Climate Bonds

A sustainable future is only possible if we can limit global warming to 2°C. To still achieve this goal, an estimated $1,000 billion need to be invested annually in developing climate-friendly renewable energy production. Due to the subsidies provided for fossil fuels, targeted support measures are needed to make renewable energy investments attractive to investors. Financing such support measures is one of the main responsibilities of the Green Climate Fund (GCF) within the framework of the UNFCCC, aiming to raise $100 billion p.a. by 2020. This raises two questions: What is the likelihood of this goal being met each year, and will $100 billion be sufficient to make annual investments of $1,000 billion dollars profitable or will funding of at least 300 billion dollars be required? Previous experience with financing commitments from tax or semi-public funds- such as revenues from emissions trading- indicate that the sums which will actually be disbursed will regularly fall short of the ones promised. An alternative way of financing and providing sums larger than 100 billion dollars to the GCF could be the involvement of central banks. These can never become insolvent in their own currency due to their monopoly of issuing the legal tender – even if they purchase non-performing assets. The economic potential of central banks was witnessed during the bank bailout, leaving no apparent reason why the