‘The role of Ministries of Finance in the green transition’ – opening remarks by the Eurogroup President, Paschal Donohoe, at the Coalition for Capacity on Climate Action (C3A) Symposium
It is a great pleasure to welcome you to the World Bank’s inaugural Coalition for Capacity on Climate Action Symposium. I hope you have enjoyed the technical and working sessions so far, and networking and learning from your colleagues and peers around the world.
Working collectively, coordinating closely, and discussing matters of common responsibility is the essence of the Eurogroup, the body of Finance Ministers which I am privileged to chair.
I really want to encourage and support the C3A, together with the World Bank in convening efforts to strengthen the knowledge and capacity of Ministries of Finance around the world to play our role in the ecological transition.
To kick off the final day of this event, this morning I want to talk about three things:
- Questions we need to answer,
- Managing political priorities, and
- Scaling action.
Some questions we need to answer
The climate transition is the great test of our age.
It is challenging every aspect of our lives and our societies, from the way we heat our homes and get to work, to how we make budgets and decide what industrial strategies we pursue for our countries.
The way I see it, as economic and finance ministers and politicians, policymakers and researchers, there are a number of major questions we have to answer. For example:
- How can innovation and investment in low carbon technologies drive economic development?
- How should the transition be funded?
- And, what will the macroeconomic effects of technological innovation and diffusion policies be – on employment, on economic growth, and on trade?
Economic frameworks, models and policies will be critical to providing some of the answers to these questions. More important will be your expertise, analyses and judgement.
Looking ahead to COP30 in Brazil, answers to these questions are central to the broader question posed by this symposium:
- What should the world look like a decade after COP30, and what steps should be taken now to set the course for a successful transition?
This might seem lofty, but as we know, it is very real.
Managing political priorities
But the ecological transition, while all pervasive, is not happening in a vacuum. We are in a period of historic change, with new technologies fundamentally changing how we live, wars across the world, and having recently emerged from a global pandemic.
All of this is also occurring while our ecology and environment is being reshaped by climate change. The lesson from history is that any of one of these changes would have restructured the societies and economies that have gone before.
All of these changes are happening all at once.
This is why we are close to an inflection point as we look at our fiscal positions and critically the demands on public finances. We are also living in a time of growing geo-political instability.
Over the last year, political developments around the globe could result in the most significant reshaping of the international economic order in the past half-century. And as the politics of change mean difficult choices, we have seen a backlash in popular support for the green transition in some parts of the world.
To give a local example, last week we had an election in Ireland and our Green Party coalition partners from the last Government suffered an enormous loss, retaining just one seat in our Parliament. But climate action has become mainstream. All of the main parties had climate action as a centrepiece of their manifestos.
We must make the case for optimism at this moment of great political change. Hannah Ritchie, the data and environmental scientist, sums up this approach so well in her new book ‘Not The End of the World’ – ‘We have the opportunity to the first generation that leaves the environment in a better state than we found it. The first generation in human history to achieve sustainability’.
So how can we manage these very different, and often competing political priorities: from defence, to digitalisation to decarbonisation?
First, we must continue to make climate action mainstream and maintain political focus on the opportunities. For example:
- Aligning sustainability goals with economic growth to create opportunities and lasting prosperity.
- Building climate resilient infrastructure, creating cleaner air, warmer homes, and green jobs, and fostering a healthier and biodiverse environment.
- Reducing energy poverty, preparing for climate adaptation and extreme weather and supporting industry to decarbonise.
We must demonstrate how the climate transition is the answer to so many issues from energy security, to better jobs and our future economic success.
Second, we must act together.
Collective action and cooperation are the solution to such market failures, threats, transitions and externalities. A liveable climate is our collective goal, whether we like it or not.
Climate change doesn’t care whether you are politically left, right, populist, or green.
But if we can focus on the opportunities and create the right incentives for change then cooperation becomes more likely and acting collectively more probable.
We need this at every level:
- At a local level as strong community involvement needs to be at the heart of our approach to climate change.
- At a national level, across the private sector and indeed government. And here ministries of finance can play a critical role. Managing different priorities is the ‘bread and butter’ of finance ministries. Budgets are by their very nature about balancing competing priorities.
- At regional level. In Europe, for example, the European Green Deal is where much of the EU’s climate policy emanates.
Finally, cooperation and collective action at a global level, which I will turn to now. Climate change is our common challenge. Our strength and our power to tackle it is in our togetherness.
Scaling action
The discussions this week take place following COP29 in Baku, Azerbaijan, in which delegates agreed on a new climate finance goal.
The new goal of at least 300 billion dollars annually by 2035 is triple the amount of the previous target, aiming to mobilise much-needed finance for developing countries to cut emissions and address the mounting impacts of climate change.
In addition, COP29 called for total financing for climate action in developing countries to reach at least 1.3 trillion dollars per year by 2035. Also welcome was the agreement on Article 6 of the Paris Accord on International Carbon Markets, resolving 9 years of negotiations.
While the outcome did demonstrate that countries are still committed to working together on climate action — even if imperfectly — more ambition is essential, especially in the run-up to COP30.
Capacity-building, technology transfer and financial support will remain critical in ensuring developing countries can position themselves in a rapidly evolving global economy subject to mounting climate and nature-related physical and transition risks.
But where there is risk, there is also opportunity.
As Nick Stern and Amar Bhattacharya, who will both address us today, have argued, the world has in its hands a new development story driven by investment and innovation in green technology, and this is a much more attractive and inclusive story than the dirty and destructive paths followed in the past.
Finance Ministries across the developing countries have an important role in managing climate risks and realising that new growth story. By doing this, we can really scale action.
Finance Ministers recognise that acting now avoids some of the costs of climate inaction and could unlock trillions in investments and create millions of jobs. But leading the response requires new capacities.
So we should turn to the Helsinki Principles, specifically Principle 2, which was adopted by the Coalition of Finance Ministers for Climate Action, which I am pleased to say Ireland joined from the outset whilst I was Minister for Finance in 2019.
This calls for sharing “our experience and expertise with each other in order to provide mutual encouragement and promote collective understanding of policies and practices for climate action”.
And this call is where C3A comes in. And why we are all here today.
C3A is a demand-driven effort to facilitate dialogue, mutual learning, co-creation and exchange on how Finance Ministries can tackle issues ranging from modelling climate damages and tapping new sources of innovation and productivity to transition fiscal and financial risks and valuing nature and integrating it into macroeconomics.
I’m tremendously encouraged by the discussions that have taken place this week for their analytical depth and policy relevance.
The engagement of policymakers from Latin America, Central Asia and Africa highlights that C3A is succeeding in creating, in collaboration with regional partners, a space for debate, critique and experimentation.
All over the world we need to intensify our efforts to keep humanity on track to meet the Paris Agreement. COP30 at the end of 2025 will be a decisive moment in that regard.
As Martin Wolf – who I am pleased to open this event with – has argued recently, climate change is a “wicked” problem – a classic negative externality that will not be solved by any one country.
To succeed, policy must be effective, legitimate and global.
The climate transition is a complex and multidimensional transformation process that involves many actors across many governments, as well as many opportunities and risks.
Shaping and coordinating appropriate policy options requires renewed analytical and conceptual frameworks, as well as a revamping of capacities within Ministries of Finance to match these challenges. C3A is offering a welcome initiative in that direction.
Let me conclude by saying I hope that the discussions today will contribute to the World Bank’s mission and our common goal to end extreme poverty and promote shared prosperity on a liveable planet.
