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Africa: Climate Change Action, Who Will Pay?

AfricaFocus Bulletin
Jun 18, 2009 (090618)
(Reposted from sources cited below)

Editor's Note

"The global climate is changing rapidly. The science is clear: the process of industrialisation has caused the concentration of greenhouse gases in the atmosphere to rise steadily. ... Environmental impacts have begun and will continue to be felt first and hardest by some of the poorest people in the world. By 2020, parts of Africa will see crop yields from rain-fed agriculture fall by up to 50%. The costs of mitigation - that is, changing our activities to decrease our use of greenhouse gases - and adaptation, adjusting to and paying for the additional developmental consequences of increased temperatures - will run into tens, if not hundreds, of billions of dollars each year. But where will the money come from?" - Stamp Out Poverty report, May 2009

With a new energy bill before the U.S. Congress and the Copenhagen Climate Change Conference (Dec. 7-18) rapidly approaching, public attention to the climate change crisis is increasing. But the complexity of the issues and the weight of special interests threaten to suffocate changes that are even remotely comparable to the scale of the problem.

Such a failure would have particularly great consequences for African countries. African Environmental ministers meeting in Nairobi in May to prepare a common negotiating position for Copenhagen stressed that "while Africa has contributed the least to the increasing concentration of greenhouse gases in the atmosphere, it is the most vulnerable continent to the impacts of climate change and has the least capacity to adapt," The ministers noted, among other points, that "existing financial mechanisms are inadequate, complex and fragmented."

This AfricaFocus Bulletin contains a briefing note based on the full Stamp Out Poverty report entitled "Assessing the Alternatives: Financing climate change mitigation and adaptation in developing countries (http://www.stampoutpoverty.org). This report evaluates the options for new funding mechanisms, and advocates a mix, including a currency transaction tax.

Also included in this Bulletin are a selection of links and brief descriptions of other recent reports on the issue of climate change, particularly as it affects Africa.

These links include (for short descriptions of each see below):

(1) J. P. Thompson, Climate Change in Africa, December 2008

http://www.africafiles.org/atissueezine.asp?issue=issue9
http://www.africafiles.org/printableversion.asp?id=19552

(2) African Ministerial Conference on the Environment (AMCEN)
3rd Special Session, Nairobi, 25-29 May, 2009
http://www.unep.org/roa/Amcen/Amcen_Events/3rd_ss/default.asp

(3) In Search of Shelter: Mapping the Effects of Climate Change on Human Migration and Displacement
CARE International, UN University, Columbia University
May, 2009
http://www.care.org/getinvolved/advocacy/migration_report.asp

(4) Anthony Costello et al., "Managing the health effects of climate change", Lancet (Published May 13, 2009)
http://www.thelancet.com/climate-change

(5) Links to articles on Climate Change from Choike, a web portal dedicated to improving the visibility of the work done by NGOs and social movements from the global South.
http://www.choike.org/2009/eng/informes/268.html

(6) G8+5 Joint Academies' Statement
http://royalsociety.org/document.asp?tip=0&id=8595

Also new on the AfricaFocus website is a page with links to previous AfricaFocus Bulletins on environment and climate change. See http://www.africafocus.org/envexp.php

Of particular importance as basic reference documents are the Stern Report from 2006 (http://www.africafocus.org/docs06/ster0611.php) and the UNEP Africa Environmental Atlas from 2008 (http://www.africafocus.org/docs08/env0806.php).

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

Assessing the Alternatives: Financing climate change mitigation and adaptation in developing countries

Stamp Out Poverty

http://www.stampoutpoverty.org

This briefing is available at:
http://www.stampoutpoverty.org/climatefinancebriefing

The report on which it is based is available at:
http://www.stampoutpoverty.org/climatefinancereport

Contact: David Hillman, Stamp Out Poverty;
dhillman@stampoutpoverty.org

May 2009

The global climate is changing rapidly. The science is clear: the process of industrialisation has caused the concentration of greenhouse gases in the atmosphere to rise steadily. If we are to avoid triggering runaway, irreversible and catastrophic climate change we need to restrict global temperature increases to as far below 2°C as possible. Perhaps the most dramatic illustration is the melting of the Arctic ice cap, predicted to happen as early as 2013, the first time there will be watery emptiness at the top of the world for more than a million years.

