IPS Blog

While the costs of mitigating and adapting to climate change rise and thus the need for climate finance in developing countries grows, wealthy governments shift focus from public support to private finance. But can the private sector meet the needs of those most impacted by climate change?

In the halls of the UN climate negotiations in Doha, Qatar, you will hear a mantra that’s being echoed by developed country governments from their capital cities to international forums. It goes something like this: We’re broke. There’s no public money. And so, we have to use the scarce resources we do have to leverage massive wealth in the private — and particularly the financial — sector.

You’ll also find in the halls of the annual climate summits the faces of private interests — industry reps, investors, and carbon traders. They’re a regular fixture here, but this year the private sector has taken centre stage in debates over climate finance.

At COP18 there are seven times as many side events about getting private finance and carbon markets engaged in climate action as events highlighting the role of public funds.

There has also been a strategic shift in the rhetoric of developed countries away from talking about “providing” climate finance to speaking about “mobilising” money. The former implies public flows. The latter suggests countries are shifting emphasis toward looking outside national budgets for financial resources.

Nowhere is the trend toward privileging the private sector more apparent than in the Green Climate Fund (GCF) — the newest financial institution under the climate Convention. After many contentious debates during the Fund’s design phase, industrialised nations succeeded in creating a sub-fund that guarantees the private sector direct access to the fund.

Countries did win one concession — a ‘no-objection procedure’ that is meant to keep multinational corporations and international investment banks from going directly to the Green Climate Fund to undertake work in countries without the knowledge of national capitals. But investors are already starting to push back, saying that any kind of vetting process by the UN would make private sector engagement untenable.

In light of these challenges, the GCF’s board will have to grapple as they write the Fund’s business model this year with the question of what the ultimate purpose of the Green Climate Fund is — to maximise the involvement of the private sector, or to support low-carbon, climate-resilient sustainable development in poorer nations as its mandate states?

While these two aims don’t have to be mutually exclusive, lessons from existing private sector institutions – like the World Bank’s International Finance Corporation – show that private finance often bypasses low-income countries, fails to reach the poor in middle-income countries, and prioritises large corporations over small and medium enterprises.

In addition, the use of financial intermediaries to repackage and channel capital leads to serious challenges in transparency and public accountability. Particularly important is the fact that private sector money flows where the profit potential is greatest. For a climate fund this means big, mainly mitigation activities — not community-scale projects, adaptation, or disaster relief.

Certainly, the private sector plays a critical role in any economy – and without its participation in making the shift away from dirty energy and polluting industry there will be no transition to a low-carbon future. But the private sector efforts that the Green Climate Fund should support are domestic enterprises that will reinvest wealth to meet the climate priorities of the people and communities most impacted by global warming.

The 2012 UN climate negotiations are not expected to be a breakthrough moment in solving the unfolding ecological crisis, but these talks will set the course for a future deal that countries have agreed will enter into force by 2020.

What’s at stake is more than a little overwhelming.

Global warming has to be kept to less than 2 degrees Celsius above pre-industrial temperatures if we want to avert climate disaster. Scientists say that means we can send 565 more gigatons of carbon dioxide into the atmosphere. Meanwhile fossil fuel companies are planning to burn enough oil, coal and gas to release 2,795 gigatons.

And the impacts of a warming planet are already hitting home. Because of sea level rise the island nation of Kiribati in the Pacific Ocean is in negotiations to resettle its entire population in Fiji. And in the United States we’ve just experienced a summer of record-busting heat waves followed by a super-storm the likes of which meteorologists have literally never before seen.

From where I sit in Doha, however, any agreement to avoid predicted extremes in weather, economic disruption and loss of life that will accompany global warming looks a long way off.

According to the Intergovernmental Panel on Climate Change — the experts group that provides the climate convention with the latest science — global greenhouse gas emissions would have to peak and start coming down by 2015. That’s right — in three years. Then, by 2050, the nations of the world would need to halve their overall climate pollution.

For the United States that translates into something like a 50 percent reduction by 2020 and deeper than 80 percent cuts by 2050 — a quasi-political calculation based on our responsibility as far and away the greatest contributor to climate change and one of the economies most capable of adapting.

Delivering serious emissions cuts won’t be easy for any country. Re-orienting a nation’s infrastructure to be climate smart — from energy to food to manufacturing to transportation — won’t be cheap.

Not surprisingly, no country wants to be the only one — or one of only a few — that is obliged to overhaul its entire economy to be low-carbon and climate resilient. It would put them at a distinct competitive disadvantage, at least at first (of course, every dollar spent on prevention saves three in disaster cleanup later).

And so the two largest economies and biggest polluters on the planet — the United States and China — have somewhat cleverly staked out positions that set them on the dangerous path of Mutually Assured Inaction. Neither of them will act on climate until the other does — but neither of them really wants to anyway.

