Even if the annual flow of carbon emissions were to immediately stabilize at today’s rate (40 gigatons), the stock of greenhouse gases in the atmosphere would be double the pre-industrial level by 2050, resulting in a high probability of dangerous temperature rises, serious economic damage and potentially destabilizing political consequences… It is the cumulative stock of emissions produced by the currently developed industrialized countries that are the root cause of dangerous rise in greenhouse gas concentrations. Since 1840, three quarters of the cumulative total has been generated by Annex I countries with the United States alone accounting for close to 30 per cent. Th e picture is even starker if per capita emissions are used.
Equity is an essential ingredient of an eff ective global climate change policy, as refl ected in the principle of “common but differentiated responsibilities and respective capabilities”, set forth in the UNFCCC. Not only have today’s high-income economies generated about 80 per cent of past fossil fuel-based emissions, but those same emissions have helped carry them to high levels of social and economic well-being. Th ese countries carry the responsibility for the bulk of climate damage but they also have the capacity to repair it. Th is will require additional multilateral fi nancing, on an adequate and predictable scale, comprising grants, concessional loans and compensatory payments. In the context of the ongoing UNFCCC negotiations, developing countries have insisted on the fact that Annex II countries have a clear-cut responsibility for providing new and additional fi nancial resources to meet the agreed full costs incurred by developing-country parties in complying with their obligations. Translating such responsibilities into tangible resources is still a major stumbling block. Th e Greenhouse Development Rights (GDR) methodology provides one possible way of sharing the burden of emissions reductions among countries according to their capacity to pay for reductions and their responsibility for past and current emissions. Each of these criteria is defi ned with respect to a development threshold so as to explicitly safeguard the right of lowincome countries to economic growth (such as a PPP per-capita income level of $9,000, beyond which human and economic development approaches “advanced” levels); only individuals with incomes above this threshold have a responsibility to pay for emissions abatement. Each country is assigned an emissions allocation based on per capita rights. In addition, each country is assigned an obligation to pay for abatement—whether at home or abroad— based on its share of cumulative emissions starting from a base year (such as 1990) and the cumulative income of its population with incomes above the development threshold.1 Following these criteria, at this point, the EU, for example, would need to contribute $32.9 billion for every $100 billion of climate fi nancing, while the contribution of the United States would be $47.7 billion and that of Japan $11.2 billion.
Placing this challenge in the context of an evolving investment programme is to recognize that developing countries will themselves be responsible for mobilizing resources on an increasing scale over time, as well as for insisting on the responsibility of developed countries for meeting the additional costs of undertaking such investments in the initial stages of the transition. Developed countries need to live up to the responsibility they took on themselves under UNFCCC regarding climate change related assistance to developing countries.
Policy Brief #13 The Trillion Dollar Plan
The rapidly unfolding global fi nancial and economic crisis will severely disrupt economic growth worldwide, affect the livelihoods of billions around the world and endanger progress toward the poverty reduction and other millennium development goals (MDGs). Major industrialized countries and some developing countries have put together massive fi nancial sector rescue packages and large fi scal stimulus packages. Since the outbreak of the crisis up to March 2009, the total support is estimated at a staggering $20.8 trillion or 33.5 per cent of the estimated World Gross Product (WGP) for 2008. Th e vast majority of these resources comprise government guarantees of toxic assets held by the banking sectors in the United States, Europe and elsewhere.
The fiscal stimulus plans total about $2.6 trillion or 4 per cent of WGP to be spent, roughly, over the three-year period between 2009 and 2011. Many observers, including analysts at the IMF and the United Nations, consider this amount of fi scal stimulusto be insufficient.
Developing countries are particularly exposed to this crisis. They have less resilient economies and with fewer resources they are more typically forced to pursue pro-cyclical monetary and fiscal policies, imposing greater variability in their economic performance to the detriment of long-term growth. Global responses should urgently redress this asymmetry.
In the first place, this would require providing sufficient financial resources to developing countries to engage in counter-cyclical measures. If spent eff ectively, this could not only put the global economy on a more sustainable growth path but also help to meet poverty targets and development goals set by the international community.
For this, the United Nations has estimated that developing countries would need around $1 trillion for 2009 and 2010, half of which would be used for covering short-term fi nancing needs, with the other half required for long-term development lendingand assistance. While this seems like large sum of money, it can be feasibly delivered through existing mechanisms and within existing commitments. Moreover, it would send a strong signal of solidarity to developing countries that they will be supported through the crisis.
