Guest Post: International finance and climate change
This is a guest post by
Anthony
D'Agostino of the World Resources Institute. The views
expressed are personal.
With the drying up of financial markets and recession blazing a Shermanesque trail across the globe, the prospects for bringing climate change to the policy foreground could look dim. Well, not necessarily, say green jobs proponents like Van Jones, the Apollo Alliance, and President-elect Obama.
Cognizant of the US' infrastructure improvement requirements which have been long-neglected (namely energy and transportation), the green jobs movement aims to coalesce a quick economic recovery through homegrown jobs with a view to long-term environmental sustainability. There's a seeming debate as to how best to stimulate large-scale decarbonization. Domestically, self-regulation has had limited success and will continue to do so in the absence of a Pigouvian price signal to incentivize deeper cuts. A cap and trade system similar to the European Union's Emissions Trading Scheme is the more palatable option and had been the instrument of choice for both presidential contenders, considering how much of a political non-starter energy taxes are. (evidently some see a parallel situation up north).
With the drying up of financial markets and recession blazing a Shermanesque trail across the globe, the prospects for bringing climate change to the policy foreground could look dim. Well, not necessarily, say green jobs proponents like Van Jones, the Apollo Alliance, and President-elect Obama.
Cognizant of the US' infrastructure improvement requirements which have been long-neglected (namely energy and transportation), the green jobs movement aims to coalesce a quick economic recovery through homegrown jobs with a view to long-term environmental sustainability. There's a seeming debate as to how best to stimulate large-scale decarbonization. Domestically, self-regulation has had limited success and will continue to do so in the absence of a Pigouvian price signal to incentivize deeper cuts. A cap and trade system similar to the European Union's Emissions Trading Scheme is the more palatable option and had been the instrument of choice for both presidential contenders, considering how much of a political non-starter energy taxes are. (evidently some see a parallel situation up north).
Yet neither a cap and trade nor taxation system are plausible tools to mitigate emissions in the developing world where a majority of GHG growth will take place: three quarters according to theIEA. Enter stage left multilateral finance.
While instruments such as the Clean Development Mechanism (CDM) and Joint Implementation (JI) have been approved vehicles for Kyoto Protocol Annex-I countries to achieve compliance by outsourcing emission-reducing projects, their success has been limited and several countries have already declared imminent failure in reaching their 2012 emission targets, like Japanand Canada among their industrialized brethren.
An alternative step has been taken by the World Bank and regional development banks through the creation of Climate Investment Funds this past summer. Developed countries have already guaranteed more than US$6 billion in assistance to developing countries to combat climate change, to be realized through a Clean Technology Fund and the Strategic Climate Fund. For the specifics on how each of these funds is to be utilized, browse the PDF downloadable from the CIF Q&A link. While this sum is a pittance when compared to how much mitigation and adaptation measures will cost annually, ( potentially 2% of global GDP according to climate economist demigod Lord Stern) it does move us in the direction of responsible parties taking a lead in shouldering the costs to avoid exceeding atmospheric concentrations of 500-550 ppm CO2-equivalents.
The question remains as to whether or not the World Bank and its regional partners are the right institutions to disburse such funds given their shoddy track record in calculating environmental costs when financing international projects.
1 Comment
Shruthi Jayaram
Anthony, I'd be interested in contextualising this to the Indian case. My knowledge regarding Indian decarbonisation efforts is very minimal. I know that Prodipto Ghosh has been writing rather extensively in the media regarding how imperative it is to take policy action on this issue. Correct me if I am wrong, but environmental concerns often arise in consonance with energy concerns. This impetus is not very potent in our case since India has sufficient coal/thorium and biomass reserves to meet our energy needs for a long time. This makes it all the more important that such clean financing measures help ensure that we become environmentally responsible.