This means that the developed countries that lend the SDRs would incur no interest expense and no responsibility for repayment. There are some serious technical problems involved in offsetting the interest income against the interest expense, particularly in the US, but the net effect would be a wash. These technical difficulties stood in the way of previous attempts to put the SDRs to practical use, but they do not apply to the proposed green fund.
There are three powerful arguments in favor of this proposal. First, the green fund could be self-financing or even profitable; very little of the IMF’s gold, if any, would actually be used.
Second, the projects will earn a return only if developed countries cooperate in setting up the right type of carbon markets. Establishing a green fund would be an implicit pledge to do so by putting the gold reserves of the IMF at risk.
Finally, this money would be available now, jump-starting carbon-saving projects.
For all these reasons, the developing countries ought to embrace my proposal. The key point is that it is possible to increase substantially the amount available to fight global warming in the developing world by using the existing allocations of SDRs, with interest payments on them guaranteed by the IMF’s gold reserves.
All that is lacking is the political will. The mere fact that tapping SDRs requires congressional approval in the US ensures that nothing will happen without public pressure — including pressure from developing countries. Yet it could make the difference between success and failure in Copenhagen.
George Soros is chairman of Soros Fund Management and of the Open Society Institute.
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