Meeting short-term liquidity needs ($500 billion)
According to the World Bank and the Institute for International Finance, private capital fl ows to developing countries declined by about $500 billion in 2008 from 2007 levels and a further decline by about $630 billion is forecast for 2009. The decline has been the result of, inter alia, a severe squeeze of trade credits, which is aff ecting trade and growth of developing countries directly.
Well over $1 trillion in corporate, external debt in emerging markets and other developing countries will mature in 2009 and will need to be rolled over. As commodity prices and exports decline and income from worker remittances subsides, most developing countries will experience severe balance of payment problems. Th e World Bank estimates that 98 of 104 developing countries are expected to fall short of covering external fi nancing needs, with an estimated gap which could be as high as $700 billion. For low-income countries alone, the IMF estimates that the balance-of-payments shock could amount to $140 billion in 2009.
The G20 already seems to have neared an agreement on doubling (as proposed by the EU) or tripling proposed by the United States) the IMF’s existing lending capacity of $250 billion. New SDR issuance could amount to $250 billion as has been proposed in the past, but failed to gain the backing of the United States government. Now this seems more acceptable. The Japanese government has already lent $100 billion of its reserves to increase the IMF’s lending capacity. Countries with vast amounts of reserves, such as China or some of the major oil exporters, could contribute similarly, though this likely will require making suffi cient progress towards governance reform of the IMF to make this politically more acceptable for these countries. Mobilizing resources through regional reserve funds should also be considered. For instance, Asian countries have already agreed to increase resources for liquidity provisioning through the Chiang Mai Initiative, their main mechanism of regional fi nancial cooperation. Both international (IMF) and regional channels should be used, requiring closer collaboration between the IMF and regional institutions of financial cooperation.
What about conditionality?
Adequate oversight of the usage of resources will also need to be established, ensuring in particular that the compensatory financing is not subject to the kind of pro-cyclical policy conditionality which is typically attached to existing mechanisms. Financing needs for fiscal stimulus ($500 billion) In addition, another $500 billion in enhanced long-term official fi nancing will be needed to cover fiscal revenue gaps in 2009 and 2010 (due to falling export revenues and slower growth) and provide developing countries with the necessary resources to protect social spending and finance fiscal stimulus packages. Spread over two years, these resources would provide the means for a stimulus of about 3 per cent per year of the combined GDP of developing countries (excluding China and major oil-exporting countries), which—assuming a multiplier eff ect of about 1.7 from well-designed and internationally coordinated fi scal packages— would support adequate growth recovery. Half of the required resources could be mobilized by enhancing the lending capacity of multilateral development banks and the remainder through increased offi cial development assistance through accelerated delivery on existing donor commitments.
How to finance $250 billion for increased development lending?
The increase in development lending could be mobilized through the multilateral development banks. This could be achieved as follows:
• By optimizing use of available capital, the World Bank could make new development financing commitments for about $100 billion.
• With a $60 billion replenishment of their capital and maintaining solid leverage ratios, regional development banks could expand development lending by about $150 billion. This should be feasible. The World Bank would be using existing lending space and has already announced increased lending capacity in this way. The Asian Development Bank has already requested a replenishment of its capital. Surplus countries with vast amounts of reserves and sovereign wealth funds could similarly allocate some of its resources to regional development banks in order to expand their lending capacity.
How to mobilize and additional $250 billion in offi cial development assistance for the poorest countries?
The increase in ODA could be mobilized as follows:
• $50 billion
• $200 billion would need to be mobilized through an acceleration of the delivery on existing ODA commitments.
The required resources can be provided on the basis of available resources and existing commitments. The World Bank’s concessional window (IDA) was already replenished by $30 billion in 2008 to cover three years of credits and grants. This could be frontloaded to make these resources available during 2009 and 2010. Equally concessional lending windows of regional development banks (ADB, AfDB, IDB and others) could be frontloaded to provide the additional $20 billion.
Donors have repeatedly pledged to deliver on existing aid commitments, including at the Doha Follow-up Conference on Financing for Development of November-December 2008. At the 2005 Gleneagles Summit, the G8 committed to raise ODA to at least $160 billion per year (at 2008 prices) by 20101 (up from $103.7 billion in 2007). Meeting this commitment should increase existing aid fl ows by a total of about $115 billion over 2009-2010. Further delivery towards the agreed UN target of 0.7 per cent of their annual GNI could provide the remaining $85 billion needed over 2009-2010, which would bring ODA to about 0.4 per cent of GNI of OECD/DAC members.
