The finance plan is part of a rush of actions as the administration seeks to prove to the world that the U.S. is back in the global fight against climate change. The president is also preparing to issue an executive order addressing the financial risks posed by climate change and to vow to cut U.S. greenhouse gas emissions in half by the end of the decade from 2005 levels.
Spokespeople for the White House and Treasury did not immediately reply to a request for comment.
Rich countries pledged in 2009 that by 2020 they’d collectively devote $100 billion annually to climate finance but have fallen far short. As the country responsible for the lion’s share of greenhouse gases in the atmosphere today, the U.S. is under pressure to loosen its purse strings.
“What America does on climate finance really will set the tone for the rest of the world,” said Joe Thwaites, an associate with the World Resources Institute’s Sustainable Finance Center.
“An ambitious pledge from the U.S. is going to unlock more ambition on climate finance from other countries,” Thwaites said, citing the Group of Seven industrial countries. “The rest of the G7 knows that the pressure is on, but they’re all waiting to see what the U.S. does here.”
The administration is honing in on a pledge to reduce planet-warming greenhouse gas emissions by 50% from 2005 levels before the end of the decade, building on the previous U.S. commitment under the Paris climate accord. That new “nationally determined contribution” compares with a target of 26%-28% by 2025 set by former President Barack Obama.
Biden is also preparing to issue an executive order addressing the financial risks posed by climate change. In it, Biden will direct Treasury to work with members of the Financial Stability Oversight Council to share climate-related financial-risk data and issue a report within six months on efforts to address such risks by each independent regulatory agency, Bloomberg News reported last week.
The virtual summit with world leaders Thursday and Friday is meant to galvanize global efforts to keep global temperatures from rising more than 1.5 degrees Celsius (2.7 degrees Fahrenheit) from pre-industrial levels.
“During the summit, leaders will also discuss mobilizing public and private sector financing to drive the net-zero transition and to help vulnerable countries cope with climate impacts,” White House Press Secretary Jen Psaki said Friday.
Biden sought the climate finance plan as part of a Jan. 27 executive order directing the Treasury and State departments to sketch out how the U.S. will steer capital away from high-carbon investments and help developing countries pare their own greenhouse gas emissions.
The resulting strategy is also expected to lay out plans for dramatically boosting U.S. aid to help nations adapt to climate change and shore up their defenses against the rising seas, intense storms and other impacts of global warming, said two of the people familiar with the matter. Much of the funding would be channeled through the U.S. International Development Finance Corporation, the people said.
Full funding details are unclear and may not be spelled out, according to one person familiar with the matter. There’s risk for the administration in laying out a specific financial commitment, since a number seen as too low could chill action by other nations. Still, the administration may announce as much as $20 billion in climate financing over four years for developing countries, one of the people said.
The administration also is seeking to use its influence in encouraging international lenders such as The World Bank Group and the International Monetary Fund to turn even further away from fossil fuels, including natural gas, said one of the people. The Treasury Department is developing new guidance for U.S. representatives to multilateral development banks that would shape their votes and encourage more climate-friendly investing, after former President Donald Trump sought to encourage fossil fuels.
Biden has already asked Congress for $2.5 billion in spending on climate finance as part of his budget request for the fiscal year that starts Oct. 1. That includes funding for bilateral climate programs run by the State Department and the U.S. Agency for International Development, as well as $1.2 billion for the United Nations Green Climate Fund that helps developing nations shift to clean energy and deal with the impacts of climate change.
The U.S. still hasn’t made good on former Obama’s 2015 pledge to donate $3 billion to the Green Climate Fund. Trump halted spending on the program after just $1 billion went out the door. In the meantime, other nations, including France, the U.K. and Germany, doubled their initial funding pledges.
The U.S. has to make up ground, said Rachel Cleetus, a climate and energy policy director with Union of Concerned Scientists. “We not only have to make up for that, we need to double our GCF pledge now as many other major economies have done.”