WASHINGTON — As the world’s finance and development ministers gather in Washington this weekend, one behind-the-scene issue worth watching is whether the World Bank should phase-out lending for new coal-fired power plants in middle-income countries.  The Bank’s staff has proposed this to ensure that the global poor gain access to affordable electricity and that multilateral aid limits the adverse impacts of climate change, which will harm the poor most of all.  The United States and Europe must rally in defense of poor countries to support this balanced approach in the face of vehement opposition from middle-income nations like Brazil, China, India and Russia.

Coal lending for middle-income countries is a bad use of scarce international development funds.  As a matter of longstanding policy, the Bank does not provide financial support for projects that can readily attract sufficient, affordable private capital.  Experience shows that many coal plants in middle-income countries are easy to finance without the Bank’s involvement; most middle-income nations have access to global financial markets or have extensive foreign currency reserves.  Using Bank funds for coal plants in these countries provides no global development benefit and violates its own priority-setting policies.

Instead, the Bank should finance projects that provide energy services to the poor in least-developed nations.  Today, 1.4 billion people live without electricity and are thus unable to meet their basic needs.  The proposed energy strategy would extend energy access to 65-80 million people by 2020, a substantial contribution to poverty alleviation.  The Bank also has an important role to play in promoting innovation and learning in clean-energy technologies. China understands this, which is why it stopped borrowing from the Bank for coal years ago.  China should be helping other nations follow its example instead of leading the opposition.

Continued coal lending for middle-income countries, furthermore, is simply inconsistent with the global consensus to limit warming to 2 degrees Celsius.  The International Energy Agency (IEA) forecasts that this will require major economies, including major middle-income nations, to shift rapidly away from coal now.  Exceeding 2 degrees of warming could result in potentially catastrophic climate impacts on the global poor and a reversal of hard-won development gains.  The IEA also projects that many coal plants built after 2010 will need to be shut down before becoming profitable in order to meet climate protection goals.  So coal lending exposes both developing countries and Bank shareholders, including the United States and Europe, to billions of dollars of needless investment risk.

The Bank’s own analysis shows that air pollution from coal plants contributes significantly to cardiovascular diseases, pre-mature mortality, and other social problems.  For these reasons some environmental and social advocates are calling for the complete cessation of coal lending.  Indeed, recent analysis by the Bank argues that energy services can be provided cost-effectively to the rural poor without increasing their dependence on fossil fuels.  But many developing nations are unconvinced, fearing that ending coal lending completely could constrain their economic development at a time when many developed nations are still building coal plants themselves.   While developed nations should transition quickly away from coal, too, the solution to developing-country concerns is to increase international funding for clean energy, as Europe, the United States, and other developed nations have agreed, rather than continue multilateral coal lending.

The proposed phase-out of coal lending in only middle-income countries represents a reasonable attempt to balance competing perspectives.  Under the proposal, the poorest countries would still have access to loans for all energy options and all countries would still be able to secure loans to improve the efficiency of their existing coal plants and to deploy new carbon capture and storage technologies, but international lending for new coal plants in middle-income countries would end.

The most vocal opponents of the draft strategy have argued that treating middle-income and least-developed nations differently is both unfair and unprecedented at the Bank.  Neither is true.  Giving poor communities that have minimal access to energy and that have done the least to cause climate change a longer transition away from coal seems entirely fair.  In contrast, continuing to fuel climate change through coal lending in middle-income nations is unfair to the world’s poorest nations who are ill-equipped to handle the ravages of climate change.  Further, the Bank has operated separate lending programs for middle-income and the poorest nations for decades; that distinction is routine.

So far, both the United States and Europe have supported a pro-poor, climate-friendly energy strategy at the World Bank, but they have yet to draw a line in the sand on coal phase-out in middle-income countries.  While the transatlantic alliance should be prepared to accept a reasonable compromise, the United States and Europe need to ensure that the poor and the climate win this energy fight.

Nigel Purvis is founder and CEO of Climate Advisers and a GMF senior transatlantic fellow.  Andrew Stevenson directs policy and research at Climate Advisers.

