Despite repeated pledges made at international conferences, the amount of money committed to official development assistance (ODA) has declined since 1984. Canada, for example, has cut its ODA by 29 percent in the past six years and its contribution now stands at 0.26 percent of its gross national product. Today, only four OECD countries (Denmark, Norway, Sweden and the Netherlands) currently meet their UN commitment to devote 0.7 percent of their gross national product to international cooperation. Contributions to regional development banks and the UN Development Programme have also dropped, curtailing their ability to fund sustainable development projects.

And while private sector investment in emerging economies was growing rapidly (at least until the Asian financial crisis), it has tended to stay away from the poorest countries in Africa and Latin America that need it most, and has "typically avoided projects whose main purpose is to generate environmental and social benefits," a UN report found. Corporate investment is still attracted by low wages, a lack of labour regulations and low environmental standards, concluded Jens Martens and James A. Paul in "The coffers are not empty: Financing for sustainable development and the role of the United Nations."

Foreign debt is another hidden obstacle to spending on climate change projects in the world's poorest countries. In 1997 the total debt-service flow from developing countries to northern governments, commercial and development banks was $269.2 billion US, more than four times the amount of official aid assistance. Given this background, the majority of developing countries are concerned that new funding for climate change projects could be diverted from existing aid budgets, further reducing the amount of money for health and other basic human needs. Since industrialized countries are struggling with their own deficits and budget problems, a number of recent studies suggest the way to solve the international funding crisis is to redirect existing levels of public funding. Increasingly, the spotlight is focusing on perverse incentives, subsidies that promote ecologically destructive practices. If even only half of these subsidies were redirected to fund climate change projects, spending would more than double current levels.

It has been calculated that $700 to $900 billion US are being spent each year on subsidies in just four sectors: water, agriculture, energy and road transportation. Examples of their perverse effects include rice growers in South-East Asia over-irrigating their fields, because subsidies cover most of the cost. Uneconomical and highly polluting coal is still being mined in Germany to maintain jobs for miners.

Governments in both North and South are addicted to subsidies: The World Commission on Forests and Sustainable Development found that the leading cause of deforestation today is clearing of land for subsistence agriculture and ranching, encouraged by government policies and subsidies. However, after old-growth forest is cleared, the soil is too poor for sustainable agriculture and farmers move on and burn more tropical forest to carve out new fields. Road subsidies in the state of Para in Brazil are resulting in the cutting of 400 to 2,000 hectares of rainforest per kilometre of new road built. In India, state and federal governments spend $40 billion US a year on subsidies, about 14 percent of the country's GDP.

Funds for climate change projects could also be freed up by reducing spending on national defence, armaments and subsidies for weapons exports. As well, an unknown amount of aid money is siphoned off through corruption every year. It has been estimated that the foreign debt of countries like Algeria, Indonesia, the Philippines, Haiti and the Congo (Kinshasha) could be paid off if stolen funds were recovered from foreign bank accounts. Martens and Paul say the corruption problem could be solved if international financial institutions insisted on stricter auditing and reporting procedures as conditions of grants and loans. [putting public monies to work for climate change mitigation]

Word Watch
	subsidy n. government financial support for activities deemed beneficial by government debt-service flow n. monies being paid on loans by debtor nations to banks and governments of developed countries More in Word Watch Glossary
In Depth
	Myers, Norman. Perverse subsidies: Tax $s undercutting our economies and environments alike. Winnipeg: IISD, 1998. 230 p. More in Hot Topic Bibliography
Virtual Ideas
	Jens Martens and James A. Paul. "The coffers are not empty: Financing for sustainable development and the role of the United Nations." July 1998. More in Hot Topic Bibliography

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