A New Dawn for Climate Finance as Climate Investment Funds Sunset?

Petra Kjell, Guest Blogger

Petra Kjell is the Programme Manager for Environment, Human Rights, and Social Impacts at the Bretton Woods Project.

This week, the Green Climate Fund (GCF) gathers in Barbados for the eighth meeting since its inception. Established in 2010 under the UN Framework Convention on Climate Change (UNFCCC) as the primary vehicle to deliver much needed climate finance, the GCF still has a number of issues to resolve until it becomes fully operational. Slow in motion, the fund received a much needed boost with some pledges during the September climate summit organised by UN Secretary-General Ban Ki-Moon.

As the new financial structure for climate action rises, another funding mechanism is due to sunset. The World Bank-hosted Climate Investments Funds (CIFs) were set up in 2008 in the shadow of the ongoing UNFCCC process as an interim measure to provide new and additional climate finance to pilot “transformational” actions in selected developing countries. Led by developed countries and implemented by multilateral development banks (MDBs), four funds were set up: the Clean Technology Fund (CTF), the Pilot Program for Climate Resilience (PPCR), the Forest Investment Program (FIP) and the Scaling up Renewable Energy Program for Low Income Countries (SREP).

The CIFs were quickly criticised by civil society groups as undemocratic and unaccountable, potentially undermining the official UN process. The leading role of the World Bank, tarnished by its reputation on many fronts, including for its funding of fossil fuels, also created a widespread mistrust of the funds. A few years down the line, civil society has complained about lack of consultation, misguided projects, and a heavy private sector focus. In Indonesia, for example, civil society groups have repeatedly raised concerns about the CIFs, such as lack of consultation on the FIP country investment plan and the risk of deforestation linked to CTF geothermal projects, but with little impact. With CIF-funded projects ranging anything from energy efficient fans in India to airport development in the Caribbean, CIF donors have also repeatedly raised questions on the legitimacy of projects for CIF funding , but few projects have gone back to the drawing board, let alone been stopped.

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Green Growth

Robert Pollin, Heidi Garrett-Peltier, James Heintz, and Bracken Hendricks, Guest Bloggers

This is a summary of the report “Green Growth: A U.S. Program for Controlling Climate Change and Expanding Job Opportunities” by researchers at the Political Economy Research Insitute (University of Massachusetts-Amherst) and at the Center for American Progress. A longer article based on the report is available at The Boston Review, here. The full report is available from the Political Economy Research Institute, here.

The question for policymakers, and all other citizens, is no longer whether humans are changing our climate. The question now is, how we can stabilize an already-changing climate in a way that promotes economic prosperity? While recently established domestic policies have made strides toward a lower carbon future, such measures are stepping stones. They prescribe the initial path but will not lead to the final goal of achieving the reductions in greenhouse gas emissions necessary to help stabilize global temperatures. Effectively mitigating climate change requires identifying exactly how the United States will transform its energy economy to attain international goals to help protect our climate.

This report quantifies the level of investment required for the United States to align emissions reductions with international goals in an economically beneficial and technically feasible manner. The specific emissions-reduction goal we explore in this study is what the Intergovernmental Panel on Climate Change, or IPCC, has proposed for the world as a whole: reducing greenhouse gas emissions by 40 percent from 2005 levels by 2035. To do its part to meet this goal, the United States must reduce its carbon dioxide emissions from energy-based sources by 40 percent, to 3,200 million metric tons, or mmt, over roughly the next 20 years. The proposals in this report put the United States on this track to effectively mitigate global climate change.

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India’s Double Challenge

Sunita Narain

While climate change is increasing the frequency of extreme weather events, traditional system of flood management through lakes and connected water channels has been forgotten. This makes flood and devastation inevitable.

The floodwaters devastating large parts of the Himalayan state of Jammu and Kashmir caught the people and the government unawares, it is said. But why should this be so? We know every year, like clockwork, India grapples with months of crippling water shortage and drought and then months of devastating floods. This year offers no respite from this annual cycle but something new and strange is afoot. Each year, the floods are growing in intensity. Each year, the rain events get more variable and extreme. Each year, economic damage increases and development gains are lost in one season of flood or severe drought.

Scientists now say conclusively that there is a difference between natural variability of weather and climate change, a pattern brought about by human emissions that is heating up the atmosphere faster than normal. Scientists who study the monsoons tell us that they are beginning to make that distinction between normal monsoon and what is now showing up in abnormal extreme rain events. Remember, the monsoons are known to be capricious and confounding. Even then scientists can see the change.

