With a new report warning that developing countries will need US$2 trillion per year by 2030 to cut their greenhouse gas emissions and address the impacts of climate change, U.S. climate envoy John Kerry is taking fire for trying to put private finance at the centre of rich countries’ response.
Wednesday was Finance Day at the COP 27 climate summit in Sharm el-Sheikh, Egypt, and discussions began with a lot of history to navigate. At the 2009 UN climate conference in Copenhagen, rich countries promised to come up with $100 billion per year in international climate finance by 2020, to help fund climate solutions in developing countries bearing the brunt of a global climate emergency they’ve done the least to cause. At COP 26 last year, in what was described as a “breathtaking” lack of commitment, that deadline was extended to 2023.
While “majority world” countries sought to recoup the missed funds, they also began turning their attention to their post-2025 climate finance requirements, with some negotiators at COP 26 pointing out that the original $100 billion pledge was never based on an accurate assessment of what was needed. It was just a number the rich countries came up with on their own, with little or no input from other nations.
The report this week, co-authored by iconic climate economist Nicholas Stern, came up with the $2-trillion figure for all the world’s developing economies except China, a number “far higher than any climate finance that has yet been forthcoming to help poor countries,” the Guardian reports.
“Around half of the required financing can be reasonably expected to come from local sources, from strengthening domestic public finance and domestic capital markets, including tapping into large pools of local finance that national development banks are able to mobilize,” the report concludes. But the other $1 trillion per year will have to come from elsewhere, including the World Bank and other multilateral development banks as well as the wealthy countries themselves.
“Rich countries should recognize that it is in their vital self-interest, as well as a matter of justice given the severe impacts caused by their high levels of current and past emissions, to invest in climate action in emerging market and developing countries,” Stern said this week. Those countries will account for “most of the growth in energy infrastructure and consumption projected to occur over the next decade,” he added, “and if they lock in dependence on fossil fuels and emissions, the world will not be able to avoid dangerous climate change, damaging and destroying billions of lives and livelihoods in both rich and poor countries.”
US Pitches Private Finance
But although the United States has been an epic laggard on public climate finance, Kerry arrived at the COP with a pitch to bring more private dollars into the mix, “a plan that would let the White House bypass opposition from a possible Republican-led Congress,” Politico reports. Other countries attending the COP “said the plan appears to be an attempt by the world’s richest country—and largest historic producer of greenhouse gases—to avoid providing its fair share of direct aid to countries struggling with climate change.”
The collision between the steps the U.S. can take and what other countries can rightfully expect is not new. Kerry signaled in September that getting increased public finance past Republican opposition in Congress was not “in the zone of reality”, Politico says. And during a climate adaptation panel in Sharm el-Sheikh, the former U.S. secretary of state and one-time Democratic presidential candidate said even the $11.4 billion the Biden administration pledged last year would be in doubt if Republicans gained in this week’s midterm elections.
“If what I think will happen in today’s elections happens and the House is gone, you’re not going to see that money,” he said.
He also suggested the emphasis on the broken promise from 2009 was drawing too much attention away from other issues on the COP agenda. “Everyone is upset because the $100-billion target hasn’t been fulfilled completely,” he said, even though this year’s total is finally approaching that threshold. “When I got 90-something on a test at school, I thought I did pretty well.”
But Kerry’s main pitch this week was for “a voluntary market in which companies would purchase carbon credits to offset their greenhouse gas emissions and meet corporate climate targets,” Politico writes. “Those credits would be generated when developing countries or their subnational governments transition their power grids away from fossil fuels.”
“We have to accelerate the clean energy transition,” Kerry declared. “My friends, it takes money to do that,” and “no government in the world has enough money to get the job done.”
Private sector capital flows are “where the real money is,” agreed White House advisor John Podesta, who’s also in Sharm el-Sheikh for COP 27 negotiations. “We’re talking billions when the need is trillions. We’ve got to unlock that [private-sector] capacity for people to make investments in building a clean energy future or else we’ll miss both the development goals and the climate goals.”
