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 fund would focus on worthy low-carbon projects that now languish in the global pipeline.
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 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.
The creation of quick-start funds would be a powerful and salutary symbolic gesture.
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 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.
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.