15 Dec 2009: Opinion

Bringing Hope to Copenhagen
With a Novel Investment Idea

Governments from the developed world will never come up with enough money to help poorer nations adapt to global warming and implement renewable energy technologies. The solution may lie in using a modest allocation of government funds to spur private sector investment in green energy projects in Africa, Asia, and Latin America.

by orville schell

As world representatives conclude their quest in Copenhagen for ways to slow global warming, something needs to be done to kick-start the discussion into a more concrete and collaborative phase. Otherwise, the UN conference will have failed to turn what so far has been a latter-day Tower of Babel on climate change into a more focused and hopeful multilateral discussion.

An already-existing feeling of global disarray was only heightened last month at the Asia-Pacific Economic Cooperation summit in Singapore when, thanks to the U.S. Senate’s obstructionism, President Obama was forced to acknowledge that the world would not be able to reach a binding climate agreement in Copenhagen. The feeling of paralysis was compounded by the manner in which the “developed world” (especially the U.S.) and the “developing world” (most notably China, India, and Brazil) had fallen into a dysfunctional state of wrangling over who was responsible for the historical burden of CO2 emissions still in our atmosphere and who should assume what proportional role for reducing them in the future. Forward motion, much less accord, on a post-Kyoto agreement seemed far from assured.

Amid all the prevaricating and confusion, two things, at least, had become clear:

First, not all the alarmed scientists, concerned NGOers, born-again disciples of “greenness” and earnest officials in the world would ever be able to solve the climate change challenge on their own.

And second, until businesses could see a clearer way to make money reducing carbon emissions, there would be no meaningful solution.

In short, it had become increasingly evident that, unless the world could find new ways to catalyze the marketplace into action, we were figuratively — and literally — cooked!

So, is there anything that can be done quickly to help prod the marketplace into action, even before the UN’s Copenhagen conference ends?

The most promising new action plan I have recently encountered calls for the establishment of several new kinds of so-called quick-start funds for low-carbon development. Such funds are crucial because of an inescapable reality: Any attempt to bring about a more rapid transition to a low-carbon economy in developing countries quickly and inevitably runs into the unresolved question of finance.

Quick-start funds are being supported by the World Economic Forum’s Task Force on Low Carbon Prosperity, which has systematically applied itself to working on strategies for just such funding. (I am a member of the task force.) At a recent meeting in Dubai, members of the forum’s Global Agenda Council on Climate Change recognized the urgency to “design, launch, and test these new forms of public-private clean energy investment models.” The group called on wealthy nations to establish a new public/private consortium to help the developing world both reduce its carbon emissions and adapt to the effects of climate change by supporting a group of quick-start funds. These funds would draw from both public and private investment sources to create more workable alternatives to government aid handouts.

How would such funds work?

The “First Loss Equity Quick-Start Fund,” for instance, would be a for-profit fund run by managers seeking to attract private institutional investors to projects in the developing world. Modest government backing would encourage the funds to take on some of the risk that potential
The fund would focus on worthy low-carbon projects that now languish in the global pipeline.
investors often face when considering clean energy projects in poorer countries. The fund would focus on the myriad worthy — and potentially profitable — low-carbon projects that now languish in the global pipeline. Such projects would include energy efficiency initiatives, development of renewable energy, smart energy distribution, and so-called REDD programs (Reducing Emissions from Deforestation and Forest Degradation) that pay countries not to clear their forests. Without some government support for a quick-start fund, uncertain policies often make conditions too risky for investors to move forward.

Research by the UN Environmental Program has indicated that $1 of public finance could remove a sufficient amount of risk to bring in up to $13 of private finance, in the form of equity and debt. Thus, a very modest allocation of public money — say $5 billion from a consortium of developed countries — could potentially catalyze $50 billion, or more, from private international investment funds. Governments would, in effect, back such funds with so-called “first loss” public capital that would diminish risk for other private investors.

If agreed on and announced in Copenhagen, the creation of quick-start funds would serve as a powerful and salutary symbolic gesture. It would represent exactly the kind of action that countries like India and China have long been seeking from the developed world — namely, concrete
The creation of quick-start funds would be a powerful and salutary symbolic gesture.
demonstrations of willingness to help poorer countries meet the challenges of global warming. Indeed, it is difficult to imagine China and India making maximum efforts to remedy climate change without such demonstrations. Moreover, if such a fund could be quickly established, it would be an ideal vessel through which President Obama could — at very low public cost — express his own commitment at Copenhagen to doing something concrete to help the developed world play a more constructive role in solving this complex global problem.

The developing world has been vociferous in its demands for such signs of U.S. leadership. These demands are not as unreasonable as they may seem to many Americans at first blush. Although China is, indeed, now the largest annual emitter of CO2 in the world, its per capita emissions are still less than one-quarter those for the average American. Moreover, even with its far larger population, China’s aggregate historical emissions are still less than one-third those of the U.S. (The statistical disparity for India is even greater.) It was precisely in recognition of this reality that the 1997 Kyoto Protocol — which the U.S. did not finally sign — explicitly stated that developing and developed countries had “common but differentiated” responsibilities for climate change and then called on wealthier nations to help poorer countries curb their emissions.