Environmental impacts have begun and will continue to be felt first and hardest by some of the poorest people in the world. By 2020, parts of Africa will see crop yields from rain-fed agriculture fall by up to 50%. The costs of mitigation - that is, changing our activities to decrease our use of greenhouse gases - and adaptation, adjusting to and paying for the additional developmental consequences of increased temperatures - will run into tens, if not hundreds, of billions of dollars each year. But where will the money come from?

Answering that question is the purpose of a new report from Stamp Out Poverty, written by the new economics foundation, which provides the basis of this briefing paper focusing on new sources of substantial on-going finance. This is one of the principal challenges in the run-up to the Copenhagen conference in December, 2009. Without a solution to how the massive costs of climate change will be met, meaningful progress will not be possible. Whilst the report concludes with the recommendation of a portfolio of mechanisms to raise substantial revenue, as important is its articulation of clear principles and criteria upon which current and future proposals can be assessed.

Adaptation financing

Clearly, an overarching concern whether speaking of mitigation or adaptation finance is that we arrive at a fair, sufficient, global deal, that does not adversely affect the world's poorest and most vulnerable people, and at the same time safeguards (rather than diminishes) current finance for development.

When addressing adaptation, specifically, the UN Framework Convention on Climate Change (UNFCCC) estimates costs to developing countries in the range of $49-$171 billion each year relating to agriculture, forestry, fisheries, water supply, human health, coastal zones and infrastructure. The central factor guiding adaptation finance concerns historical responsibility. Whose fault is it that the planet is warming up? Industrialisation in developed countries is responsible for the lion's share of the problem. As such, the 'polluter pays principle' should apply - essentially, the developed world needs to make compensation payments to developing countries for the environmental damage it has caused. Beyond this a key consideration is 'ability to pay', and again, it is developed countries who have the greater capacity.

With the source of flows from North to South in mind, the report develops criteria to judge financing proposals which include:

  • Sufficiency - where the funds generated are equal to the scale of the task
  • Predictability - where funds are generated in as stable and predictable a way as possible
  • Equity - where contributions reflect both historical responsibility and capacity to pay
  • Additionality - where funds are 'new and additional' to existing aid commitments
  • Verifiability - where funds are collected and disbursed in a transparent and verifiable manner
  • Ease of implementation - where mechanisms are favoured that can be readily implemented.

As well as these criteria it is argued that a combination of financing mechanisms is to be preferred to one silver bullet solution and that as far as possible mechanisms should be a) broadly international in form, and b) diverse in their cost impact ie not designed to fall on one small constituency but more economically spread out.

A number of proposals have been submitted to the UNFCCC by national governments and other bodies regarding the funding of adaptation and mitigation in developing countries. In the report twelve proposals are reviewed. Please see Box 1 for a brief description of each one.


BOX 1 Twelve proposals for mitigation and adaptation financing

1 The G77+ China proposal - developed countries provide funding of 0.5% of GDP mainly for mitigation

2 The World Bank's Pilot Programme for Climate Resilience (PPCR) - discretionary loans for adaptation given by developed countries as part of ODA through the World Bank

3 The Mexican Climate Change Fund (MCCF) - countries are obliged to contribute to the fund on the basis of emissions, population and income, mainly for mitigation

4 The Swiss Carbon Tax proposal - a global tax on all carbon emissions in all countries, but with a per capita exemption that would benefit some poorer countries

5 The US Auction Levy - where a small proportion of the proceeds of auctioning carbon permits within the US are earmarked for funding adaptation activities in developing countries

6 The EU Emission Trading Scheme (ETS) Auction Levy - where a proportion of the proceeds of auctioning carbon permits within the countries of the European Union are earmarked for funding adaptation activities in developing countries

7 The Global Capital Fund Mechanism - bonds are issued on the international capital markets and the proceeds are invested in mitigation and adaptation

8 The Norwegian 'Assigned Amount Units' (AAU) proposal - the international auctioning of national carbon emission permits

9 The Tuvalu Burden Sharing Mechanism - a levy on air travel and freight shipping with different rates for developed and developing countries and exclusions for travel to and from Least Developed Countries (LDCs)

10 The International Air Passenger Adaptation Levy (IAPAL) - a levy on international air travel

11 The International Maritime Emission Reduction Scheme (IMERS) - a levy on international shipping

12 The Currency Transaction Tax (CTT) - a very small duty on international currency transactions as a long term funding stream for adaptation


Mitigation financing

The UNFCCC speaks of figures upward of $200 billion per year that will be required to fund mitigation in developing countries, breaking down the costs into the following categories: energy, industry, buildings, transport, waste, agriculture, forestry and technology.