The U.S. climate team said in no uncertain terms before leaving Washington DC for Doha that a second Obama term doesn’t translate into a shift away from blocking a climate deal that big countries like China are not legally bound by.

Lead negotiator Jonathon Pershing has repeatedly insisted that he can’t bring home a deal he can’t sell to Congress — and unfortunately Congress is still in the pocket of polluters (look no further for evidence than a recent letter to President Obama from 18 Senators who accepted more than $11 million from dirty energy companies urging him to approve the Keystone XL pipeline and unlock the Canadian tar sands).

At the end of the first week of negotiations, with a fair and effective climate deal looking out of reach, it’s hard to see how developing countries — or civil society — can compel the industrial world to take bold action and live up to their responsibilities.

UPDATE Friday, November 30, 2012, 11:30 AM ET:

Janet Redman, Co-Director of the Sustainable Energy and Economy Network, will be at the UN Climate Summit in Doha, Qatar, providing live updates from the conference and advocating for innovatice sources of finance – such as a “Robin Hood” tax on financial transactions – to fill the Green Climate Fund. She's just spent her first day at the summit,

Redman is calling for the United States to take bold action at the UN climate summit. Faced with extreme weather, environmental instability and a growing sense of economic vulnerability, Americans rejected inequality and climate denialism in the voting booth, she says. Now, they are calling on newly re-elected President Barack Obama to take bold action to stop climate disruption in Doha, Qatar, at the 18^th Conference of the Parties to the UN Convention on Climate Change (UNFCCC).

“We recognize there are constraints on the president – in no small part from Congress – but the electorate wants action on climate change before Superstorm Sandy becomes business as usual.” Redman added, “There are measures we can take now. We can join European countries and agree to tax financial transactions, which could raise hundreds of billions of dollars for climate programs and other public goods. And we can promote the Green Climate Fund as the main channel for public finance to support low-carbon and climate resilient sustainable development priorities of countries and communities most impacted by climate change.”

While some at the center of Obama’s climate team warn that a second term will not bring a new approach to the administration’s foreign policy on climate, Redman asserts that, “re-election is a mandate for the U.S. to be a constructive player that supports equitable action on climate. That means the U.S. has to take responsibility for its historical contribution to global warming by committing to deeper pollution cuts and providing support for poorer countries to respond to climate change. It’s time to hold Obama’s feet to the fire.”

Janet will be tweeting @Janet_IPS and blogging at http://www.ips-dc.org/ and will be available for interview from the climate summit in Doha.

My relationship with President Obama has been getting a bit strained lately. I really like Obama, and I know he likes me, too. But I feel like he’s taking me for granted… as a climate voter.

I know it sounds like something out of an afterschool special, but back in 2008 it looked like we were headed somewhere significant. Obama the presidential candidate said he cared about the environment. He wooed me with his talk about rebuilding the U.S. economy with a combination of renewable energy and clean manufacturing, and vowed to be a global leader in the international fight to halt climate change. He won me over as a green voter and a progressive. Obama was my guy.

But ever since Super Tuesday, when Republicans cast their ballots for Governor Mitt Romney as presidential favorite, Obama’s been acting funny. The more Romney veered from his climate protecting past — and the more supporters cheered when he did — the further Obama distanced himself from me and my friends.

By the time debate season rolled around six months later he was pretending he didn’t even know me. And I didn’t feel like I knew him either.

Obama and Romney were almost indistinguishable on climate and energy policy, practically going to the mat to prove who loved dirty coal more than the other guy. Romney’s energy platform rested on expanding extreme energy like deepwater oil drilling, toxic natural gas fracking, and tar sands production. Obama said he wanted to do all that, too, and throw in some wind and solar.  It was the first time since the 1980s that neither the right or left candidate talked about climate change.

Where was my guy?

Some of my friends said I shouldn’t be so hard on him. They hinted that it might even be my fault that Obama’s been acting like he doesn’t know me. He told us when he won the election four years ago that he wanted to fight for clean energy and community resilience, but that we needed to make him do it.

Many of us tried. We rallied our friends and families — and members of congress — behind a comprehensive climate bill, shut down dirty power plants in major cities like his home town of Chicago, and got arrested outside his front door demanding that he reject permits for the Keystone XL pipeline to pump in tar sand oil from Canada. Environmentalists and climate change activists waited patiently during health care reform, the financial crisis, bank bailouts, immigration discussions, and fights over taxes. And we’re still waiting.

I admit, we weren’t perfect. We didn’t build enough public pressure to keep king coal and big oil from turning the American Clean Energy and Security Act into Swiss cheese, for example, but Obama didn’t exactly walk boldly into the political space that we did make for him either.

