* IMF board rejects Fund's involvement in green fund
* Staff proposal sees mobilizing $100 bln a year
By Lesley Wroughton
WASHINGTON, March 25 International Monetary
Fund member countries have rejected an idea supported by IMF
chief Dominique Strauss-Kahn to create a green fund to help
developing nations pay for the impact of climate change.
The IMF made no public acknowledgment of the rejection by
the board and instead published the proposal on Thursday as a
staff paper, emphasizing it did not represent the views of IMF
Board officials privately told Reuters the paper was the
subject of much disagreement at an informal meeting earlier in
March, where many members argued the IMF had no expertise or
mandate to address climate change.
The paper said the IMF would not create, finance or manage
the green fund and that the proposal should be seen as part of
the overall debate over how to finance climate adaptation. It
is a big theme in global talks on a new climate treaty expected
to be hammered out in Cancun, Mexico, at the end of the year.
Strauss-Kahn has been a proponent of creating a green fund,
something he first mentioned during the World Economic Forum in
Davos earlier this year.
The IMF paper outlines ways for mobilizing $100 billion a
year by 2020 to help poor countries cope with climate change.
This is the same amount the World Bank and United Nations
estimated last year as the cost to developing countries of
adapting to the impact of climate change -- which is equivalent
to foreign aid flows provided to poor countries by rich ones.
Developing countries argue rich industrial economies that
prospered while using environmentally damaging fossil fuels
should help poorer countries deal with climate change.
The IMF paper proposes rich countries make an initial
contribution to the green fund in the form of IMF special
drawing rights, or SDRs, an international reserve asset and the
fund's unit of account.
Last year, IMF member countries agreed to issue $250
billion worth of SDRs to central banks to boost liquidity in
the face of a financial crisis and credit squeeze.
The idea would be that developed countries would make an
initial capital injection into the fund using some of the $176
billion worth of SDR allocations from last year in exchange for
a stake in the green fund.
The fund would then leverage resources from private and
official investors by issuing low-cost "green bonds" in global
capital markets, the IMF paper said.
The fund would use the money to provide grants or cheap
loans to developing countries to deal with climate change.
Strauss-Kahn unveiled the proposal to IMF member countries
during an informal board meeting on March 4, a day before he
left for Africa where he launched the idea in Nairobi, Kenya.
Board officials, speaking on condition of anonymity, told
Reuters most of the 24 directors present, except for those from
France and Britain, rejected the proposal.
They said board members, speaking in turn, told
Strauss-Kahn that climate was not part of the IMF's mandate and
that SDR allocations are a reserve asset never intended for
"The message to the managing director was clear ... no one
wants the IMF involved in this," one director from a large
developing country said.
Another director complained that Strauss-Kahn was trying to
make the IMF relevant in an area it had no expertise and would
probably require a change in the IMF's articles of agreement if
it pursued the idea.
The director said climate-related development should be
left to the World Bank, which already oversees several funds to
deal with clean technology and climate adaptation.
In a speech in Nairobi, Strauss-Kahn acknowledged while
"some rightly argue that climate change is not in the mandate,"
the amount of resources needed for climate change would have a
bearing on countries' economies.
He said the IMF did not intend to manage such a fund but
"now is the time to put new ideas on the table."
Oxfam, the international development group, welcomed the
IMF proposal, saying it showed there are ways to deliver
large-scale resources to fight climate change.
"The fact that the IMF is proposing that adaptation efforts
are funded by grants rather than loans is positive," said Oxfam
spokesman David Waskow. "Worryingly, what is not specifically
laid out in today's proposal is where this money will come
He said money needed to be funneled through a "fair and
accessible" fund that is accountable to the U.N. climate
(Editing by John O'Callaghan)