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About the Pact:
| Objective | To improve low-income governments’ access to crisis funding, reduce their debt loads, and free up money to address climate change. |
| Additional lending Capacity | $200 billion more in lending capacity for multi-development banks (MDBs) to aid developing nations in tackling climate challenges. |
| Suspension of debt payment by World Bank | Disaster clauses for loan agreements were announced by the World Bank, suspending debt payments in the event of severe weather-related catastrophes and offering financial assistance. |
| Steps by IMF |
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| Polluter Tax | Encouraging the introduction of pollution charges as a tool for discouraging environmentally damaging practises. |
| EU Initiative | The EU published a call to action on “Paris Aligned Carbon Markets” with the objective of using carbon pricing mechanisms to cover at least 60% of worldwide emissions. |
| Challenge | The current pledge of $100 billion hardly scratches the surface of what the Global South would ultimately need to build resilience against climate change ($2 trillion yearly by 2030 for developing nations outside of China). |
Why in news?
The ‘Global Financial Pact on Climate Change summit was held in Paris.