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India's Double Challenge

Sunita Narain

While climate change is increasing the frequency of extreme weather events, traditional system of flood management through lakes and connected water channels has been forgotten. This makes flood and devastation inevitable.

The floodwaters devastating large parts of the Himalayan state of Jammu and Kashmir caught the people and the government unawares, it is said. But why should this be so? We know every year, like clockwork, India grapples with months of crippling water shortage and drought and then months of devastating floods. This year offers no respite from this annual cycle but something new and strange is afoot. Each year, the floods are growing in intensity. Each year, the rain events get more variable and extreme. Each year, economic damage increases and development gains are lost in one season of flood or severe drought.

Scientists now say conclusively that there is a difference between natural variability of weather and climate change, a pattern brought about by human emissions that is heating up the atmosphere faster than normal. Scientists who study the monsoons tell us that they are beginning to make that distinction between normal monsoon and what is now showing up in abnormal extreme rain events. Remember, the monsoons are known to be capricious and confounding. Even then scientists can see the change.

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New Climate Bill Would “Shrink Government,” Reward Taxpayers

James K. Boyce

Regular Triple Crisis contributor James K. Boyce, director of the Program on Development, Peacebuilding, and the Environment at the Political Economy Research Institute (PERI) and Professor of Economics at the University of Massachusetts-Amherst, addresses a new “cap-and-dividend” climate bill before the United States congress. This interview originally appeared at The Real News Network. Prof. Boyce’s detailed views on climate policy appeared earlier, in five parts, on Triple Crisis and its sister publication Dollars & Sense. It is available in full here.

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New Climate Bill Would "Shrink Government," Reward Taxpayers

James K. Boyce

Regular Triple Crisis contributor James K. Boyce, director of the Program on Development, Peacebuilding, and the Environment at the Political Economy Research Institute (PERI) and Professor of Economics at the University of Massachusetts-Amherst, addresses a new “cap-and-dividend” climate bill before the United States congress. This interview originally appeared at The Real News Network. Prof. Boyce’s detailed views on climate policy appeared earlier, in five parts, on Triple Crisis and its sister publication Dollars & Sense. It is available in full here.

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Climate Policy as Wealth Creation, Part 5

James K. Boyce

This is the final installment of a five-part series on climate policy adapted from regular Triple Crisis contributor James K. Boyce’s March 31 lecture for the Climate Change Series at the University of Pittsburgh Honors College. This installment lays out his case for a cap-and-dividend policy, which Boyce argues would put into practice the “widely held philosophical principle … that we all own the gifts of creation in equal and common measure.”  The first four installments of the series are available herehere, here, and here.

The full lecture and subsequent discussion are available, as streaming video, through the University of Pittsburgh website. Click here or on the image below.

The Case for Cap and Dividend

A carbon price is a regressive tax, one that hits the poor harder than the rich, as a proportion of their incomes. Because fuels are a necessity, not a luxury, they occupy a bigger share of the family budget of low-income families than they do of middle-income families, and a bigger share for middle-income families than for high-income families. As you go up the income scale, however, you actually have a bigger carbon footprint—you tend to consume more fuels and more things that are produced and distributed using fuels. You consume more of everything; that’s what being affluent is about. If you’re low-income, you consume less. So in absolute amounts, if you price carbon, high-income folks are going to pay more than low-income folks.

Well, under a policy with a carbon price, households’ purchasing power is being eroded by that big price increase, that big tax increase. But money is coming back to them in the form of the dividend. Because income and expenditure are so skewed towards the wealthy, the mean—the average amount money coming in from the carbon price and being paid back out in equal dividends—is above the median—the amount that the “middle” person pays. So more than 50% of the people would get back more than they pay in under such a policy. As those prices are going up, then, people will say, “I don’t mind because I’m getting my share back in a very visible and concrete fashion.” I would submit to you that it’s politically kind of fantastical to imagine that widespread and durable public support for a climate policy that rises energy prices will succeed in any other way.

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Climate Policy as Wealth Creation, Part 4

James K. Boyce

This is the fourth installment of a five-part series on climate policy adapted from regular Triple Crisis contributor James K. Boyce’s March 31 lecture for the Climate Change Series at the University of Pittsburgh Honors College. This installment focuses on how the revenues from a carbon price will be distributed: Who gets the money? The first three installments of the series are available herehere, and here.

The full lecture and subsequent discussion are available, as streaming video, through the University of Pittsburgh website. Click here or on the image below.

Who Gets the Money?

