IPS Blog

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 

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.

With the Occupy movement spreading faster than wildfire, it's hard not to ask how every issue relates to it. Climate change is no exception. The question is particularly compelling right now because representatives of 194 countries are gathered in Durban, South Africa, to negotiate next steps for the UN Framework Convention on Climate Change.

The connection is easy to make, actually. Like the economic crisis that sparked the Occupy movement, climate change is about inequality.

A few countries are responsible for releasing the vast majority of the global warming pollution that’s in the atmosphere. And they got rich pumping the subsidized oil and burning the cheap coal that produced those emissions. Their wealth did come at a cost — but to poor communities, especially in the global South. And, ironically, the countries and communities that are least responsible for today’s climate crisis are some of the most vulnerable to its impacts and have the fewest resources to respond.

A cacophony of global voices comes together at the annual UN climate summit. Policymakers, indigenous nations, labor unions, youth activists, environmentalists — you name it, they’re probably here, trying to stop global warming.

But powerful corporations whose bottom line depends on access to cheap energy, land, water, and other natural resources are here as well. Not surprisingly, their mission is to defend the status quo, and they wield the political weight of some of the richest nations and the most influential financial institutions (like the World Bank).

Frustrated with the seemingly boundless clout of corporate interests and those heralding the benefits of market-based solutions, like carbon trading, critics have taken to referring to this 17th Conference of the Parties (COP) to the climate convention as the Conference of Polluters. They're putting out a call to #OccupyCOP17.

José María Figueres, a former Costa Rican president, echoed the sentiment. Calling on all vulnerable countries to occupy the meeting and refuse to leave until progress is made, he said, “We need an expression of solidarity by the delegations of those countries that are most affected by climate change, who go from one meeting to the next without getting responses on the issues that need to be dealt with."

Figueres was referring to two key goals. First, developed countries must renew their commitment to reduce greenhouse gas emissions under the Kyoto Protocol — the only internationally binding treaty on climate pollution. Second, they must commit to providing developing countries with the money they need to support their adaptation to a warmer world and the transition to low-carbon economies. The United States and other rich countries are sidelining both of these broadly shared objectives.

Janet Redman, co-director of the Sustainable Energy & Economy Network at the Institute for Policy Studies, is observing the United Nations climate talks in Durban, South Africa. www.ips-dc.org

Join the global call for climate justice by participating in 1,000 Durbans in conjunction with the December 3^rd Day of Action on Climate Justice.

The Institute for Policy Studies has joined with Friends of the Earth International, Jubilee South Asia, Pan Africa Climate Justice Alliance, Third World Network, and other movements and organizations fighting for climate justice in the international policy arena at the UNFCCC intercessional talks in Bonn.

We will provide regular updates on key policy areas and issues being debated here at the climate talks — such as emissions reductions, climate finance, halting deforestation, and carbon markets, among other issues.  We invite our allies to use these updates to help inform regional and national activities, provide information for media outreach, and enhance national and regional advocacy plans. Please feel free to circulate.

Update No. 1: Bonn Climate Negotiations

The Big Picture

United Nations climate negotiations resumed in Bonn, Germany, on June 6. This session follows the slow progress made at earlier talks in Bangkok in April, and are essential for building momentum toward the Durban climate conference in November.

The Bangkok talks were focused on setting the agenda for the negotiations for the rest of the year and were setback by divisions between countries over the scope of international climate talks. In Bangkok, some rich developed countries insisted on limiting the negotiations to implementing the narrow range of issues agreed at Cancun; in contrast most countries supported continuing under an agreed workplan from 2007 (the Bali Action Plan).[1]

The Bonn talks are to be based on the broad agenda advocated by most countries in Bangkok, but the clash in the "paradigm" for the negotiations will underline further disagreements in Bonn. These fault-lines include:

• Setting binding emissions reduction targets through the Kyoto Protocol
• Insufficient emissions reduction targets currently on the table
• The Green Climate Fund

1. Setting new binding emission reduction targets in 2011?

The Kyoto Protocol represents the current model of international climate law – it requires developed countries to set binding emission reduction targets and to meet them over a 5 year period. The first five-year period ends in 2012 and time is running out to agree on targets for the next ‘commitment period’ (2013-2017/2020) in accordance with the mandated negotiations, which have been running since 2005.

Developing countries, particularly the Africa Group, have made clear that a continuation of the Kyoto Protocol is essential, as it provides a paradigm of legally binding emission reduction targets. Some developed countries, including Russia and Japan, have indicated they will walk away from their international legal obligations to agree commitments for the period after 2012. The United States is similarly opposed to binding emissions reduction targets. Instead of negotiating science-based targets reflecting their fair share of the global effort, they are now proposing a “pledge-based” system in which each country does whatever it determines domestically.

