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.
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.
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
ABOUT THE AUTHOROrville 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.
Recommend
Tweet
DIGG
Email
Print
Stumble Upon
ShareRELATED ARTICLES
Taking Green Chemistry Out
Of The Lab and into Products
Paul Anastas pioneered the concept of green chemistry and has led the effort to rethink the way we design and make the products we use. In an interview with Yale Environment 360, he talks about the challenges of bringing this approach to policy making and the frustrations of tackling environmental issues in a politically polarized era.
Could a Changing Climate
Set Off Volcanoes and Quakes?
A British scientist argues that global warming could lead to a future of more intense volcanic eruptions and earthquakes. And while some dismiss his views as preposterous, he points to a body of recent research that shows a troubling link between climate change and the Earth’s most destructive geological events.
China’s Looming Conflict
Between Energy and Water
In its quest to find new sources of energy, China is increasingly looking to its western provinces. But the nation’s push to develop fossil fuel and alternative sources has so far ignored a basic fact — western China simply lacks the water resources needed to support major new energy development.
Insurance Companies Face
Increased Risks from Warming
If the damages related to climate change mount in the coming decades, insurance companies may face the prospect of paying larger disaster claims and being dragged into global warming lawsuits. But many firms, especially in the U.S., have barely begun to confront the risks.
Besieged by Climate Deniers,
A Scientist Decides to Fight Back
Climate scientist Michael Mann, who has faced years of attacks from climate-change skeptics, explains why he believes bad-faith assaults on science have no place in a functioning democracy and why the truth about global warming will inevitably gain wide acceptance.
MORE IN Opinion
Besieged by Climate Deniers,
A Scientist Decides to Fight Back
Climate scientist Michael Mann, who has faced years of attacks from climate-change skeptics, explains why he believes bad-faith assaults on science have no place in a functioning democracy and why the truth about global warming will inevitably gain wide acceptance.
The Folly of Big Agriculture:
Why Nature Always Wins
Large-scale industrial agriculture depends on engineering the land to ensure the absence of natural diversity. But as the recent emergence of herbicide-tolerant weeds on U.S. farms has shown, nature ultimately finds a way to subvert uniformity and assert itself.
Shunning Nuclear Power
Will Lead to a Warmer World
A physicist argues that if we allow our overblown and often irrational fears of nuclear energy to block the building of a significant number of new nuclear plants, we will be choosing a far more perilous option: the intensified burning of planet-warming fossil fuels.
Innovation is Not Enough:
Why Polluters Must Pay
Innovative energy technologies are certainly essential if the world is to curb carbon emissions. But in response to a recent e360 article by the co-founders of the Breakthrough Institute, an economist argues we must also cap emissions or put a price on carbon in order to avoid the worst impacts of climate change.
Beyond Cap and Trade,
A New Path to Clean Energy
Putting a price and a binding cap on carbon is not the panacea that many thought it to be. The real road to cutting U.S. emissions, two iconoclastic environmentalists argue, is for the government to help fund the development of cleaner alternatives that are better and cheaper than natural gas.
On the Road Back to Rio,
Green Direction Has Been Lost
Twenty years ago, an historic environmental summit in Rio de Janeiro produced groundbreaking treaties and high hopes that pressing issues would be addressed. But as organizers prepare for the Rio+20 conference in June, there is little on the agenda to suggest any substantive action will be taken.
As Roads Spread in Rainforests,
The Environmental Toll Grows
From Brazil to Borneo, new roads are being built into tropical forests at a dizzying pace, putting previously intact wilderness at risk. If we hope to preserve rainforests, a leading researcher says, new strategies must be adopted to limit the number of roads and reduce their impacts.
Solar Power Off the Grid:
Energy Access for World’s Poor
More than a billion people worldwide lack access to electricity. The best way to bring it to them — while reducing greenhouse gas emissions — is to launch a global initiative to provide solar panels and other forms of distributed renewable power to poor villages and neighborhoods.
In Australia’s New Carbon Tax,
A Host of Missed Opportunities
The Australian government will begin imposing a tax on carbon emissions in mid-2012. But large giveaways to industry mean Australia’s scheme doesn’t go nearly far enough in reducing the nation’s CO2 emissions or providing economic stimulus.
Making the Case for the
Value of Environmental Rules
Some U.S. politicians have been attacking environmental regulations, arguing that they hurt the economy and that the costs outweigh the benefits. But four decades of data refute that claim and show we need not choose between a clean environment and economic growth.
RELATED e360 DIGEST ITEMS
18 May 2012: Apple’s Main Data Center
Will Use Only Green Power by 2013
17 May 2012: Human-made Pollutants May Be
Expanding Tropical Zone, Study Says
17 May 2012: Retreat of Columbia Glacier
Vividly Captured in NASA Satellite Images
16 May 2012: Wildlife in Tropical Regions
Has Declined 60 Percent Since 1970
16 May 2012: State Oversight Helps Reduce
Effects of Fracking, Study Says
15 May 2012: U.S. Companies Use Steel Linked
To Amazon Destruction, Greenpeace Finds
14 May 2012: Various Uses of Wood
Determine Emissions from Deforestation
14 May 2012: Americans Willing to Pay
Slightly More For Clean Energy, Study Says
11 May 2012: Eel Breeding Innovation
Sought to Conserve Wild Populations
10 May 2012: Lack of Profitability Drives
U.S. Company Out of Biofuels Business
Yale Environment 360 is
a publication of the
Yale School of Forestry
& Environmental Studies.
SEARCH e360
CONNECT
Twitter: YaleE360e360 on Facebook
Donate to e360
View mobile site
Bookmark
Share e360
Email newsletter
Subscribe to our feed:
ABOUT
About e360Contact
Submission Guidelines
Reprints
e360 VIDEO
The Warriors of Qiugang, a Yale Environment 360 video that chronicles the story of a Chinese village’s fight against a polluting chemical plant, was nominated for a 2011 Academy Award for Best Documentary (Short Subject). Watch the video.
DEPARTMENTS
OpinionReports
Analysis
Interviews
e360 Digest
Video Reports
TOPICS
BiodiversityBusiness & Innovation
Climate
Energy
Forests
Oceans
Policy & Politics
Pollution & Health
Science & Technology
Sustainability
Urbanization
Water
REGIONS
Antarctica and the ArcticAfrica
Asia
Australia
Central & South America
Europe
Middle East
North America
e360 VIDEO REPORT
As temperatures rise and water supplies dry up, tribes in East Africa increasingly are coming into conflict. A Yale Environment 360 video reports on a phenomenon that could become more common: how worsening drought will pit groups — and nations — against one another. Watch the video.
e360 MOBILE
from Yale
Environment 360 is now available for mobile devices at e360.yale.edu/mobile.
Top Image: aerial view of Iceland. © Google & TerraMetrics.
e360 VIDEO REPORT
Leveling Appalachia: The Legacy of Mountaintop Removal Mining, an e360 video examining the environmental and human impacts of this mining practice, won the award for best video in the 2010 National Magazine Awards for Digital Media. Watch the video.
OF INTEREST
COMMENTS
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.
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.
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.
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.
Comments have been closed on this feature.