Cancun summit paves the way for global green fund
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Several new avenues for raising funds to combat climate change have been proposed at the ongoing UN climate summit in Cancun, but there is less agreement on who should manage and govern this green fund
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Despatches from Cancun, December 1, 2010: While negotiators from the global North and South have been waging a verbal war over the tiniest of nuances – but often, these contain the biggest of meanings and implications – in draft texts at the ongoing UN climate summit in Cancun, Mexico, some proposals are slowly taking shape.
At Copenhagen exactly a year ago, some 29 countries which signed the accord – later taken ‘note of’, but not necessarily endorsed, by 130 more countries – agreed on a Fast Start Fund of $30 billion a year by 2012, which works out to an average of $10 billion a year.
How much of this will be fresh and additional sources of funding, and how much merely ongoing aid which is being repackaged under the aegis of a clean and green fund is by no means clear. Incidentally, rich countries are already on the back foot as far as commitments on development aid are concerned. They have poured billions into banks when they threaten the economies of these countries, but aid is not forthcoming on the development front.
In Monterrey, Mexico, exactly 30 years ago, they agreed to provide 0.7% of the GDP as aid. So far only a few Scandinavian countries and the Netherlands have done so. At Copenhagen, the voting block known as G77+ China, consisting of some 130 countries, ratcheted this proportion up to 1.5% of GDP (a little over twice as much), while the irrepressible President Evo Morales of Bolivia cited the figure of 6%.
As Lidy Nacpil of the NGO known as Jubilee South told delegates at Cancun, “This climate debt should be based on the right to reparations, not be treated as charity. The entire funding over climate change should be based on human rights: every human has a right to atmospheric space.”
The role of the World Bank in acting as a conduit in funneling such funds was severely criticised, considering its past record. It is, for instance, funding a coal-powered power station in South Africa worth $3.75 billion, which will be the world’s fourth largest such coal-based facility, requiring supplies from 40 new coal mines to, literally, keep the [home] fires burning.
Some five new avenues have been identified for raising funds to combat climate change. The first is a financial transactions tax – a variant of what is named after its mentor, the US economist James Tobin. He proposed taxing a small fraction (less than 1%) of the speculative financial transactions sloshing around the world every day. In 1972, he calculated that this would yield sufficient funds to take care of all development (and obviously environment) problems of the entire world, without hurting anyone except Wall Street, London’s City, the world’s financial capital, and other such “casino money” dealers, as a Friends of the Earth activist put it in Cancun.
In 2001, retired speculator George Soros put forward a proposal for Special Drawing Rights or SDRs, a la the International Monetary Fund’s mechanism of the same title, that the rich countries would pledge for the purpose of providing international assistance, without necessarily dismissing the Tobin tax idea. He stated, "I think there is a case for a Tobin tax ... (but) it is not at all clear to me that a Tobin tax would reduce volatility in the currency markets. It is true that it may discourage currency speculation but it would also reduce the liquidity of the marketplace."
A second source would be to crack down heavily on tax evasion of multinational corporations. The distinction is important: although national companies, India being no exception, are equally if not more corrupt, it is the transnational entity which can be penalised to provide funds for a Green Fund to combat climate change. Havens like Monaco and small island states – incidentally, the latter will be the first to be hit by ocean level rise with global warming – have been thriving on these illegal transactions. There is a parallel with this proposal and one which seeks to pressure Swiss banks into revealing the identities of the countless thousands who have deposited their ill-gotten money in the vaults of that tiny, picturesque mountain-locked country.
As a corollary, the black money of India that is being laundered in island states such as Mauritius could also be taxed. It is an open secret that Indians send their money to Mauritius from where dummy companies invest in India, thereby legitimising their ill-gotten wealth. This could easily be taxed, since it has an international dimension, and at least part of the proceeds diverted to the Green Fund. Ironically enough, Mauritius publicises itself as a green paradise (with some blue thrown in due to its sparkling seas), but it is also one with a difference for black money operators.
A third source of funding is taxes imposed on aviation and shipping, since these use atmospheric space which transcends national boundaries and damage the environment – whether air or sea. According to Sol Oyuela of ChristianAid, these two modes of transport account for 8% of the global greenhouse gases and, what is more, these have not been capped under the Kyoto Protocol. She felt that these taxes would yield between $10 and $20 billion a year, both on passengers and cargo in both modes of transport.
