Tag: world bank
Panama could not be a more fitting place to reboot the negotiations on controlling the high and rising emissions from international shipping. Last month’s G20 finance ministers’ discussions on raising climate finance from international transport suggest there is a huge opportunity to do so.
The magnificent sight of the Panama canal is a reminder of the scale of emissions from the international maritime fleet. Shipping is already responsible for 3% of global emissions – more than those of Germany, and twice those of Australia. Without urgent action, emissions could triple by 2050, likely ruining any chance of keeping global warming below the 2°C target agreed in Cancun, let alone the 1.5C target needed. Tackling the emissions from this sector is a vital part of the efforts needed to close the emissions gap.
A step in the right direction was taken this June when governments in the International Maritime Organisation (IMO) established energy efficiency design standards for new ships. But welcome though this was, it will only reduce shipping emissions by around 1% below business-as-usual levels by 2020.
It is clear that weak efficiency standards alone are not enough. A carbon price for shipping is needed to drive emission cuts at the scale needed – applied either through a bunker fuel levy or the auctioning of emissions allowances in a new sectoral emissions trading scheme.
As the preliminary report of the World Bank and IMF shows, a carbon price of $25 per tonne would raise the cost of global trade by approximately 0.2% - or $2 for every $1000 traded – and would raise $26 billion per year by 2020. The report suggests that to make a global agreement stick, this revenue should be used to compensate developing countries for the economic impact of higher shipping costs – ensuring they face no net incidence as a result – and as climate finance.
Even after some revenues are used as compensation, this should still leave at least $10 billion per year to be directed to the Green Climate Fund. That would be a significant step towards the $100 billion per year that developed countries have promised to mobilise by 2020, which – unlike Fast Start Finance pledged to date – should be genuinely new and additional to existing promises of development assistance.
The World Bank and IMF report shows the way to a new approach to tackling shipping emissions which Parties meeting in Panama must seize. Building on the work in the G20, a decision in Durban on the key principles of this approach would give the IMO all the guidance needed to get to work on designing and implementing a scheme that delivers a double dividend for the climate. By helping to close the emissions gap, and fill the Green Climate Fund, such a deal on could be a flagship of success in Durban.
As the World Bank Group positions itself to play a central role in delivering climate finance, the incoherence in its lending practices scream out for attention.
Despite increasing its renewable energy lending, the institution spent more on coal in 2010 than renewable energy and energy efficiency combined. The Bank’s continued commitment to coal – the most energy intensive and destructive fuel source on the planet – is a black mark on its record that no amount of rosy public relations spin can scrub off.
If the World Bank believes it can credibly deliver climate finance, it must make a strong and credible commitment to clean up its act. And now it has the perfect opportunity to demonstrate that by revising its Energy Strategy to phase out fossil fuels, ensure energy access for the poor, and guarantee that all large scale hydropower lending meets stringent requirements.
A strong strategy guiding its energy investments for years to come will send an important signal that the Bank is serious about delivering on its commitment to climate finance.
Without a strong energy strategy however, it is clear that the Bank should not serve even a trustee role in future climate finance. Beneath its glossy brochures and hearty speeches, a large portion of its energy sector lending is going to destructive coal projects. The world is changing rapidly and the Bank is not keeping up. If it genuinely wants to help build the 21st century clean energy economy, it must heal the wounds it has inflicted in the past.
And the World Bank can make the strongest statement of all by quitting coal for good.
The US proposal on financial architecture has received considerable interest over the last few days, and with good reason. It is an interesting mix of new and old, good and bad, promising and perverse.
ECO can see movement in two respects.
First, after consistently resisting calls for a new institution, the US has now endorsed the creation of a new fund.
Second, as Article 11 requires, the US has agreed that the fund should be under the guidance of and accountable to the COP; that the COP should determine its policies and priorities; and that it should have balanced and equitable representation of all Parties.
The more cynical among ECO readers may wonder whether restating the provisions of the Convention really counts as progress. But we will take movement wherever we can find it. After all, in the quest for a useful negotiating text, we could do a lot worse than the Convention itself.
It now appears that we have a broader basis for agreement on parts of some critical issues of financial architecture and
governance (we are assuming, of course, that the silence of some other umbrella Parties and the EU can be taken as assent). And it would appear that the US has heard the concerns of developing countries regarding simpler administrative procedures and, perhaps, on direct access to financing.
The proposal may also provide a basis for a deal on another contentious issue – the use of existing institutions. Many Parties have expressed their bitter experience and deep frustration with the procedures and governance of multilateral development banks. And while ECO is not a Party, we cannot see giving a policy-making role to an institution like the World Bank. Its own senior sustainable development economist recently called the Bank’s continued support for coal a moral imperative. Another contentious issue is a reaffirmation and expansion of the role of the GEF, which may provide additional fodder for developing countries to resist this proposal.
But we understand that the US may wish to use existing institutions only for fiduciary oversight and auditing functions, leaving the substantive work to the new mechanism and its technical panels. If this is indeed the US position, they should say so clearly. Nobody wants to see this money squandered, so the need for strong fiduciary oversight should attract broad support.
Unfortunately, the US proposal brings us no closer to agreement on a number of other key issues. All countries except LDCs will be expected to contribute, and there are no guarantees that the funds that are made available will be new and additional to existing ODA. And assessed contributions are off the table. Instead, the fund is to be replenished on a voluntary basis. Periodic pledge parties, rather than a common understanding of historic responsibility and capacity, will determine contributions. This ECO is told will maximise contributions and provide predictability.
Other issues remain to be resolved. Key among these are the specific makeup of the board, how it will be appointed, and whether there will be separate thematic windows. But for the US, these issues can be negotiated. The key point is that it provides sufficient fiduciary assurances that donors will put money into it.
Of course, fiduciary oversight is only an issue if there is actually money to safeguard. Now let us see some movement on scale. ECO has previously stated that US$150 billion of public financing is required to deal with climate change in developing countries.