Can Mario Draghi pull COP26 across the finish line?

Luca Bergamaschi is co-founder of ECCO, an Italian independent think tank on climate change.

The first drafts are out in Glasgow, and the United States and China have just agreed to work together to increase their climate ambitions in the 2020s. This is all good – yet not good enough to bring COP26 over the finish line.

The proposed text being hammered out in the closing days of the COP26 climate conference is ambitious, but there’s still more to be worked out. Crucially, there’s still a notable lack of confidence regarding the willingness of rich countries to help the most vulnerable adapt to the consequences of climate change and compensate them for the loss and damages of our more dangerous future.

An agreement on finance will be critical to making the summit a success — but it also is the draft’s biggest gap. Plugging it will require rich governments, in particular European countries and the U.S. to show up and build the trust and the coalitions needed for a strong consensus outcome. The looming question is, where will that political leadership come from? 

The G7 landscape doesn’t look rosy: The U.S. is hamstrung by Congress and has just struck a deal with China; Germany doesn’t yet have a government; France is facing one of its most uncertain elections; the U.K., via its treasury, has just embarked on fiscal austerity; the Japanese government is only two weeks old, and Canada’s is not much older. 

That means, for a successful COP, all hope might rest — once again — on the leadership of Italian Prime Minister Mario Draghi.

The lack of progress on giving both short- and long-term finance the same weight as mitigation efforts won’t go down well with vulnerable countries. And without a clear, broad and deep financial offer from leaders, there is high risk of a low ambition outcome that sets us far from the path of achieving our goal to keep global temperature rise below 1.5 degrees Celsius. 

It is not an exaggeration to say that Draghi and Italy could pull COP26 across the finish line. In his opening speech, Draghi declared, “we need a quantum leap on the fight against climate change” — and we certainly need the same on political leadership. In doing so, he could also set the foundations for reforming the global financial architecture and effectively move toward a Bretton Woods 2.0 world — a world with a brand-new monetary order.

In Glasgow, Draghi has already depicted this new landscape — one that responds to the urgency of climate change and enhances the global financial system’s capacity to mobilize “tens of trillions.” For that, however, we need a fundamentally new role and new rules for multilateral development banks and international development finance institutions, in particular the World Bank and the International Monetary Fund (IMF).  

Critical changes are needed to provide access to those who really needed it, avoid conditionalities, ensure the trillions needed do flow to developing countries, build country-led platforms and co-share risks with private sectors. Critically, both adaptation and loss and damage should be put on equal footing with mitigation investment.

Announcing this agenda, with the support of a dedicated task force to move it forward, and a Leaders Summit in 2022 could potentially be a breakthrough. And yet, it might not be enough without putting “real” money on the table, here and now, while ensuring the credibility of commitments — particularly those from the private sector.

That’s where the special drawing rights (SDRs) come in. These reserve assets that the IMF can issue, effectively provide more assets that its members can use. In response to the pandemic and the need for liquidity, the IMF issued $650 billion in SDRs, and the G7 enjoyed over $280 billion thereof.

Announcing a significant SDRs reallocation at COP26 could be the other piece of the puzzle. The IMF’s new Resilience and Sustainability Trust — set up during the Italian G20 presidency — is there to be used, provided it delivers when it comes to adaptation, loss and damage, and ensures universal access without conditionalities.  

Draghi has the potential to become the front-runner that rallies Europe and other donor countries behind a financial offer that keeps the 1.5-degree goal alive. A welcome geopolitical truce between the U.S. and China is necessary, but it is not a sufficient condition for an ambitious outcome in Glasgow. What COP26 really needs is a combination of — and a coalition for — ambition, credibility and solidarity. This is exactly what saved the eurozone in 2012. Can Glasgow become Draghi’s next whatever-it-takes moment? We’ll soon see.