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Putting Climate at the Heart of the Economy: Could Korea Be the Key Player in a New Global Economy?

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Korea's success in luring the Green Climate Fund to the Songdo International Business District confirms its increasing importance in the fields of finance and international relations. The selection of Songdo, an experimental city combining the best of Korean technology, global business acumen and cultural creativity, also hints at the appeal of Korean innovation and the potential to create a financial center in an age within which the economy moves according to different axes.

Interestingly, although Koreans were rightfully proud of this decision, there has been little discussion about the long-term implications of the new-born Green Climate Fund setting up shop in Korea for the nation's global role.

The Green Climate Fund is just starting, but it is broadly perceived to have the potential to serve an institution that is as critical to the world economy, if not more so, than any other part of the Bretton Woods system.

When the World Bank was established in 1944 for the purpose of alleviating poverty, there was no awareness of the threat of climate change for human civilization, or its profound impact on developing societies. But Green Climate Fund is an institution that takes climate change head on, not just as a small part of its operations as is the case with the World Bank's "green bonds." When this global institution dedicated to funding projects in the developing world for adaptation to ecological challenges and climate change mitigation sets up shop in Songdo over the year, it could become the core of a new green economic cluster. That cluster could formulate global responses to unprecedented climatic threats that go beyond our simplistic assumptions about nation states and economic growth.

Although the role of the Green Climate Fund might seem minor to some on Wall Street, the challenges of the future will require large-scale responses, suggesting that in fact adaptation and mitigation could become the primary issue in finance. Korea should not only host the Green Climate Fund, but work closely with stakeholders in the developed and developing world to clearly define and expand its role. Korea is uniquely positioned to play this role in light of its strong ties with Africa, South America and Asia -- serving as an "honest broker" that is truly first among equals.

Korea enjoys enormous prestige in the developing world as the sole example of a developing nation that has entered the camp of developing nations in all respects. Developing nations see much to benchmark in Korea in terms of infrastructure, government and technology -- precisely because Korea is not so far from where they are now. Korea is a middle power that could succeed where others have failed.

But it is above all the potential for innovation in Korea that makes the locating of the Green Climate Fund in Songdo so exciting. We will need to rethink many of our assumptions about growth, currency, trade and security as we are forced to come to grips with climate change. Korea has shown a willingness to take chances, to imagine new fields and new possibilities, going beyond the institutional conservatism found so often in Europe and the United States.

It is clear that the Green Climate Fund focus on the climate itself and the shift to long-term investments aimed at the common good of the entire globe are intended as a move against the speculation that has so roiled the economies of the world. Although the kinks may take a decade or so to iron out, the potential of this shift is historic and Korea's role in that subtle transformational moment is critical.

Korea has taken the initiative in financing low-carbon emissions and sustainable development. In February 2013, the Korea Export-Import Bank (KEXIM) issued a $500 million green bond to support long-term renewable energy, energy efficiency and clean water projects. This is the first time that a national bank has issued a green bond and moreover offered it globally for mainstream institutional investors. As such financial innovations are benchmarked by the developed and developing world, we will see the beginnings of a financial revolution.

Moreover, Korea has the know-how for reforestation that resulted from its efforts to cover its bare mountains with trees after the devastation of the Korean War. That capacity is already being put to good use overseas by Korean NGOs like Future Forest (Kwon Byong-hyun president) through its tree planting work in the Kubuqi Desert (Inner Mongolia). If Korea serves as a model for the developing world not only for how to develop IT research laboratories or plan smart grids, but also to bring back forests and sustainable farming, the Green Climate Fund will be much enriched and could evolve into a central financial institution for the world.

Although it is too soon to say what Korea's role will be in reshaping the world of global finance, I think we can take heart in the fact that Korea has most recently made clear that banks must serve a public goal and scaled back the privatization of the banking sector with the decision against privatizing the Korea Development Bank and in favor of maintaining a share of 50 percent or more in the Industrial Bank of Korea. Korea is doing far better at keeping finance focused on critical issues than the United States or Europe and that difference could be decisive.

I encourage Koreans to be bold and creative in their work with the Green Climate Fund going forward. We need to use the climate issue to create a common agenda that grounds finance in the common good. We need to consider new instruments that tie currency directly to the state of the environment (an "eco-currency") and come up with new metrics for assessing growth and development. The danger posed today by the "currency wars" born of short-term national interest makes this issue all the more pressing and Korea's role all the more urgent.

Based on an op-ed in The Hankyoreh.

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