The World Bank’s proposal for a “Vulnerability Fund” of the size of 0.7 per cent of the developed countries’ stimulus packages (amounting to about $15 billion) might form a part of this broader proposal.
UN-DESA Policy Brief #17 Reaching a Climate Deal in Copenhagen
There is a growing awareness that action is urgently needed to seriously address the climate change problem. Th e multilateral process that began with the United Nations Framework Convention on Climate Change (UNFCCC) in 1992 resulted in the Bali Action Plan (BAP) in 2007. Th e BAP calls for enhanced action on adaptation, mitigation, technology development and transfer, and fi nance, which should be specifi ed in an international agreement by the end of 2009 in Copenhagen. This brief addresses some key development and burden sharing aspects related to mitigation and adaptation which need due consideration to ensure a successful and sustainable outcome of the negotiations.
Crisis as opportunity
The current financial crisis provides an opportunity to make a fundamental change in the patterns of international cooperation, investment and production. New sustainable development trajectories are to be sought, based on low-carbon, clean technologies, with a large component of renewable energy sources. In fact, there are important synergies to be expected from integrating climate and energy related investments into strategies addressing the economic downturn, for example the employment gains of shifting towards renewable energy. A ‘shared vision’ based on the essential premise of the UNFCCC convention—common but diff erentiated responsibilities and capabilities will be the basis of any new international agreement agreed in Copenhagen. Negotiating parties must ensure that this shared vision show a clearand strong commitment to the overall objective of sustainable development and catch-up growth in developing countries. It should also include equity considerations such as poverty reduction and convergence in terms of income distribution and emissions per capita.
..Towards a new climate finance architecture
In order to enhance predictability, funding must not be voluntary but tied to agreed long-term commitments, based e.g. on pro rata mechanisms (such as levied percentages of financial flows, mandatory contributions in relation to GDP). Wider ranging options which include taxes on capital flows or on international transport, energy use or emissions, or volumes of transactions in carbon markets, permit-auctioning, and others can generate considerable additional annual fl ows on the order of tens of billions of dollars. Revenue sources, like auctioning of emissions permits and carbon or energy taxation imply carbon-pricing, which in itself may stimulate the shift towards sustainable, low-carbon development. Yet, carbon pricing may generate adverse (regressive) income eff ects which will need to be addressed. Th e future fi nancial ‘architecture’ should enable the mobilization of adequate, additional and predictable funding. It would need to be built on, and handle, fl ows of fi nance mobilized according to objective criteria refl ecting responsibilities and capabilities to contribute to climate related policies. Disbursements to eligible recipient countries should also be based on agreed criteria which should indicate priorities of resource allocation towards the most vulnerable countries. The overall governance in a new architecture should ensure policy coherence and a focus on sustainable development.
Effective mitigation will require lead and aggressive action in the North as well as mitigation actions in developing countries in the future, supported by full and eff ective assistance by the North, as articulated in the convention and reaffirmed in BAP. Development has to be central to the climate change agreement —both mitigation and adaptation have to be an integrated part of development agendas and the global process must strengthen the appropriate links with global and national efforts in this connection. Th is requires an urgent scaling up of funding and technology available to developing countries for mitigation as well as adaptation and support for an investment “push” and catch-up growth in developing countries. Th is remains the only sustainable option to deal with future developing country emissions and climate change challenges.
could be mobilized by front-loading resources in the already replenished International Development Assistance (IDA) window of the World Bank and those in the concessional windows of the regional development banks.
Agenda 21 is a comprehensive plan of action to be taken globally, nationally and locally by organizations of the United Nations System, Governments, and Major Groups in every area in which human impacts on the environment.
Agenda 21, the Rio Declaration on Environment and Development, and the Statement of principles for the Sustainable Management of Forests were adopted by more than 178 Governments at the United Nations Conference on Environment and Development (UNCED) held in Rio de Janerio, Brazil, 3 to 14 June 1992.
The Commission on Sustainable Development (CSD) was created in December 1992 to ensure effective follow-up of UNCED, to monitor and report on implementation of the agreements at the local, national, regional and international levels. It was agreed that a five year review of Earth Summit progress would be made in 1997 by the United Nations General Assembly meeting in special session.
The full implementation of Agenda 21, the Programme for Further Implementation of Agenda 21 and the Commitments to the Rio principles, were strongly reaffirmed at the World Summit on Sustainable Development (WSSD) held in Johannesburg, South Africa from 26 August to 4 September 2002.Read Full Post | Make a Comment ( 12 so far )