Photo by World Bank

Share/Bookmark

WASHINGTON — Next Monday, climate diplomats will gather in Cancun, Mexico, for the 16th annual installment of global climate negotiations. Expectations are low following the partial collapse of last December’s session in Copenhagen, Denmark. A global treaty to succeed the Kyoto Protocol, which expires in 2012, seems years away and may never meet expectations. At best, Cancun will repackage elements of last year’s Copenhagen Accord and pronounce them “building blocks” for a new global agreement. Nations may decide to create (without actually funding) a new Green Fund, but it may take years to mobilize resources and make the fund operational, and even then the Green Fund will not be a silver-bullet solution. Global climate talks have begun to resemble a bad soap opera — they seem to never end, yet never really change and at times bear little resemblance to reality. This is why climate diplomacy as we know it is losing its relevance.

Fortunately, a growing number of countries are now grasping that much of what needs to be done for climate change is desirable for other reasons. Stricter energy efficiency standards for vehicles, for example, lessen dependence on imported oil. Replacing inefficient coal-fired power plants saves lives by improving local air quality. Public funding to catalyze innovation in clean energy technologies creates jobs and improves trade balances. Reducing deforestation helps minimize natural disasters and empower indigenous peoples. The interest in these climate-friendly policies is not confined to Europe. Some of the global leaders are emerging economies such as South Korea, Mexico, Brazil, and China. We are witnessing nothing short of a global change in mindset and mentality. Green growth and low emissions development are becoming national priorities, not international demands. Climate change may not be the first rationale for nations adopting green-growth policies, but the climate benefits are no less real.

International diplomacy will still be needed. But to be useful it has to adopt a different style and morph into a new green-growth diplomacy. To get there, our conception of desirable outcomes must change. Traditionally, the main goal of diplomacy was to secure “international commitments” — formal promises of specific mitigation actions, ideally codified in legal agreements or treaties. In the new approach, economic policies adopted in Beijing or New Delhi become more important than what happens in diplomatic forums like Copenhagen or Cancun. Going forward, collaborative processes that help nations identify and implement opportunities for green growth, and thereby maximize the climate dividend, are more likely to yield tangible benefits than efforts to allocate global burdens. In short, we need to place less emphasis on international promises and more on domestic action, less on burden sharing and more on smart development policies.

Diplomacy needs to adjust in order to reflect the new “bottom up” (nationally determined) context in which cooperation will occur. Let me be clear: An ambitious and comprehensive “top down” global treaty that spells out the responsibilities of developed and developing nations for the next decade would be highly desirable. But this will take time. Global climate negotiations have become a lagging indicator — ratifying understandings that have been resolved at the national level or negotiated first elsewhere, such as in the G20 or the Major Economies Forum. Climate policymakers can learn a thing or two from trade negotiators, who understand the virtues of a network of bilateral, regional, and global partnerships, where progress in one place spurs action elsewhere.

Finally, we must relearn how we use the diplomatic tools and incentives at our disposal. In the past, America and Europe have linked various carrots and sticks to the successful conclusion of new international climate agreements. In the future, incentives like market access and foreign aid — as well as coercive trade measures when appropriate — should be tied to whether nations take ambitious domestic action at home, not whether they make international promises in global negotiations. Financial incentives in particular must be understood primarily as a means to accelerate action here and now, not as the prize that is offered in the context of a future treaty in which nations promise action in the even-further future.

Our sole reliance on old-style climate negotiations as the primary vehicle for accelerating global action must come to an end to make space for more flexible, collaborative, and action-oriented partnerships with developing nations.

This essay draws from a recently published GMF policy brief entitled Jumpstarting Green Growth. Click here to read the full paper.

Nigel Purvis is a Senior Fellow at the German Marshall Fund, President of Climate Advisers, and a Visiting Scholar at Resources for the Future. Previously, he directed U.S. climate and environmental diplomacy at the U.S. State Department.

Share/Bookmark

Despite promises by European governments and the Obama administration to conclude a global climate agreement later this year, the odds of a major breakthrough in December at the Copenhagen climate conference appear to be shrinking.   The official negotiating text for the envisioned Copenhagen agreement is hopelessly complex and riddled with brackets nations have inserted to express their objections to dozens of politically sensitive issues that professional negotiators €“ well trained in the art of saying “no” €“ are unlikely to resolve in six months.   The best hope for a breakthrough prior to Copenhagen was the recently completed Major Economies Forum (MEF) and G8 Summit in Italy. Yet, neither the MEF nor the recent G8 produced real breakthroughs on mitigation targets, funding levels, or institutional arrangements.   The best that leaders of the world’s major economies could do was “recognize” that scientists advise them to hold global warming to 2 degrees Celsius and resolve to “resolve to spare no effort to reach agreement in Copenhagen.”

