Maurice Strong, Agenda 21 and more from Lord Moncton

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

http://www.un.org/esa/policy/policybriefs/policybrief13.pdf

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.

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.

The increase in ODA could be mobilized as follows:

 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.