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A few well-written words can convey a wealth of information, particularly when there is no lag time between when they are written and when they are read. The IPS blog gives you an opportunity to hear directly from IPS scholars and staff on ideas large and small and for us to hear back from you.

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Entries tagged "carbon trading"

A Devil's Bargain on the Climate

February 24, 2014 ·

This blog originally appeared in Foreign Policy in Focus.

(Friends of the Earth International/Flickr)Two years ago, environmentalist Bill McKibben caused a stir when he revealed the “terrifying new math” of climate change. McKibben calculated that to have a reasonable chance of staying below what climate scientists call the “tipping point” of global warming — a temperature rise of more than 2 degrees Celsius over pre-industrial levels — humans can only send 565 more gigatons of carbon dioxide (CO2) pollution into the atmosphere.

Here’s the catch: The oil, coal, and gas reserves that fossil fuel companies and petro-states already have on their books account for about 2,795 gigatons of CO2. If they dig up — and we burn — those reserves, we’ll release five times more carbon than the atmosphere can handle. Hello, climate disaster.

That means that between 60 and 80 percent of known fossil fuel reserves are “unburnable” if the world is to have a chance of avoiding the tipping point. That’s why students, religious leaders, philanthropists, and everyday folks with retirement savings are doing the math and demanding that their investment dollars not prop up an industry that threatens life on earth as we know it.

These voices are joining community activists, Indigenous Peoples, and workers in the Global South — many of whom are on the front lines of climate chaos — who are calling on international institutions not to bank on fossil fuels to drive their economic development. It’s alarming, then, that a new UN Green Climate Fund that is being set up to help transition economies away from fossil fuels may itself support fossil fuel projects.

There’s no future — financially or ecologically — in development projects that warm the planet and destabilize the environment. If the UN wants to help developing countries make the leap to renewable energy, it should take a lesson from divestment activists all over the world and keep its checkbook closed to dirty energy projects.

A Bad Bet

For some, divestment will seem like leaving money on the table. Leaving those fuels in the ground, after all, makes for a lot of “stranded assets.”

The UK-based Carbon Tracker Initiative calculates that these unexploited reserves are worth about $4 trillion in share value and support $1.27 trillion in corporate debt. If you’re the financial officer of a university endowment or a pension fund manager, you might protest that your job is to raise money — and fossil investments still generally outperform renewable energy.

But in the long term, dirty energy investments won’t be so sure a bet. As more and more countries feel the impacts of climate change, serious efforts to curb carbon pollution could make those investments less appealing. Leaders of some of the most important international development and climate institutions recognize this and recently took the stage at the World Economic Forum to bring together the ecological and economic sides of the divestment case.

UN climate convention chief Christiana Figueres said investors would be “in blatant breach of their fiduciary duty” if they failed to pull their money out of fossil fuel-linked funds in the face of “clear scientific evidence” of global warming. And Dr. Jim Kim, president of the World Bank, called on long-term investors to “rethink what fiduciary responsibility means” in the face of climate change and to address the financial risk associated with their carbon-intensive investments.

Climate Fund for the 21st Century

Ironic, then, that the new UN Green Climate Fund could, perversely, become a major source of funding for fossil fuel infrastructure.

The mandate of the fund is to support a transformational shift in the global south away from fossil fuels and toward clean, climate-resilient development. But tucked away in the fine print of the fund’s governing document is support for technologies like carbon capture and storage (aka “clean coal”) — a technology that is not viable at scale and does nothing to address the cradle-to-grave environmental and social devastation that coal wreaks.

In fact, any mention of phasing out fossil fuels is conspicuously absent in the new climate fund, even as other international financial institutions are finally moving to wind down some of the coal-fired excesses of their energy portfolios.

There is, however, a window of opportunity to remedy this as the Green Climate Fund board members work toward final design elements at their meeting this week in Bali. One of those elements could be an exclusion list of dirty energy projects it simply won’t finance. Another is to agree on a framework of indicators of success (in board-speak, the “results management framework”) and strict performance standards that rule out dirty energy.

Most importantly, the board must adopt strong environmental and social safeguards for the projects it supports. In addition to avoiding fossil fuel projects, that might also mean refusing to promote projects like large hydroelectric dams that can cause large-scale displacement of people and loss of land and livelihoods.

An Uphill Battle

The task of keeping dirty energy out of the Green Climate Fund will not be easy.

Several board members have vested economic interests in maintaining the financial viability of “less dirty” energy approaches like “clean coal” and natural gas. And large transnational corporations, including Bank of America (dubbed “the coal bank” by activists), play a significant role in shaping the fund.

Scientists are telling us that we must get off fossil fuels fast. We’re already witnessing the devastating impacts of climate change on our neighbors and friends across the world. And for many national governments, funds to deal with the climate crisis are scarce.

The opportunity is clear. And common sense, not head-in-the-sand economic interests, must dictate action. The Green Climate Fund should take a lesson from ordinary investors all over the world who see that there’s no future in fossil fuels — not for their portfolios, and not for the planet.

Janet Redman is the director of the Climate Policy Program at the Institute for Policy Studies. Oscar Reyes, an associate fellow at the Institute for Policy Studies, helped launch climatemarkets.org.

An Inside View on the Tricky World of Wall Street-Driven Climate Markets

April 18, 2013 ·

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.

Climate Finance Markets Site - www.climatefinance.org

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.

Climate Finance Markets Site - www.climatefinance.org

See climatemarkets.org or follow us on Twitter @ClimateMarkets1