There is some concern about such taxes adding to the price of exports from developing countries. However, this can be overcome by giving some of this revenue as a rebate to such exporters to compensate them. Alternatively or in addition, all such revenues could be allocated to the global Green Fund, which was proposed in Copenhagen and is now being tossed around in the delegates’ sessions in Cancun.
A fourth source are, as already mentioned, SDRs which countries especially vulnerable to climate change, like small island states and poor countries which are coastal, like Bangladesh, could access. G77 would presumably oppose housing any such mechanism in the IMF, considering that it was with this multilateral institution – notoriously, one of the Bretton Woods twins, with the World Bank – that countries first faced the conditionalities for receiving assistance and other neo-liberal paradigms.
Incidentally, it is worth asking why India has now projected itself in general as a country which is in a position to give financial aid, rather than receive it. After all, it does have over 800 million who live on less than the World Bank’s yardstick of $1 a day, which is surely the largest such number in the world. Even the near-two-digit GDP growth cannot obliterate this inconvenient truth.
A final source for the Green Fund – which Tim Gore of the Climate Action Network, a global NGO, said was “long overdue, considering we have been waiting for it for 20 long years” – are carbon taxes. Even around the UN Earth Summit at Rio de Janeiro, the Worldwatch Institute in Washington DC brought out a report which suggested that $50 a tonne of carbon would yield more than enough to take carte of both environment and development needs of every country in the world.
Judging by questions to the Climate Action Network from American journalists, the US is worried that the Green Fund would be managed by “a big UN bureaucracy”. It is admitted that the UN may not function as effectively as a private organisation or even as the World Bank and IMF (both technically UN organisations, but bereft of certain distinguishing democratic features of pucca UN agencies). However, it cannot be denied that the global South has received short shrift both in the management of these two institutions – which receive, it is important to remember, government funds for development – as well as in their disbursement. The very fact that the former is always headed by an American and the latter by a Frenchman indicates that they preach neo-liberal policies but practise some form of feudal monopoly.
A document titled ‘Climate Business for Poverty Reduction? The Role of the World Bank’, by two researchers from the University of Zurich and released in Cancun, reads: “Overall, the available evidence clearly shows the ambivalence of the Bank’s role in the carbon market [for offsetting emissions and trading such reduction certificates in the market]. Whether its impact on market development and poverty alleviation through the Clean Development Mechanism (CDM) is strong enough to justify its presence as a consultant for both buyers and sellers, as a project developer and as a manager of multiple trust funds, it is difficult to say. Much more transparency…would be required. If the Bank is serious about its pioneering and catalysing role, we should soon see a clear phasing out of its activities in the CDM.”
The Overseas Development Institute (ODI), the UK’s leading independent think-tank on international development and humanitarian issues, has issued a policy brief titled ‘Reforming Climate Change Finance’, which it issued in Cancun. “ODI estimates that of the $19 billion pledged to date (both by way of fast start funds and long-term financing), $2 billion has been deposited into dedicated climate funds, with only $700 million disbursed so far. The proposed trajectory of increase in international finance represents a daunting challenge for the next decade. Yet this money is necessary if climate change is to be tackled, otherwise there is the danger that existing hard-won gains in development will be lost.”
Some of the stumbling blocks between countries on the Green Fund remain how to ensure certainty of flows over time.
Developed countries generally stress the importance of mobilising private sector finance, through carbon markets and potential new market mechanisms, but some developed countries are opposed to markets.
The governance of the fund is also a sticky issue. Some would like the creation of a new institution with balanced representation of developed and developing countries, while others would prefer to strengthen existing institutions such as the Global Environment Facility (a subsidiary of the World Bank, UNDP and UNEP).
Other issues relate to the trustees of the fund (ie World Bank versus an open-bidding process); the establishment of one or several specific funding windows (mitigation, adaptation, technology and capacity-building); simplified or direct access to funds by developing countries; and how to address the need for priority assistance to least developed countries.
Infochange News & Features, December 2010