IPS Blog

The World Bank likes to talk a good game on climate change. But when it comes to taking action, its approach can be “too narrowly focused, small scale and uncoordinated,” admits Bank President Jim Yong Kim. Worse still, it often backs entirely the wrong strategies, like carbon markets, while continuing to invest billions every year in new fossil fuel infrastructure.

VIEW NEW WEBSITE HERE: www.climatemarkets.org.

Since taking the helm, Jim Kim has made repeated promises that addressing climate change – and the devastating impacts it has on development – will be at the center of the Bank’s agenda. Key to this is a new Presidential Task Force on Climate Change, which will examine fossil fuel subsidies, carbon markets, “climate smart” agriculture, and partnerships to build cleaner cities. At the same time, the Bank’s low-income focused International Development Association (IDA), and its private sector arm, the International Finance Corporation (IFC), have both identified climate financing as a priority area.

The World Bank-IMF spring meetings convening in Washington DC provide an opportunity for the Bank to flesh out a new approach. The early signs are not promising, though. Carbon markets remain a central pole of the bank’s strategy, with $110 million pledged to a “Partnership for Market Readiness” that is encouraging the creation of new markets modeled on a European scheme that has already virtually collapsed.

There are indications, too, that much of the Bank’s “bold” new thinking is based on reaching out to the financial sector, using some of the same Wall Street tricks that proved so devastating for the United States and global economy in the 2008 crash. The Bank isn’t alone in this approach: the Green Climate Fund, and many of the other international financial institutions, are looking to encourage (“leverage”) private sector finance to plug the massive holes in climate financing left by industrialized countries failing to meet their obligations.

Dusting down the same old financial approaches isn’t going to work. In climate circles, it's already possible to hear the familiar refrain that rich-country austerity means that “There Is No Alternative” to courting the private sector. To which we’d respond: the United States is not broke, and neither are the other industrialized (“Annex I”) countries that should be making far larger public financial contributions and developing ambitious domestic plans to curb the greenhouse gas emissions that cause climate change. On the financial side, these could be supplemented by a range of genuinely “innovative” approaches, including financial transaction taxes, or a "Robin Hood tax."

We’ve set up a new website on Climate Finance and Markets (climatemarkets.org) to explore these new approaches, and to monitor how the World Bank, the Green Climate Fund and others are courting the financial sector.

The site, put together by IPS with the support of the Heinrich Böll Foundation North America, offers a range of materials that could help climate activists and advocates understand the new financial tools that are emerging, the role of key private sector actors (from banks to private equity funds), attempts to “leverage” private investment, and alternatives to this Wall Street-driven approach. Bank staff, public officials and journalists attending the World Bank-IMF spring meetings could even learn a thing or too as well.

See climatemarkets.org or follow us on Twitter @ClimateMarkets1

IPS joined other members of the U.S. Robin Hood Tax campaign in Washington DC, where officials from the finance and climate ministries of select developed countries met to discuss how to mobilize private sector investment in developing countries to address climate change. Chanting, "Human need, not corporate greed! Robin Hood Tax now!" protesters dressed as polar bears, farmers, and bankers engaged with officials entering the meeting to urge them to support a Robin Hood Tax.

This demonstration drew attention to the fact that trillions of dollars of public money have been spent to bail out Wall Street while government officials pay short shrift to untapped and extremely promising innovative sources of public money like a Robin Hood Tax. In doing so, officials risk putting corporate profits over the needs of climate-impacted people.

Both the financial crisis and the recession have left a massive hole in public finances, threatening job creation, community services, and the ability to address climate change. While Wall Street has already bounced back, ordinary people are still trying to recover from problems caused by corporate abuse in the financial sector. The Robin Hood Tax calls for the institution of a small tax of less than half of one percent on Wall Street transactions in order to generate many billions of dollars each year toward crucial public goods and services, like healthcare, education, and helping the world’s poor confront the climate crisis. 

