Carbon pricing is essential to unlock trillions of dollars in private capital needed to reach emission reduction targets, experts and business leaders said on Thursday.
Speaking at the World Economic Forum Annual Meeting 2023 here, they urged development banks to take greater risks and coordinate their green investing to accelerate decarbonisation.
Despite the urgent need for climate finance, numerous barriers have impeded the flow of private capital to decarbonisation projects around the world and especially in the Global South, they noted.
Financial experts agreed that a major hurdle is the need for carbon pricing. "We're still resisting the necessity that carbon has to be priced, and the price has to climb up," said Kristalina Georgieva, Managing Director of the International Monetary Fund.
Public resistance to a carbon tax has prevented many nations from establishing carbon pricing via taxation but taxation is not the only way to deter emissions, she added.
Carbon trading, regulation and different pricing schemes are alternative strategies that countries have used to impose costs for emissions.
Better coordination of these strategies would incentivise private capital to invest in more net-zero projects around the world, experts argued.
Another barrier to private finance has been the lack of common standards and data on reducing emissions.
Experts expressed frustration that, after nearly three decades of COP summits, there is still a lack of common metrics on many environmental goals.
Standard Chartered Bank Group CEO Bill Winters said, "we need standards. We're all terrified of being accused of greenwashing, even if we're doing the right thing". Multilateral development banks such as the IMF as well as national development banks must play a leading role in catalysing private finance for climate change adaptation, the business leaders said.
"Multilaterals and national development banks have got to take much higher risk," said Patrick Khulekani Dlamini, CEO of the Development Bank of Southern Africa.
One problem has been that national and multilateral development banks compete for projects and do not share information, an expert said, while stressing that better coordination among public financial institutions could encourage more risk-taking and improve banks' evaluation of the risks of different projects.
Finance experts agreed that, given the urgency of emissions reductions, understanding the costs of inaction is also essential to accelerate private finance.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)