Financing Climate Change:
Paying the Climate Change Piper
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Financing Climate Change: Paying the Climate Change Piper |
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The underlying significance of recent climate change negotiations at Kyoto and Buenos Aires is that the majority of the world's nations have at last accepted the premise that global warming is a reality and that concrete action must be taken. Now the debate has shifted to nuts-and-bolts issues: what can be done to reduce greenhouse gas emissions as equitably and cheaply as possible? Where will the money come from to adapt to predicted environmental changes, such as building dikes to protect populated regions threatened by rising sea levels? In the end, resolving these very practical matters will determine the speed and effectiveness of the global response. Unfortunately, the task of finding answers to these complex issues has become even thornier since the Asian financial crisis, which infected Thailand in June 1997, and then spread like a virus to global capital markets by the summer of 1998. Fears abound that currency and stock market jitters could choke the flow of private sector investments into developing countries. There is also the worry that the threat of a world recession could provide industrialized nations with an excuse to further cut back or postpone their commitments to increase aid dollars for both basic human needs and climate change. Despite healthy economic expansion in the past decade in the North, official development assistance has been steadily declining, and the aid to GNP ratio among OECD countries dipped to a record low of 0.22 percent in 1997. In response to this trend, the UN General Assembly has begun preparations for a world summit in 2001 to establish a new framework for financing sustainable development, an initiative supported last summer by World Bank president James Wolfensohn. While no one disputes that global warming will affect everyone, the question of "who should pay" raises a tangled thicket of moral issues. Some commentators say the money is there, it is just being spent on the wrong things, like hidden subsidies that accelerate deforestation, and landmines that tie up millions in health care costs and make agricultural land unusable. The reality is that Europe and North America have produced about 85% of the human-induced carbon dioxide in the earth's atmosphere and continue to produce much higher per capita emissions-30 times more by some calculations-of greenhouse gases than the nations of the South. The gap is even greater when you look at the world's least developed nations. In effect citizens of the South will face huge costs to cope and adapt to the disruptions caused by climate change, even though it was the high-energy lifestyle of citizens of developed countries that created the problem. When the United Nations Framework Convention on Climate Change (FCCC) was negotiated in 1992, the principle was accepted that developed countries have a financial obligation to provide new and additional resources to help developing nations adapt to the threat of climate change. However, industrialized countries refused to be specific about the extent of their commitment. The final text of the treaty, a last minute compromise, states that industrialized nations would fund "agreed full incremental costs". The result has been a festering debate between North and South about what percentage of the total cost of environmental projects is eligible for funding. The Global Environment Facility (GEF), an agency based in Washington, D.C. and charged with funding climate change projects, has in the past been criticized for its narrow interpretation of its funding mandate. For example, if a country needs to build a new power station, under the terms of the treaty, donor funding would be available for only the cost difference between a coal-fired generation plant and a natural gas generation plant. The domestic or development benefit of the power station is not fundable, only the technology that reduces carbon emissions. At the recent climate change negotiations in Buenos Aires, it was agreed to expand the role of the GEF so that they could provide funding to developing countries to offset the cost of adapting to the environmental and economic impacts of climate change, and fund the full cost of reporting on greenhouse gas emissions. The GEF currently has a budget of about $687 million US a year, which it must divide between projects involving biodiversity, protecting international waters and the ozone layer. So while the GEF has been given an expanded mandate, the question remains, Where will the additional funds come from to pay for the huge costs of adapting to climate change? [historic responsibility of industrialized nations for climate change] | |||||||||||||||||
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IISDnet / DI Digest Home / Financing Climate Change © 1999 International Institute for Sustainable Development |
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