And now he wants my vote again.

Call me a sucker, but I know Obama really cares about me. I’m convinced he believes the science of climate change, knows that we have to reduce America’s greenhouse gas pollution (just look at the new vehicle standards and coal power plant rules put in place during his first term) and wants to do right by people in the United States who care about climate. I also know that he’s trying to play to the middle of the road in a country where a third of the population still doubts the existence of global warming.

So the choice seems to be between Governor Romney, who’s promising to lead the nation as a climate denier, and President Obama, who’s been doing his best impression of one. 

I may be a glutton for punishment, but I will cast my vote for Obama tomorrow because from inside the beltway the political optics signal a concrete difference for the state of the environment if we have a second Obama administration or four years of Romney.

Still, I’m not going to let Obama hold my hand in public until he starts acting like the man who courted the climate community before the last election.

As UN climate negotiations in Durban, South Africa, go into their final week, IPS got a quick update from Janet Redman, co-director of IPS’s Sustainable Energy & Economy Network, who is in Durban at talks.

Janet spoke to us from the corner of a crowded conference room at the summit about the current state of the negotiations:

Interviewer: It’s recently been announced that 2010 saw the most dramatic upswing in greenhouse gas output on record. How are folks in Durban reacting to this?

Janet Redman: Greenhouse gas emissions rose between 2009 and 2010 by a record-breaking 6 percent in one year. There’s a real sense of urgency here in Durban because of the news that emissions are growing at such an alarming rate.

But unfortunately that sense of urgency is not translating to action by the biggest historical polluters here.

In particular, what’s happened this week is a blame game that’s now shifted to the big developing countries. Developing economies still have incredibly high rates of poverty, even in countries that are considered “emerging economies” such as India and China. The EU and the U.S. are pegging the potential failure to reach a climate deal here in Durban on those two countries.

But we don’t need a new deal – or what some are calling a new mandate. What we really need out of this next week is to see countries agree to a second commitment period of the Kyoto Protocol, and to see a completion of the Bali action plan, which was a set of commitments and obligations that developing countries said they would take on with the support of developed countries and a commitment by the United States to take actions comparable to those of other wealthy northern countries. This was the compromise world leaders struck because the U.S. said it would never, ever sign the Kyoto Protocol.

The big news is that if developed countries are willing to agree to fulfill their own obligations that already exist in the convention and in this Bali action plan, then developing countries are considering negotiating internationally-binding activities that could take effect in 2020. That’s a pretty big deal. So basically, China’s already doing more than the U.S. is on renewable energy, but they’re even saying, we’re willing to take on binding commitments in the near future, as long as you show us good faith that you’re willing to do what you said you would do in Bali in 2007.

Interviewer: It sounds like there’s a lot of discussion on just renewing what’s already been agreed upon. Do you think that renewing or approving these already-negotiated terms would be enough?

JR: Well, in some sense it’s a first step toward a bigger change. One of the things that we’re hearing here is a call for a new mandate. I think that’s a real mistake because there are two existing mandates right now.

Again, the Kyoto Protocol is one mandate, and the Bali action plan is another mandate. The convention has set that up very clearly, so the idea of asking for a new mandate here in Durban actually undermines existing commitments that are science-based that have been agreed to already in the past 20 years since the UN Framework Convention on Climate Change was established.

So I think having movement on agreements would be enough to set the negotiations on a really positive track for subsequent periods after the second period of the Kyoto Protocol, but also on a positive track in terms of implementing the convention which of course is what this is all about.

Interviewer: There’s been discussion on possible threats to climate financing for developing countries. Are there any further observations that you’d like to share about that?

JR: Last week we were really concerned about the U.S. obstructing talks on opening the doors of the Green Climate Fund. As of earlier today, it looks like almost every country is satisfied with moving forward on the Fund, and building the Board that will put more meat on the bones of the GCF over the next year.

What’s still incredibly frightening is the blatant cooptation of the Green Climate Fund by the private sector, with unabashed support from the U.S. and the UK. If the financial sector and multinational corporations have direct access to the Fund and can bypass sovereign national governments, then we have a real potential for serious problems with democratic control, transparency, the application of social and environmental safeguards and basic standards, and the Fund’s effectiveness in achieving climate goals.

Finally, even if we get the Fund here in Durban it may be nothing more than an empty shell. The U.S. is still blocking a conversation on long term finance – both the scale that should be delivered on and the sources of where that money should come from. A text released last night did mention innovative sources of finance, but an outcome here in Durban needs to be much more specific about how countries will make that real. One thing they can do right now is commit to a work plan for implementing some of the leading proposals, such as a financial transaction tax.  

Interviewer: Thanks very much for taking the time to talk to me, Janet!

JR: Thank you!