Bonn represents a pivotal moment for the future of the Kyoto Protocol. The Bonn climate talks need to pave the way for agreement in Durban on the next phase of legally binding emission reduction targets. Durban is the last chance to agree, as the first phase of commitments ends in 2012. If there is no agreement in Durban, the world may be faced with climate anarchy, without an international regime in place.

2. Will those new pledges be enough?

The latest science shows that negotiators at Bonn will be out of touch with what the latest science clearly requires if the world is to avert dangerous climate change. The current pledges risk warming of 2.5 to 5 degrees according to the United Nations Environment Programme. The problems with developed countries’ proposed targets are manifold: they are too low to meet what the science requires but they are also accompanied by ‘creative accounting’ proposals which result in emissions reductions only on paper. Furthermore the extensive use of offsets will see rich countries shift the burden for reducing emissions to developing countries – while doing almost nothing at home.

Analysis revealed in Bangkok showed that when emission reductions were converted into gross amounts – rather than percentages – it was clear that developing countries’ pledges for emission reductions were even higher than those from developed countries (3.6 Gigatonnes to occur in developing countries with only 1.9 Gigatonnes to occur in developed countries).[2] Together, these pledges fell well short of the 14+ Gigatonnes the UN says is necessary to be on path to remain below 2 or 1.5 degrees C.

In addition, the emissions reduction targets proposed by developed countries are ridden with loopholes. The rules currently being considered do not take into account emissions from shipping and aviation, overestimate emissions reductions by forests and land use in developed countries and allow the carry-over of unused pollution permits and offset credits . This means that the total emission of developed countries could actually increase even if their ‘official’ targets say they are making reductions.[3]

The debate over these rules, how they shift the burden of reducing emissions to developing countries and whether they are in line with the science will be of central importance in Bonn – particularly as the agenda sets particular time for addressing this issue.[4]

3. Creating a "Green Climate Fund"

In Cancun, one of the few areas of agreement was the establishment of a "Green Climate Fund" (GCF) to oversee the collection and disbursement of "climate finance." Currently the details of the GCF are being negotiated by a ‘Transitional Committee’ (TC) which has already met in Mexico in April and again in Bonn from May 30.

Flashpoint issues in the negotiations of the GCF have already included the role of the World Bank as its trustee, given concerns regarding its potential conflicts of interest due to its role in financing fossil-fuel based projects, and its practice of mixing roles as a banker, financial advisor and project implementer (known as the "Arthur Anderson syndrome" following the financial crisis). This conflict may be compounded by proposals relating to secondments and staffing of the new fund, which draw heavily on the World Bank as a source.

Similarly, many observers are concerned that the process of the GCF is off-track. It is currently heavily focused on technicalities and structure – without having agreed to what the priorities of the fund should be or the actual scale of public funding. In Cancun, countries agreed to a "goal" to "mobilize" $100 billion by 2020 from “a wide variety of sources”. However, developed countries are yet to commit to any specific level of public funding.

A further critical question here is what a "balanced" allocation of finance between adaptation and mitigation really means.[5] It is to be expected at Bonn that developing countries, who are the most vulnerable to climate impacts, will push the GCF to identify the needs and priorities of recipients before designing structures to best meet those needs.

Finally there is concern that the GCF is too focused on "private finance" options (through loan guarantees, publicly-provided insurance, or other risk sharing instruments) and thus risks putting too much power into the hands of profit-driven interests. Market failures and distortions by private interests are a significant structural cause of the climate crisis and many countries fear a continued focus on the private market could have the effect of financing projects that are ineffective at confronting climate change but are very effective at transferring public monies into private coffers. These countries and observers will be pushing for the GCF to be primarily funded through public sources (including innovative mechanisms such as Special Drawing Rights and the "Robin Hood Tax").

[1] See recent affirmation of the importance of the Bali Action Plan and the Kyoto Protocol at the India-Africa forum, 25 May 2011, (para 7), http://pib.nic.in/newsite/erelease.aspx?relid=72319

[2] Stockholm Environment Institute, “The Implications of International Greenhouse Gas Offsets on Global Climate Mitigation” (March 2011), www.sei-us.org/Publications_PDF/SEI-WorkingPaperUS-1106.pdf

[3] Stockholm Environment Institute, “Assessing the current level of pledges & scale of emission reductions by Annex I Parties in aggregate, AWG-KP In Session Workshop, Bonn, 2. August 2010; and, Kartha, S. “How Accounting Tricks, Loopholes, and Strategic Carbon Banking Could Negate Developed Countries’ Copenhagen Pledges”, Tellus Institute Brown Bag Lunch Series, 10 November 2010.

[4] On Thursday 9 June 2011 according to preliminary schedule.

[5] This is a reference to the objective of the fund from the Cancun outcome document – see Annex III of 1/CP.16, http://unfccc.int/resource/docs/2010/cop16/eng/07a01.pdf#page=2.