the green bonds, we see a lack of expertise, it is a new market element. But also on the investor side, we see that most asset managers and pension funds are not really well informed about these interesting markets. Therefore, too little is done, and they hesitate. What we even see is that, with the global slowdown and the rising interest rates, investors are even starting to pull out of these markets and economies. So last year, we saw a withdrawal of USD 70 billion from emerging bond funds. So we really have to address these issues.
Our idea and our offer are that we first of all share directly expertise and know-how on how you develop these green bond markets. Nobody issues more green bonds than the European Union. We had to learn it, too. We have stepped up massively in the last years. But it was a learning process. So we want to share this knowledge – this is very important – and also give technical assistance and expertise to build up such a market. The second part is: Of course, we also have to push the investor side. Therefore, we want to financially support the de-risking for the investors. This is the first entry, the first open door to go into these markets. And here, together with the EIB and the Development Finance Institutions of Member States, we are now committing EUR 1 billion to basically give private investors the certainty they need to step up their investments. And this could attract around USD 15 to 20 billion of sustainable investment. That is the second element.
The third element is something new on which we still have to work very hard – the green bonds exist already as a market –, this is the topic of carbon pricing. Carbon pricing is one of the most effective, if not the most effective, tool to cut emissions in a way that nudges the polluters – the industry, the traffic mobility sector, the building sector – either, if they continue to pollute, to pay for the pollution or – and this is the interesting part – that nudges the participants into innovation. And emissions trading or carbon pricing, so put a price on carbon, greenhouse gas emissions, has, as a consequence, that people decide: Do I want to pay for it? No, I prefer to innovate and go into the clean direction. We have made a very good experience with that in the European Union. Just to give you a figure: We started to introduce carbon pricing in 2005 – lots of learning processes had to be done, with successful years and less good years. But if you look back now, throughout the whole period there were revenues from carbon pricing of EUR 142 billion. And at the same time, CO2 emissions went down by 35%. So you want to reach both goals: You want to have emissions go down and their revenues.
Now, we are extending the emissions trading on buildings and road transport. And what we have newly introduced is that we say that the revenues have to go 100% into climate issues and here a fair share should go to climate finance abroad. But this is only the European Union. The initiative I wanted to propose is that we look at global carbon pricing because that could of course generate much more funding – and it is private money – that could then go into the climate finance that we so badly need. And here again, two figures: How much of the global greenhouse gas emissions are covered by carbon pricing right now? Only 4%, it is almost nothing. But these 4% have already generated USD 55 billion last year. So it is really worth thinking about how we could increase the level of carbon pricing. For example, in the highly developed countries, if we take the G20, they generate 80% of greenhouse gas emissions. If we only cover for example 60% of the greenhouse gas emissions with carbon pricing, you can imagine what could be generated and how much investment this could liberate to go into climate finance.
So Global Gateway exists; green bonds are on a good way; carbon pricing, we still have to work a lot on it. But the proposal is fully aligned with the Global Carbon Pricing Challenge that Canada launched on carbon pricing. And I think it is really worth looking into it.
