From Financing to Fossil Fuels Subsidies:
The Case for Climate Action at Canada’s Summits
By Clare Demerse
Picture yourself as the leader of a G8 country.
When you look ahead to the summer’s G8 meeting, you might remember that the last time you saw many of your peers was at the United Nations (UN) climate negotiations in Copenhagen last December. Unfortunately, that meeting didn’t have a very happy ending: the Accord you reached there is little more than an outline, and it’s going to take a lot more negotiation, trust and ambition before you get to a strong deal.
You’ve been briefed on the science of climate change, so you know that global greenhouse gas (GHG) emissions need to peak well before 2020 to avoid locking in catastrophic consequences, particularly for the world’s poorest and most vulnerable. Meanwhile, the UN climate talks are starting up again, preparing for a global high-level meeting in Mexico this December.
Adding it up, you realize that the June G8 and G20 Summits in Canada give you and your colleagues a golden opportunity to rebuild the momentum needed for a strong global climate agreement.
The Case for Climate Action at the Canadian Summits
The starting point for a breakthrough on climate change this summer is climate financing, which means providing support for developing countries as they reduce their own emissions (“mitigation”) and adapt to the consequences of climate change (“adaptation”). For example, financing could be used to provide malaria treatment to more people as the disease spreads to new areas, or to cover the cost difference between “dirty” energy and a clean alterative.
Developed countries first accepted an obligation to provide climate financing under the 1992 UN Framework Convention on Climate Change. Years of unfulfilled promises since then have made financing a critical trust-building issue at the UN talks. And support for mitigation in developing countries is also an essential element in closing the gap between countries’ current plans and the far higher level of ambition that’s needed to achieve the Copenhagen Accord’s environmental goal, which is to stay below 2°C of global warming.
A range of estimates show that a very significant amount of new funding — in the hundreds of billions of dollars per year — will ultimately be needed to protect people, livelihoods and ecosystems in developing countries, and to make the transition to clean energy that is essential for cutting emissions.
As a starting point, the Copenhagen Accord contains a “collective commitment” by developed countries to provide “new and additional resources… approaching USD 30 billion for the period 2010–2012.” This is usually referred to as “fast-start” financing. In the months since Copenhagen, developed countries have announced pledges that add up to about US $8 billion a year — but with most details still to come, and with very serious questions about how much of this is truly new funding.
Because it is needed so urgently, fast-start funding is expected to come primarily from national budgetary allocations and to flow through existing channels. That includes funds like the UN’s Least Developed Countries Fund, which was designed to identify and then support top-priority climate adaptation needs in the world’s poorest countries. When G8 leaders meet in Canada this June, they should affirm their intention to meet or exceed the $30 billion pledge, and explain how they will ensure that the funding is truly “new and additional” to Official Development Assistance commitments.
The Copenhagen Accord also commits developed countries to a goal of mobilizing US $100 billion a year by 2020 “from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance.” Alternative finance will be an essential element of that 2020 commitment. Clearly, it would be difficult to raise the magnitude of new funding needed solely from government budgets. And it’s critical to avoid diverting (or double-counting) aid dollars that are still urgently required: climate change hasn’t made tackling poverty any easier or any less important.
But consider one alternative way to raise funds, a global levy on GHG emissions from international shipping and aviation. This measure could raise tens of billions of dollars a year. Because no such global levy exists now, it would generate “new and additional” funding. And because it’s charged in proportion to pollution from ships and airplanes, it has the benefit of encouraging cleaner transportation at the same time as it generates funds for climate investment.
Similarly, countries with domestic systems that put a price on GHG emissions (whether through taxes or through regulatory systems like “cap-and-trade”) could set aside a fraction of the revenues generated for climate action in poorer countries. Policymakers in
both the U.S. and the EU are already considering this approach.
Another way to link reducing emissions with fundraising is to cut subsidies to fossil fuels and re-profile the savings into support for climate action. The good news is that fossil fuel subsidy reduction is clearly part of the G20’s mandate this year: the 2009 Pittsburgh G20 leaders’ summit agreed to phase out “inefficient fossil fuel subsidies” over the medium term, and mandated energy and finance ministers to “develop implementation strategies and timeframes” in time for this June’s G20 Summit.
International financing could also come from sources not related to GHG emissions, including an allocation of “Special Drawing Rights” (as was recently proposed by the IMF) or through a tax on financial transactions.
The government of Mexico has already signaled that it will make financing a priority at the next major UN climate summit, which it will host in early December in Cancun. G20 countries can help reach a successful outcome in Mexico by making a commitment this summer to support innovative options for climate financing.
Climate change is a global problem, and
all countries have a role to play in deciding
how to tackle it.
Climate change is a global problem, and all countries have a role to play in deciding how to tackle it. That’s why the UN, not the G8 or G20, is the right home for the next global agreement. But it’s the leaders of the richest countries who bear the greatest responsibility for the emissions now in the atmosphere, and it’s to them that the rest of the world is looking for leadership — which includes both funding climate action in poorer countries and raising the level of their ambition in taking action at home.
Canada’s Track Record
Unfortunately, any G8 leader who arrives in Muskoka with high expectations of climate progress risks going home disappointed. To date, it’s hard to find any evidence that the Government of Canada is ready to provide the leadership that the world is looking for on global warming.
Canada is the only G8 country that has yet to announce a fast-start financing contribution. With the possible exception of emissions from aviation and shipping, our government has shown virtually no interest in international means to generate innovative financing. And it has yet to propose a carbon pricing system that could cut emissions and raise revenues in Canada, preferring to wait and see what the US proposes.
When he announced his G8 and G20 agendas in Davos this winter, Stephen Harper reserved just one sentence for climate change — and used those few words to describe climate change as a “non-economic” matter that falls outside the G20’s agenda. (We would argue that few things are more economically relevant than transforming the world’s energy systems and creating the associated clean energy jobs.) Breaking a tradition established by its predecessors as G8 presidents, Canada has chosen not to convene a meeting of environment ministers to prepare for the leaders’ summit.
If Canada hopes to brighten its tarnished reputation on climate change this June, the government has a long way to go in the short few weeks that remain. But as we say in the great summer pastimes of G8 meetings and baseball, it ain’t over till it’s over.
Clare Demerse is the associate director for climate change at the Pembina Institute, a sustainable energy think tank.
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