More from Yale e360

The Challenge of Copenhagen:
Bridging the U.S.-China Divide

The United States powered its rise to affluence with fossil fuels, and China resents being told it should not be free to do the same. So the prospects for reaching an agreement in Copenhagen are far from certain.

Is it Déjà Vu in Denmark?
Twelve years ago in Kyoto, the world was poised to act on a climate treaty but looked for a clear signal from the United States. Now, with the Copenhagen talks set to begin, the outcome once again hinges on what the U.S. is prepared to do.
Quick-start funds should not be confused with foreign assistance or even with efforts such as the $10 billion Copenhagen Launch Fund recently proposed by British Prime Minister Gordon Brown. This effort, subsequently endorsed by presidents Obama and Sarkozy, is also aimed at providing multilateral government support for small countries. But the truth is that there will never be enough government foreign aid to enable developing countries to both mitigate and adapt to climate change in any meaningful way.

It was hardly surprising, then, that upon arriving in Copenhagen, Su Wei — one of China’s most senior officials at the UN climate talks — described the proposed $10 billion fund as “a drop in the ocean.” He went on to accuse developed nations of seeking to avoid the commitments they had agreed to in the Kyoto Protocols.

If the industrialized nations are unable to pour enough money into the developing world to spur a transition to a low-carbon economy, they can still catalyze the marketplace by enacting smart policies.

So why not launch a quick-start fund now, while thousands of delegates are still gathered in Copenhagen and groping for answers in what has been a discouragingly inchoate process? Since there will be no solution to climate change without the full participation of China and India, and since both have expressed repeated dissatisfaction at the West’s response to their urgent need to keep their economies growing while also meeting climate change obligations, this is the time to demonstrate that we in the developed world are, in fact, willing to shoulder our fair share of the global responsibility.

POSTED ON 15 Dec 2009 IN Business & Innovation Climate Policy & Politics Science & Technology Africa Asia Asia North America 


Why do they have enough money for the credit crunch of for military actions and never for the global warming? A proposal has been made since the G2O in order helping your country to find public finance without any borrows. Why don't you echo it? This proposal is to change the subsidies made for the fossil fuel (oil gas and coal) and to devote them to the global warming.

Posted by meleze on 15 Dec 2009

I have to say that I'm frustrated by how slow things are going at the moment in terms of what's been going on at Copenhagen. There's all this talk but I don't get the feeling there's any great urgency.

I also agree with the comment from malaise that governments are spending massive amounts on wars and yet the environment is taking a back seat.

Posted by Christine on 17 Dec 2009

you are right, they need to kick-start the discussion into a more concrete and collaborative phase. Otherwise, the UN conference will have failed to turn what so far has been a latter-day Tower of Babel on climate change into a more focused and hopeful multilateral discussion.

Posted by mike on 17 Feb 2010

New 2010 reports indicate global subsidies for fossil fuels on the order of a half trillion dollars per year, thereby economically encouraging exactly what is wrong with "the economy. "

We do not stop a speeding car by stepping on the accelerator. A little tap of five billion on the brakes is relatively meaningless against this onslaught of perverse public payments.

Posted by James Newberry on 11 Mar 2010

Comments have been closed on this feature.
orville schellABOUT THE AUTHOR
Orville Schell is the director of the Center on U.S.-China Relations at the Asia Society and the primary editor of “A Roadmap for U.S.-China Cooperation on Climate and Energy” published by the Asia Society and the Pew Center on Global Climate Change. He has written previously for Yale Environment 360 about the challenges of Copenhagen and how the U.S. and China can work together to tackle climate change.



Republican Who Led EPA Urges
Confronting Trump on Climate

William K. Reilly, a Republican and one-time head of the EPA, is dismayed that a climate change skeptic has been named to lead his former agency. But in a Yale e360 interview, he insists environmental progress can be made despite resistance from the Trump administration.

The Legacy of the Man Who
Changed Our View of Nature

The 19th-century German scientist Alexander von Humboldt popularized the concept that the natural world is interconnected. In a Yale e360 interview, biographer Andrea Wulf explains how Humboldt’s vision helped create modern environmentalism.

A Drive to Save Saharan Oases
As Climate Change Takes a Toll

From Morocco to Libya, the desert oases of the Sahara's Maghreb region are disappearing as temperatures rise and rainfall decreases. Facing daunting odds, local residents are employing traditional water conservation techniques to try to save these ancient ecosystems.

From Obama’s Top Scientist,
Words of Caution on Climate

As President Obama’s chief science adviser, John Holdren has been instrumental in developing climate policy. In an interview with Yale e360, Holdren talks about the urgency of the climate challenge and why he hopes the next administration will not abandon efforts to address it.

