Transcript Climate Finance

Climate Finance
Two main issues
• Where to get the money?
• How to spend the money?
Where to get the money?
• Reallocate fossil fuel subsidies
– They greatly exceed climate finance goals
• Money from:
– Carbon taxes
– Emissions permits
– International carbon pricing
– Private, bilateral and multilateral sources
How to spend the money?
• To finance mitigation & adaptation
• Mitigation example:
– subsidize clean energy technology
– large-scale, multilateral financing
– structure per WTO TRIMS, GATT, SCM & IIAs
• Adaptation example:
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–
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subsidize subsistence farmers to adopt GMO crops
small scale, national financing
another way to address IPR problem
structure per WTO SCM and Agriculture
Multilateral Financing
Mechanisms
Multilateral Financing Mechanisms
World Bank
• UNFCCC process and World Bank energy
projects have been working at cross purposes
• Fossil fuel subsidies:
– are expensive
– inflate GHG emissions
– mainly benefit middle and upper classes
• Their reduction:
– encourages energy efficiency
– increases relative attractiveness of renewable energy
– frees up resources for poverty alleviation, including
clean energy for those without electricity
GHG Emission Under Different Scenarios
36
Gigatons of CO2e
35
34
33
BAU
Subsidy Removed
450 ppm
32
31
30
29
28
2010
2012
2014
2016
Year
2018
2020
Australia
Belgium
Canada
France
Germany
Iceland
Ireland
Italy
Japan
Netherlands
New Zealand
Norway
Spain
Sweden
United Kingdom
United States
Millions of Dollars
16,000
14,000
12,000
10,000
8,000
6,000
Fast Start Finance
Pledges (average
2010-2012)
4,000
2,000
Fossil Fuel Subsidies
(2010)
0
Developing Country Fossil Fuel
Consumption Subsidies
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•
•
•
•
2007: USD 342.15 billion
2008: USD 554.44 billion
2009: USD 300.14 billion
2010: USD 408.8 billion
8% of 2010 total reached poorest income
group (the bottom 20%)
• Goal of Green Climate Fund: USD 100
billion per year for developing countries
Percentage of subsidy received by the bottom 20% population
South Africa
Sri Lanka
Philippines
India
Bangladesh
Vietnam
China
Pakistan
0%
2%
4%
6%
8%
10%
Multilateral Financing Mechanisms
UNFCCC Green Climate Fund
• Goal: USD 100 billion per year by 2020
• Proposed sources:
– 30% emission allowance auctions, domestic carbon taxes
– 10% carbon pricing international transportation
– 10% redeployment of fossil fuel subsidies in developed countries
or a financial transaction tax
– 10% private investment flows
– 11% multilateral development banks
• Suggested carbon price USD 20-25 per ton of CO2e
• Prioritize funding adaptation for most vulnerable
developing countries & preserving rainforests
• World Bank interim trustee, Secretariat South Korea
Multilateral Financing Mechanisms
Kyoto Protocol (Australia, Europe)
• Clean Development Mechanism (certified
emission reduction (CER) credits)
• Adaptation Fund (2% of CERs)
• Official Development Assistance
• Mexico City examples:
– metrobus, new metro line
– European money, European buses & trains
– Reduced my carbon footprint
Climate Finance and WTO
Subsidies Law
Climate Finance and WTO
Subsidies Law
• Bilateral foreign aid conditional on the use of
suppliers from the donor country
• CDM projects that include bilateral official
development assistence similar
• % of CDM projects for which CER recipient was
technology supplier
–
–
–
–
Denmark 91%
Spain 50%
Germany 40%
Japan 37%
SCM Agreement Article 1.1(a)(1)
‘subsidy’ definition
• ‘a financial contribution by a government or any public
body within the territory of a Member’ (emphasis added).
• Does ‘within the territory of a Member’ apply to ‘a
government’, ‘public body’ or ‘financial contribution’?
• If the financial contribution must take place within the
territory of a Member,
– ‘a Member’ could mean the Member that makes the financial
contribution
– or could mean any Member.
• Former interpretation might exclude foreign aid from
application of SCM Agreement.
Article 1.1(a)(1)
financial contribution
• Bilateral climate financing: could be a
direct transfer of funds or some other form
of income or price support, depending on
the terms of the aid package.
• Multilateral climate financing: might take
form of payments to a funding mechanism.
Article 1.1(b) ‘benefit’
• Foreign aid & CDM logic is investment would not
occur without funding.
• The funding creates financing necessary for
participation of the donor country’s suppliers.
• Creates opportunity that would not have existed
otherwise in the market.
• That could qualify as a benefit.
• BUT, if no market benchmark without aid
program, can’t prove benefit is conferred.
Export subsidies
• Deemed to be specific
• Prohibited
• Test of contingency in fact is met when the
granting of a subsidy, without having been made
legally contingent upon export performance, is in
fact tied to actual or anticipated exportation.
• Climate financing subsidy is tied to the
exportation to the recipient country.
• Could be a prohibited export subsidy.
Backward WTO subsidies law
• Fossil fuel subsidies are not generally
specific to a domestic industry.
• Clean energy subsidies usually are
specific, but might be saved by benefit
analysis.
• Specific subsidies can be subject to
unilateral or multilateral action.
• Prohibited subsidies are deemed specific.
Financing Adaptation
Subsistence farmers and GMOs
Financing Adaptation by
Subsistence Farmers
• Climate change will have greater impact on
viability of traditional plant varieties in tropical
developing countries than in temperate
developed countries.
• In developing countries:
– greater need for GM seeds to raise yields & adapt to
climate change
– larger percentage of population depends on
agriculture (e.g. 50% in India)
– poorest depend on subsistence agriculture
– rely on collecting seeds to sow future crops
Subsistence farmers need
• Microfinancing for GMO seeds, fertilizer
and herbicides:
– to afford adaptation
– to raise incomes with increased output
• Microinsurance for crop failure from
drought, floods or other natural calamities
• WTO Agreement on Agriculture
exemptions should allow.
Financing Mitigation
Clean Energy Projects
Financing Clean Energy Projects
• Debate regarding access to clean energy
technologies should not be on IPRs
• Real issues: creating incentives for and
removing obstacles to clean energy
development and dissemination
• Need to reallocate fossil fuel subsidies
• May need to reform WTO subsidies law
• Need to remove barriers to trade in clean energy
technologies & services, investment
Cost Comparison of Electricity at Distance from Grid
30
Rupees per kWh
25
20
Coal
Wind
Wind/Solar
Biomass
15
10
5
0
0
5
10
15
20
Distance in Kilometers
25
30
Conclusion
• Where to get the money?
– Fossil fuel subsidies
– Permit auctions, carbon taxes
– Both raise money and reduce emissions
• How to spend the money?
– Clean energy subsidies
– Adaptation for the poor