Politics had much to do with this. President Obama tried hard not to get too far ahead of the U.S. Congress now that the latter is finally taking up climate legislation in a serious way.   Germany holds a national election later in the year and a general election is also coming up in the United Kingdom.   Both countries have been hit hard by the global economic downturn and have opposition parties that strive to out-green the ruling party.   Understandably, their leaders are reluctant to appear soft on the United States when it comes to emissions mitigation, and they are not particularly eager to make new financial commitments to developing nations.   No doubt domestic politics also influenced the leaders of China, India, and other emerging economies.   But the primary reason for the stalemate at the MEF was that neither developed nor developing nations were prepared to be specific enough about compromises they would be willing to make on issues of concern to the other group to allow the other parties to move away from long-held positions.   With U.S. mitigation goals still up in the air and the financing package offered by the developed world still more rhetorical than concrete and real, the elements of the global deal were simply not in place yet.

With the 2009 MEF behind us, the last, best hope for progress in Copenhagen may rest with the United States and Europe.   Unless the United States and Europe find common ground on both emissions mitigation and financing for developing nations, China and other emerging economies are unlikely to make major compromises. By reaching agreement now on the blueprint for transatlantic climate cooperation, Europe and the United States could add new momentum to global climate talks.   The blueprint for a strong transatlantic climate partnership, in short, needs these elements:

€¢       European pressure on Congress to raise the United States’ ambitions on climate change, coupled with pragmatic, eventual acceptance of the best emissions target America can deliver.
€¢       A united effort to convince emerging economies to join developed nations in accepting verifiable international obligations to implement ambitious climate-friendly growth plans that include measurable, reportable, and verifiable mitigation actions.
€¢       A concrete and generous transatlantic offer of assistance to developing nations to help them pursue low-carbon growth and adapt to climate change, within the context of a decentralized system of bilateral agreements, existing multilateral institutions, and private sector-oriented market mechanisms.

(Note: This is adapted from an upcoming policy paper by GMF Fellow Nigel Purvis.)

Share/Bookmark

WASHINGTON – Most climate change opinion leaders on both sides of the Atlantic have modest expectations for the July G-8 summit in Hokkaidō, Japan.   On the central political question €“ how quickly Europe, the United States, and other G-8 partners should reduce emissions over the next decade €“ the transatlantic allies appear an ocean apart.   Outside the United States, most G-8 policymakers seem content to run out the clock on the Bush administration with the goal of finding common ground with a new, more climate-friendly U.S. president in 2009.   Downplaying the Hokkaidō G-8 summit could be a serious mistake.   While G-8 nations are unlikely to reach an agreement this year on ambitious quantitative medium-term emission reduction targets, much could be done now to lock-in sound”architectural elements” or legal frameworks for numerical commitments that could be negotiated next year or soon after.  

There are three reasons why making progress now is critical.  

• First, a sound G-8 statement on the preferred design of the post-2012 climate system would make reaching a good international climate agreement easier.   By signaling what G-8 nations are prepared to do to mitigate their emissions over the next decade or so and what they expect from other major emitters, G-8 leaders could give the international community a clear picture of where global climate negotiations should head.
• Second, bypassing the Bush administration would unnecessarily increase the risk that the United States will not join the next climate agreement. Most liberals in Congress will support any environmentally credible and economically affordable climate agreement that emerges from global diplomatic talks.   In contrast, conservatives in Congress will be suspicious of any new climate agreement that imposed substantial costs on the U.S. economy (likely), particularly if China has somewhat different obligations than the United States (also likely).   Any G-8 consensus endorsed by President Bush this year, however, would help soften possible conservative opposition, perhaps even winning over members of Congress who opposed the Kyoto Protocol.  
• Third, pushing off all major decisions until next year would jeopardize the internationally agreed upon goal of concluding a climate agreement in 2009. The post-2012 climate negotiations are politically and technically complex.   Trying to resolve all major issues in calendar year 2009 would strain the international process.

So, what could be accomplished at the G-8 this July?   Quite a lot.   My recently published German Marshall Fund policy brief explains where progress should be possible.   In short, the United States could accept Europe’s call for all developed nations to assume legally binding emission targets if Europe joins with the United States in pressing China, India and other major developing country emitters to also take on new legally binding climate commitments (but not necessarily national emission targets).   I welcome your reactions on this idea.

 Nigel Purvis – President, Climate Advisers

Share/Bookmark