An Unusually Warm Arctic Year:
Sign of Future Climate Turmoil?

This year will almost certainly go down as the warmest on record in the Arctic, with autumn temperatures soaring 36 degrees F above normal. In a Yale e360 interview, climatologist Jennifer Francis explains why a swiftly warming Arctic may have profound effects on global weather.


MORE IN Opinion

Why U.S. Coal Industry and
Its Jobs Are Not Coming Back

by james van nostrand
President-elect Donald J. Trump has vowed to revive U.S. coal production and bring back thousands of jobs. But it’s basic economics and international concern about climate change that have crushed the American coal industry, not environmental regulations.

How the Attack on Science Is
Becoming a Global Contagion

by christian schwägerl
Assaults on the science behind climate change research and conservation policies are spreading from the U.S. to Europe and beyond. If this wave of “post-fact” thinking triumphs, the world will face a future dominated by pure ideology.

Why We Need a Carbon Tax,
And Why It Won’t Be Enough

by bill mckibben
Putting a price on carbon is an idea whose time has come, with even Big Oil signaling it may drop its long-standing opposition to a carbon tax. But the question is, has it come too late?

Floating Solar: A Win-Win for
Drought-Stricken Lakes in U.S.

by philip warburg
Floating solar panel arrays are increasingly being deployed in places as diverse as Brazil and Japan. One prime spot for these “floatovoltaic” projects could be the sunbaked U.S. Southwest, where they could produce clean energy and prevent evaporation in major man-made reservoirs.

Point/Counterpoint: Should
Green Critics Reassess Ethanol?

by timothy e. wirth and c. boyden gray
Former U.S. Senator Timothy Wirth and former White House Counsel C. Boyden Gray argue that environmental criticisms of corn ethanol are unwarranted and that the amount in gasoline should be increased. In rebuttal, economist C. Ford Runge counters that any revisionist view of ethanol ignores its negative impacts on the environment and the food supply.

The Case Against More Ethanol:
It's Simply Bad for Environment

by c. ford runge
The revisionist effort to increase the percentage of ethanol blended with U.S. gasoline continues to ignore the major environmental impacts of growing corn for fuel and how it inevitably leads to higher prices for this staple food crop. It remains a bad idea whose time has passed.

How Satellites and Big Data
Can Help to Save the Oceans

by douglas mccauley
With new marine protected areas and an emerging U.N. treaty, global ocean conservation efforts are on the verge of a major advance. But to enforce these ambitious initiatives, new satellite-based technologies and newly available online data must be harnessed.

Why Supreme Court’s Action
Creates Opportunity on Climate

by david victor
The U.S. Supreme Court order blocking the Obama administration's Clean Power Plan may have a silver lining: It provides an opportunity for the U.S. to show other nations it has a flexible, multi-faceted approach to cutting emissions.

With Court Action, Obama’s
Climate Policies in Jeopardy

by michael b. gerrard
The U.S. Supreme Court order blocking President Obama’s plan to cut emissions from coal-burning power plants is an unprecedented step and one of the most environmentally harmful decisions ever made by the nation’s highest court.

Beyond the Oregon Protests:
The Search for Common Ground

by nancy langston
Thrust into the spotlight by a group of anti-government militants as a place of confrontation, the Malheur wildlife refuge is actually a highly successful example of a new collaboration in the West between local residents and the federal government.

e360 digest
Yale Environment 360 is
a publication of the
Yale School of Forestry
& Environmental Studies


Donate to Yale Environment 360
Yale Environment 360 Newsletter



About e360
Submission Guidelines

E360 en Español

Universia partnership
Yale Environment 360 articles are now available in Spanish and Portuguese on Universia, the online educational network.
Visit the site.


e360 Digest
Video Reports


Business & Innovation
Policy & Politics
Pollution & Health
Science & Technology


Antarctica and the Arctic
Central & South America
Middle East
North America

e360 VIDEO

A look at how acidifying oceans could threaten the Dungeness crab, one of the most valuable fisheries on the U.S. West Coast.
Watch the video.


The latest
from Yale
Environment 360
is now available for mobile devices at e360.yale.edu/mobile.


An aerial view of why Europe’s per capita carbon emissions are less than 50 percent of those in the U.S.
View the photos.

e360 VIDEO

An indigenous tribe’s deadly fight to save its ancestral land in the Amazon rainforest from logging.
Learn more.

e360 VIDEO

Food waste
An e360 video series looks at the staggering amount of food wasted in the U.S. – a problem with major human and environmental costs.
Watch the video.

e360 VIDEO

Choco rainforest Cacao
Residents of the Chocó Rainforest in Ecuador are choosing to plant cacao over logging in an effort to slow deforestation.
Watch the video.

e360 VIDEO

Tribal people and ranchers join together to stop a project that would haul coal across their Montana land.
Watch the video.