VIEW RECENT ARTICLE ON CLIMATE FINANCE BY JANET REDMAN: http://www.fpif.org/articles/wall_streets_climate_finance_bonanza 

1) Say no to the Keystone XL pipeline.
Without waiting for Congress the State Department can deny TransCanada’s request for permission to build a pipeline across the United States carrying toxic tar sand oil to polluting refineries in the Gulf of Mexico.

2) Regulate power plants.
Since the Supreme Court ruled that greenhouse gases are pollutants in 2007, the Environmental Protection Agency has the power to put controls on carbon emissions. This means the EPA has tools to regulate new and existing power plants and industrial sources that are spewing methane, nitrous oxide and soot into the air.

3) Curb natural gas exports.
The Department of Energy can reject licenses for oil and gas industry to expand their export of liquid natural gas to countries with which we don’t already have free trade agreements. And Obama could direct the U.S. Trade Representative to withdraw from negotiations on the TransPacific Partnership, which would fling the doors wide open to LNG export to countries in Asia.

4) Negotiate a global climate deal in good faith.
Obama should instruct the climate team at the State Department to return to the negotiating table ready to compromise in order to reach international consensus for a strong and equitable 2015 climate treaty.

In the last year, climate change has come home to the United States in a visceral way. During his State of the Union address, Obama should lay out bold plans for the transition to an ecologically sane economy that reduces inequality.

Images of waves crashing into the Statue of Liberty, wildfires engulfing homes in Colorado, and flood water shutting down the Louisiana interstate have rocked the American psyche over the past twelve months.

For me, 2012 meant living through record-breaking heat waves that buckled metro tracks and derailed commuter trains in my adopted home of Washington, DC. Sadly it also meant saying good-bye to the beach on the Jersey shore where my brother and I played as kids.

Since Obama committed the United States to responding to climate change in his inaugural address, saying that a “the failure to do so would betray our children and future generations,” American families in the Southeast were hit by severe tornados and in the Northeast by crippling snowstorms.

Of course, dealing with climate change in our country is about more than bad weather. We’ve heard about how battered infrastructure and closed businesses strain on national and local coffers. We hear less about how climate change exacerbates inequality — disproportionately impacting the lives and livelihoods of people living in poverty and low-income communities.

A shot at a better life for everyone has to entail a shift away from an “all of the above” energy plan that includes sources that poison people, pollute the environment, and lock us into decades of pumping carbon dioxide into the atmosphere. The expansion of fossil fuels and the increasingly extreme ways of getting at it — through fracking, deepwater drilling and blasting the tops off mountains — has got to go the way of the dinosaurs.

Obama said that “the path towards sustainable energy sources will be long and sometimes difficult” — no less because the fossil fuel industry and the members of Congress to whom they contribute continue to undermine legislative action on climate. But the transition to shared prosperity and a vibrant clean economy can be made easier with sustained leadership from the president and his administration.

Here are a few actions Obama can take without Congress that he can highlight in tonight’s State of the Union address to show he’s serious about the fight against global warming:

• Say no to the Keystone XL pipeline. Without waiting for Congress the State Department can deny TransCanada’s request for permission to build a pipeline across the United States carrying toxic tar sand oil to polluting refineries in the Gulf of Mexico.
• Regulate power plants. Since the Supreme Court ruled that greenhouse gases are pollutants in 2007, the Environmental Protection Agency has the power to put controls on carbon emissions. This means the EPA has tools to regulate new and existing power plants and industrial sources that are spewing methane, nitrous oxide and soot into the air.
• Curb natural gas exports. The Department of Energy can reject licenses for oil and gas industry to expand their export of liquid natural gas to countries with which we don’t already have free trade agreements. And Obama could direct the U.S. Trade Representative to withdraw from negotiations on the TransPacific Partnership, which would fling the doors wide open to LNG export to countries in Asia.
• Negotiate a global climate deal in good faith. Obama should instruct the climate team at the State Department to return to the negotiating table ready to compromise in order to reach international consensus for a strong and equitable 2015 climate treaty.

