Larry Summers' trillion-dollar climate spending plan
Larry Summers — who spent the last year-and-a-half warning about easy money and inflation — is calling on the World Bank to loosen its lending limits to combat climate change and think in the "trillions not the billions."
The big picture: Summers wants the U.S. to increase its capital contribution to the bank by $5 billion. With a total of $30 billion in new capital from across the globe, along with a revamped financial model, Summers argues that the bank could lend some $100 billion per year, with much of it directed towards energy projects.
Why it matters: The World Bank is front and center in the debate on how far and how fast industrialized economies can push developing countries to transition to green energy.
Driving the news: The former Treasury secretary and top White House economist told Axios ahead of this week's annual meetings of the International Monetary Fund and World Bank that the bank should take "the immense opportunity to catalyze finance and greatly accelerate the green energy and green agricultural transition.”
- His comments follow an op-ed published Monday in Project Syndicate.
The intrigue: Summers, a candidate to lead the bank under President Obama, will be interviewed Tuesday at 1:30p ET as part of the annual meetings by embattled bank president David Malpass, whom former Vice President Al Gore last month labeled a "climate denier."
- Malpass’s term ends in April of 2024, meaning a decision about his replacement will likely be made in the summer of 2023.
- A holdover from the Trump administration, Malpass had appeared to question that burning fossil fuels was warming the planet. He later clarified his remarks in an interview with CNN and an internal bank email.
- White House officials condemned Malpass's comments, but removing him would be exceedingly difficult and could end the informal agreement giving the World Bank’s presidency to the Americans and the IMF to the Europeans.
Don't forget: Summers has vexed the White House for suggesting that Biden stoked inflation by spending too big in his first year as president.
- But now he’s on the side of bigger investments. He’s calling for more funding for the World Bank and wants it to use its leverage to finance trillions of dollars in new projects.
- Treasury Secretary Janet Yellen also wants to work with shareholders to help the bank develop a new roadmap to include a greater emphasis on climate.
Zoom in: Summers' op-ed calls attention to what he sees as the bank’s underutilized lending capacity: “Given the magnitude of global challenges over the next decade, we should be thinking in the trillions not the billions for the Bank."
- He told Axios that the bank "shouldn’t focus on overly broad restrictions such as lending to natural gas power plants" and “they need to focus on what they can do, and to take the immense opportunity to catalyze finance and greatly accelerate the green energy and green agricultural transition.”
The bottom line: Now that President Biden has passed some $370 billion in new domestic climate spending, officials are shifting their focus to the international arena to reduce global carbon emissions.
- Summers wants bank reform to be a central part of that discussion.