The ‘Fraught History’ of Offsets
While Politico says Kerry has been stressing the need for environmental integrity in what amounts to a massive carbon offset program, the news story details the UN’s “fraught history” with offsets. “If not carefully constructed, carbon markets also create an avenue for polluters to claim credit for reducing emissions, while actually doing less to directly lessen the carbon pollution from their own operations.”
“We’ve seen offsets being used as greenwashing and to delay action,” said Harjeet Singh, head of strategy at Climate Action Network-International. “I think the big question is, how is this going to be different?”
“You can’t be just meeting targets by buying cheap credits that often lack integrity, rather than doing the hard work of reducing emissions yourself,” agreed Catherine McKenna, the former Canadian climate minister who chaired a UN high-level expert group on net-zero commitments. Having fossil companies buy up cheap carbon offsets that have negative impacts on Indigenous communities is “one of the most glaring examples,” she added, and “paying very little to continue to pollute while having a harmful impact” is not the way to get emissions under control.
Colombia’s minister of environment and sustainable development, Susana Muhamad, wasn’t prepared to let the U.S. off the hook for its climate finance obligations.
“Yesterday I heard Special Envoy Kerry and I was not happy with his response on finance because actually he was saying that the private sector will fill the gap,” she said, in conversation with New York Times reporter David Gelles. “I think that the governments of the world and the public sector have a lot more to do. We have to do fiscal and financial reforms of the institutions and hopefully we can count on the United States, otherwise it’s already like accepting failure.”
“John Kerry knows the science on climate, he knows what is at stake for people, and yet what he’s proposing with his offsets threatens to badly undermine global efforts to cut emissions,” added Power Shift Africa Director Mohamed Adow. “He wants to monetize the global commons. If he was ignorant then it might be excusable, but he’s not, which makes what he’s doing so egregious.”
The carbon offsets in Kerry’s proposal “are an accounting trick which will create loopholes for polluters to carry on polluting,” Adow added. “What we need is the pressure of hard limits on emissions to drive the innovation for decarbonization.”
Unlocking the Funds
But freeing up actual funds for climate projects in developing countries was still a new “centrepiece” for discussions this week, Bloomberg reports, in contrast to announcements at last year’s COP in Glasgow that focused much more on the world’s biggest banks and asset managers. This week, Reuters says, the UN released a list of dozens of projects worth a combined $120 billion, 19 of them in Africa, that are ready for private investors to take onboard. They range from a $3-billion water transfer scheme between Lesotho and Botswana to a $10-million investment in the public water system in Mauritius.
“We can now show that a meaningful pipeline of investible opportunities does exist across the economies that need finance most,” said Mahmoud Mohieldin, one of a group of UN-appointed Climate Change High-Level Champions. After a year of meetings with stakeholders around the world, “we now need a creative collaboration between project developers and public, private, and concessionary finance, to unlock this investment potential and turn assets into flows.”
Avinash Persaud, an advisor to Barbados Prime Minister Mia Mottley, said the focus on private funding had merit, but shouldn’t be pushed too far. “I think the reality is that the carbon credits market isn’t there yet,” he told Politico. While carbon markets are “possibly the icing on the cake,” he added, “we still need the cake,” in the form of direct financial support to developing countries facing down the climate emergency.
The head of the $10-billion Bezos Earth Fund, former World Resources Institute president Andrew Steer, echoed that point in a pre-COP interview with the Guardian, stressing that it isn’t up to private philanthropy to fill the gaps left by rich countries failing to meet their climate finance targets.
“We want to resist simply replacing [government money]. That would not be good,” he said. “I don’t think we should buy into the idea that we’re somehow an alternative to government, because governments have an obligation and they are not living up to it to the extent they should.”
This article first appeared in The Energy Mix.