Obama doesn’t have to wait for Congress to act — and we don’t have to wait for Obama, either.

People have already started. They’re putting their bodies in the path of Keystone’s southern leg to halt construction. They’re closing down dirty power plants in the cities where they live and work, and meeting with neighbors to create plans to make their communities climate resilient. And thousands of people from around the country will gather in Washington, DC this weekend to call on Obama to push forward on climate in his second term.

Tonight, as Obama addresses the nation he’ll be laying the groundwork for his climate legacy.  His comments will also shape how the growing majority of Americans who care about global warming perceive him — as a climate champion or an agent of politics as usual.

Europe has taken a bold leap forward to implement an innovative plan that could help protect people and the planet. Poised to set an example of climate leadership for the developed world, will countries like the United States come along?

At the end of January European Union finance ministers approved a proposal by eleven EU member states[1] to implement a coordinated financial transaction tax (FTT) — a tiny tax on trades of stocks, bonds, and derivatives. Through a process known as “enhanced cooperation,” this subset of EU countries (dubbed the EU11) was able to move forward with a common tax policy without having to include all 27 EU member states. The European Parliament gave the proposal a green light in December 2012, and the EU Council waved it forward at their meeting last month without a vote because of overwhelming support among member states.

EU tax commissioner and FTT proponent Algirdas Šemeta called it "a major milestone.”

The next step in making the FTT proposal a reality is for the eleven member states in the “coalition of the willing” to agree to details of the common tax. Negotiations are expected to wrap up and a formal agreement officially approved by the European Parliament in 2013.

The implications are potentially huge for climate finance. That’s the money that communities in developing countries need to make the transition from climate-vulnerable to climate-resilient, and from dirty energy development to low-carbon development.

The cost of that shift is measured in the hundreds of billions (some say trillions) of dollars. Rich industrialized countries have promised to deliver $100 billion a year by 2020. A fraction of what’s needed, but still a big lift compared to today’s levels of around $10 billion a year (if you count generously).

At the tax rate originally proposed by the EU Commission of a harmonized minimum 0.1 percent for stocks and bonds and 0.01 percent on derivatives, the EU11 FTT has the potential to raise up to €37 billion (nearly $50 billion in US dollars) every year.

France, which implemented a financial transaction tax in August 2012, has already made a commitment to direct 10 percent of the tax revenue to global public goods like development, health, and climate change (3.7 percent is destined for the Green Climate Fund). Members of Germany’s Social Democrat party have made general political murmurs that if they succeed in upcoming elections they will send revenue from an FTT to development to help meet the country’s 0.7 percent ODA goal.

Global campaigners are pushing the EU11 to be ambitious in targeting a significant portion of their FTT revenue to fight climate chaos. Members of the Pan African Climate Justice Alliance used the recent 2012 global climate summit to call for the eleven countries to deposit 25 percent of the money raised into the Green Climate Fund. Representatives in the EU parliament and from developing countries are also calling for FTT revenue to be used by developed countries to meet their mid-term and long-term financing obligations.

With Timothy Geithner stepping down as Secretary of Treasury there’s renewed optimism that the Obama administration might support an FTT under Jack Lew’s leadership of the Department. Supporters of the tax are planning to raise the issue at Lew’s confirmation hearing in Washington DC tomorrow.

This would be a move that experts like Joseph Stiglitz endorse, who said, “as Mr. Obama’s second term begins, we must all face the fact that our country cannot quickly, meaningfully recover without policies that directly address inequality. What’s needed is… a more progressive tax system and a tax on financial speculation.”

An FTT that raises revenue for a fund that supports developing countries in dealing with the disproportionate impacts visited upon them by climate change is an important step in fighting global inequality. Here, the EU11 can be a global leader.