How much money are we talking about, when we put a cap on carbon emissions? What I want to share here are some “back of the envelope” calculations. Don’t take these to the bank, but they’ll give you some idea of the ballpark we’re talking about, what kinds of prices are likely to be associated with what levels of emission reduction. These are figures that trace the trajectory if we’re going to achieve an 80% cut in emissions by the year 2050.

In the first five years of the policy, if we were to have such a policy in 2015, we’d be emitting on average about 6 billion tons of carbon dioxide per year, a little bit less than in the absence of a policy. The price associated with that would probably be in the neighborhood of $15 a ton, so we’d be talking about $90 billion a year, or about $540 billion over those first six years. In the next decade, we’d be ratcheting those emissions down further to about 4.5 billion tons. To do so, the price would have to be about $30 a ton, generating a total cost to consumers and therefore a pot of money of about $135 billion a year, or $1.35 trillion over the decade. In the next decade, getting down to about 3 billion tons of carbon, we’d be raising the price to about $60 a ton, generating about $1.8 trillion over the decade. And the last decade, ratcheting down further to 1.5 billion, perhaps somewhat optimistically assuming here that the price needed would be only $120 a ton—that would assume that a lot of R&D has happened, a lot of new technologies come online, investments in public mass transit are online, etc., so you don’t have to push the price through the roof—that would generate another $1.8 trillion.

You add it up and over that 35-year period, we’re talking about something to the order of $5.5 trillion. Economists have a technical term for it—“a hell of a lot of money.” So the question is: Who owns that atmospheric parking lot and, therefore, who will get the money?

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Climate Policy as Wealth Creation, Part 3

James K. Boyce

This is the third installment of a five-part series on climate policy adapted from regular Triple Crisis contributor James K. Boyce’s March 31 lecture for the Climate Change Series at the University of Pittsburgh Honors College. This installment focuses on the costs associated with the institution of a carbon price, both the private costs of measures to reduce emissions and the larger private costs that would be paid for emissions that are not eliminated. The first two installments of the series is available here and here.

The full lecture and subsequent discussion are available, as streaming video, through the University of Pittsburgh website. Click here or on the image below.

Just How Much Would It Cost?

Back in 2009, the Speaker of the House of Representatives, John Boehner (R-Ohio), commented in the debate running up to the vote on the American Clean Energy and Security Act—known as the Waxman-Markey bill, after its main sponsors, Henry Waxman (D-Calif.) and Ed Markey (D-Mass.)—that if this bill were passed, it would be the biggest tax increase on working families in American history.

Now, that was probably political hyperbole, but Boehner wasn’t entirely wrong. It would be like a tax increase, and it would be substantial. It has to be substantial if it’s going to engender the kinds of changes in consumption of fossil fuels that are needed to push forward the clean energy transition. We’re talking about big changes: an 80% reduction in our emissions by the year 2050 below some baseline level. We’re talking about really a revolution in energy, and the kinds of price increases that would be ultimately needed to drive that forward are not inconsequential, and so Boehner had a really serious argument there.

What was the Democratic response? “No, no, it’s not a tax, really it’s not like a tax, and really it’s not a big price increase, it’s not going to hurt people all that much, it’s equivalent to a postage stamp a day.” Now, that postage-stamp-a-day estimate came from an estimate of something quite different from the price increases that households would face.

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Climate Policy as Wealth Creation, Part 2

James K. Boyce

This is the second installment of a five-part series on climate policy adapted from regular Triple Crisis contributor James K. Boyce’s March 31 lecture, part of the Climate Change Series at the Honors College of the University of Pittsburgh. The lecture explores how to turn the atmosphere (heretofore treated as an “open access” resource, into which greenhouse gases can be dumped at no cost to the emitter) into a common-property resource. The first installment of the series is available here.

The full lecture and subsequent discussion are available, as streaming video, through the University of Pittsburgh website. Click here or on the image below.

The Tragedy of Open Access

The kind of problem that carbon emissions epitomize is what’s called in economics the “tragedy of open access.” It’s also sometimes called the “tragedy of the commons,” although since that phrase was coined back in 1968 by Garret Hardin, it’s become clearer to folks that there’s a difference between commons and open access. Very often, commons are, in effect, regulated through systems of common-property resource management. Open access is really the heart of the problem. The problem is that, currently, we’re able to put carbon dioxide in the atmosphere as if there’s no scarcity of the biosphere’s capacity to absorb emissions. There’s no price associated with doing so—it’s free. There are no property rights associated with this—no one owns the carbon absorptive capacity of the atmosphere. And the problem is that when you have resources that are treated as open access resources but in fact are in limited supply, you can get overuse of the resource—you can get abuse of the resource to the point where you’re damaging the resource and the economy.

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