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Q&A: The World Needs a Marshall Plan for Climate Change

Thalif Deen interviews RICHARD KOZUL-WRIGHT, chief of the U.N.'s Development Strategy and Policy Analysis Unit

UNITED NATIONS, Sep 9 2009 (IPS) - When world leaders meet for a mega talk-fest on climate change at the United Nations in late September, the focus will be more on politics and less on finance.

“No new financial commitments to support the efforts of developing countries were expected during the summit,” says Janos Pasztor, director of the U.N.’s Climate Change Support Team.

“But it is hoped there would be a new framework (for funding arrangements),” he adds cautiously.

Secretary-General Ban Ki-moon, the summit’s strongest proponent, says he expects more than 100 world leaders to participate in the one-day meeting scheduled to take place Sep. 22.

“I expect them to demonstrate their political leadership. I expect them to play their role as global leaders, addressing these challenges (of climate change), which require global leadership and global solidarity.”

The ‘World Economic and Social Survey 2009’, published by the U.N.’s Department of Economic and Social Affairs and released last week, estimates that between 500 billion and 600 billion dollars would be needed annually to address some of the problems caused by climate change, which will be on the agenda of a major international conference in Copenhagen in December.

Last year, British Prime Minister Gordon Brown unveiled the ‘Roadmap to Copenhagen’, including a proposal for 100 billion dollars to be raised annually to finance mitigation and adaptation measures, especially in the world’s poorest nations facing droughts, floods, deforestation, sea-level rise and pollution.

But that proposed funding, mostly by Western donors, still falls far short of the targets set by the United Nations.

“Billions in public financing will be required,” warns Ban, “There must be new money, not just re-packaged official development assistance (ODA).”

“If we can bail out banks,” he argues, “certainly we can find the funds to protect millions, if not billions of people and their means of survival.”

In an interview with IPS U.N. Bureau Chief Thalif Deen, Richard Kozul-Wright, chief of the Development Strategy and Policy Analysis Unit at the Department of Economic and Social Affairs, says finance issues are an integral part of the climate change debate. “I think the summit can have a very positive impact. The secretary general has insisted on the need for vision, urgency and leadership on the climate issue and has been working very hard to provide these,” he said.

He said the summit will be an opportunity for member states, and particularly the leading players, to show their support for his efforts and to move the discussion forward as the clock ticks down on reaching a deal in Copenhagen, including a new global treaty on greenhouse gas emissions.

Excerpts from the interview follow.

IPS: Against the backdrop of the present global financial crisis, what are the chances of increased funding from rich nations? RICHARD KOZUL-WRIGHT: Strictly speaking, chance should not have anything to do with it as advanced country governments have (at previous climate change meetings in Kyoto and Bali) signed up to meeting the additional financing costs incurred by developing countries in their mitigation and adaptation efforts.

Moreover, developed countries – including now the United States and Australia – have accepted the scientific evidence that anthropomorphic activity lies behind the already dangerous rise in global temperatures, and that if developing countries follow their example, then the consequences will be dire for everyone.

That activity has been located – predominantly – in rich countries. Indeed, the high carbon growth path adopted by these countries lies behind both the climate challenges and the massive income gaps that currently characterise the global economic landscape. The good news is that their success also means that these countries have the resources to tackle climate change both in their own country and developing countries.

IPS: Are there are new sources of potential funding available? KW: The World Economic and Social Survey (WESS) suggests various mechanisms through which new resources could be mobilised for this purposes, including green bonds and the re-direction of existing government expenditure – e.g. from military purposes or the subsidies that currently go to high carbon energy services – to meet climate threats at home and abroad.

Moreover, one thing that the financial crisis has shown is that determined governments can, if the political will exists, very quickly mobilise finance on a massive scale in response to a systemic shock – and to the tune of many trillions of dollars.

The one percent of global gross domestic product – between 500 and 600 billion dollars – which WESS suggests as a (annual) ballpark figure to tackle climate change in developing countries is of course the figure that the United States committed after World War Two to help reconstruct Europe – the Marshall Plan.

At that time, many in the United States argued that the country did not have the money or that it would be wasted, but in fact it was an important factor not only in helping reconstruction in Europe – and defeating political extremism there – but also in furthering American economic interests abroad.

Our own big push story is seen in similar terms as providing a win-win scenario for North and South and the modeling exercise in chapter one (of WESS) tries to show that a big investment push on the scale we are suggesting is consistent with strong global growth, including in developed countries.

IPS: Which should take precedence in the battle against climate change: political efforts or economic efforts? KW: Ultimately it is the continuation of sustainable growth that matters to any financing effort by these countries. Indeed, in light of the crisis, the shift in investment dynamic away from speculative investments towards more productive long-term investments – in renewable energy services, transportation, etc – is precisely what all countries need to do to bring about a more stable and balanced global economy.

That doesn’t mean that political effort isn’t required from the leaders of advanced countries to make the case for large scale funding. But one hopes that having persuaded their citizens that it was necessary to use their money to save banking communities from extinction that they can be equally persuasive in making the case that other communities – including possibly the whole human species – do not suffer that fate.

IPS: How confident are you about the proposal for the creation of a global clean energy fund? What would be the primary objectives of such a fund? KW: Obviously the need for such a fund follows from the previous logic of a big push and the recognition that existing bilateral and multilateral financing mechanisms have not – since the Marshall Plan – been designed to deliver such a push.

Donor countries have begun to accept that the aid architecture has not been functioning very well, in part because it is too fragmented and politicised, and that multilateral financing has failed to support the adjustments needed for inclusive and sustainable growth in developing countries.

This can hopefully provide the basis for a frank and open discussion of whether that same architecture is likely to function effectively when the climate challenge is added to existing development challenges. The focus of a clean energy fund would be very much on large-scale investments to expand capacity in renewable energy services as well as related investments in energy efficiency.

However, given that there are significant complementarities between the production and consumption of energy services, related investments in transportation, for example, could conceivably fall under its financing profile. It would certainly have to be geared to supporting very large financial transfers.

IPS: Should such a fund be under the aegis of the United Nations or the World Bank? KW: Developing countries are very sensitive to how such a fund should be managed, given the undemocratic governance arrangements that have characterised the Bretton Woods institutions (the World Bank and the International Monetary Fund), and their tendency to perpetuate indebtedness and other sources of economic vulnerability.

Moreover, even on their own internal assessments these institutions have not had a good record when it comes to factoring climate change in to their lending profile. Certainly our own assessment suggests that these institutions have shifted a long way from the principles that made the Marshall Plan a successful programme.

It is possible that these institutions could recover those principles but whether they can or cannot should not be decided by creditor countries alone but must be worked out with developing countries, particularly as many of these feel very strongly that financing for climate must not leave them with undiversified economies, exposed to unsustainable levels of debt, and still vulnerable to external shocks – even if they do have cleaner energy services.

In that respect, of course, the climate financing architecture must be part of a wider discussion of the reform of the international financial architecture in the post-crisis world.