For Jeffrey Sachs, $100B climate finance target has 2 major problems

In December 2009, developed country parties to the U.N. Framework Convention on Climate Change in Copenhagen, Denmark, made a seemingly lofty pledge to the world: raise $100 billion a year by 2020 to support climate action in developing countries and make the world a much safer place to live in. Nearly six years later, money mobilized for climate financing is nowhere near that target, despite an early $30 billion commitment during the fast-start finance period. Even the Green Climate Fund, considered a major vehicle to bankroll global climate finance, has only been able to raise $10.2 billion last year — money that will be spent over a three-year period. Beyond the fact that the world is woefully off track in meeting this ambitious target, renowned economist Jeffrey Sachs believes there are two major problems surrounding this lofty pledge: lack of honesty, and that $100 billion a year is still too small to make an impact. “The $100 billion [commitment] cuts in two ways. On the one hand, the countries have not been honest at all in mobilizing that funding. Second, had they been honest, we would see that it’s much too small to be decisive,” Sachs said at a conference attended by Devex at the Asian Development Bank headquarters in Manila. “The $100 billion itself is relatively a modest number.” The special adviser to U.N. Secretary-General Ban Ki-moon, who also led the U.N. Millennium Project’s work on the expiring Millennium Development Goals, stressed that the world needs to balance out its priorities given that the “global economy” spends “trillions of dollars per year on energy financing” but not particularly in preventing and mitigating the harmful effects of climate change. “The rich countries are completely irresponsible in not laying out what is that $100 billion because they want to count everything in it whether it’s publicly provided or from the private sector,” he said, echoing the sentiment of World Resources Institute experts that details, such as the source of pledged funds, remain “ambiguous” until now. How can it be funded? While there have been pledges toward meeting the $100 billion goal, a significant gap remains. One way to bridge this gulf, according to Sachs, is to impose carbon taxes on heavily carbon-emitting nations. “Without a sense of proportion, the right way to get to a proportionality … is through carbon taxation,” he explained. “We need to move to an assessment on countries according to their CO2 emissions. The numbers make clear sense.” Sachs explained that implementing a fiscal regime on carbon emitters can “easily raise” the $100 billion commitment every year. To put things into perspective, the world emitted almost 40 billion tons of carbon into the atmosphere in 2013, according to the Canberra-based organization Global Carbon Project. The Earth Institute director explained that if international bodies levied countries $3 for every ton of emitted carbon, the $100 billion can be raised. Even when economic maturity is considered and only rich and developed countries, which contribute almost half of all carbon emissions, are taxed $5 per ton, while upper-middle-income countries like China are levied $2.50, “we’d easily raise over $100 billion per year that could be allocated toward the lower-income countries to help facilitate the transition to a low-carbon energy system.” WRI experts, however, cautioned in a detailed analysis that government funding alone may not be enough to fund the whole amount by 2020 “unless [climate financing appropriation] grows at an annual rate of 25 percent.” Other suggestions from the WRI report include developed country climate finance plus leveraged private sector investment, a combination of the first two plus the financial capacity of multilateral development banks like the World Bank and ADB, and an amalgamation of the previous options, including climate-related official development assistance as compiled by the Organization for Economic Cooperation and Development. WRI experts also explained that despite the longevity of climate action and finance issues in the global development discussions, many aspects remain unclear, including the universally accepted definition of climate finance, what kind of financial instruments could be considered climate finance, how it should be measured, and the ambiguity of whether the $100 billion itself should be considered “new and additional” funding. Concerted efforts So how can we achieve the $100 billion target while making sure that every last penny is spent effectively and efficiently for global climate action? “The main point I would emphasize is that every region is going to have to do everything,” Sachs explained. “This is not a matter of some regions being able to adjust and leaving others not to [do so].” The economist added that apart from carbon emissions, development stakeholders should focus on technology development — not just technology transfer — to equip developing countries and help them transition to an energy-efficient and low-carbon environment. “We came back in the mood that rich countries don’t talk to us about anything that calls for public funds on anything except for war. That’s the only thing that gets voted through,” he explained. “Parliaments right now focus on military spending, but other than that, governments right now are unwilling to do almost anything no matter how small because they’re all facing chronic budget deficits … so they feel stymied.” He concluded that these nations, which are slowly tapering off international responsibilities to attend to domestic ones, should reconsider their stance because “this is not a case of historical responsibility that high-income countries do this and not us because, arithmetically, it just doesn’t work. Everybody has to do this.” Read more international development news online, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you FREE every business day.