Moving away from fossil-fuel dependence for energy generation is predicted to be the most expensive category. The Stern Review states that 'investing' today to move the economy onto a low-carbon footing would certainly be expensive, but far less so than dealing with the economic consequences of the level of climate change resulting from continuing with 'business as usual' - a colossal 5%- 20% of global GDP on an on-going basis.

In terms of ways forward the report describes two approaches: quantity-based or price-based. That is, to shift to a sustainable, low-carbon trajectory we can either restrict the quantity of global emissions, or we can increase the costs of these emissions to achieve the same result. In policy terms these two options equate to a global limit, or 'cap'; or to a global carbon tax. Either option can only work in the context of a sound and effective global deal to limit climate change, which is based on historical fairness and where future human development is an integral part.

Responsibility and capacity to pay

It is essential that decisions on climate change financing be made on a fair and equitable basis, using clear principles, and that national contributions should vary to reflect responsibility and capacity to pay. One of the recognised systems by which to assess which developed countries ought to shoulder what proportion of financial responsibility, in respect of both mitigation and adaptation, is the Greenhouse Development Rights (GDR) framework. [see http://www.ecoequity.org] Fundamental to the GDR approach is firstly the need for emergency measures to reduce global carbon emissions rapidly to avoid global temperature rise of 2°C; and secondly the overriding need for poverty reduction in developing countries.

Under the framework, Responsibility is calculated by taking each country's total 'cumulative' emissions per capita, and Capability is calculated using per capita national income data, adjusted to reflect differences in purchasing power and inequality from one country to another. As well, the rights of poor people to develop are safeguarded through the use of an income threshold; the greater the proportion of a country's population that falls below this poverty line, the less that country is required to invest. Finally, proportionate reponsibility can be determined through the use of a Responsibility and Capacity Index.

Recommendations

Adaptation

A set of criteria was applied to the twelve proposals which, through the use of an indicative scoring system, enabled them to be compared. At the end of this process it was clear that no one instrument would generate a sufficient volume of finance and that a portfolio approach be adopted. One possible combination, the report recommends, applies the Norwegian ‘Assigned Amount Units’ Levy at 2%, raising around $14 billion pa, combined with the International Air Passenger Adaptation Levy, raising $10 billion pa, and the IMERS levy on international shipping, raising $15 billion pa. This would amount to $39 billion a year; however by adding in the Currency Transaction Tax, which could raise in the region of $40 billion pa, the total generated would climb to approximately $79 billion a year.


BOX 2 Governance and disbursement of funds

While this paper focuses solely on the raising of finance, the following are key principles regarding institutional arrangements and the spending of funds:

Governance

1 Representation - governing bodies should have equitable, and balanced participation

2 Decision making and activities must be transparent

3 Financing must be accessible to all developing countries, specifically poor and vulnerable ones such as LDCs which often struggle to access funding

4 Financing should be carried out under the auspices of the UNFCCC 5 Funds for adaptation should not be made in the form of loans

Disbursement

1 Funding must be distributed fairly and through existing mechanisms, where possible: for adaptation, priority must be given to the poorest and most vulnerable countries and communities within those countries

2 Principles of sustainable development must be taken into account, and projects should comply with international and national environmental agreements

2 The Greenhouse Development Rights Framework: The right to development in a climate constrained world. Paul Baer, Tom Athanasiou, Sivan Kartha, and Eric Kemp-Benedict. Published by the Heinrich Böll Foundation, Christian Aid, EcoEquity and the Stockholm Environment Institute. Revised second edition. Berlin, November 2008. Available at:

3 The GDR framework is one option amongst a number of alternatives for assessing responsibility and capability while taking into account development needs. In this report we do not seek to establish a definitive framework.


Mitigation

The report proposes that an equitably designed global carbon market or a global carbon tax could constitute the principal source of funding for mitigation if based on the ambitious global climate deal that is needed. It is likely, however, that this would not provide sufficient transfers from North to South to finance mitigation fully, nor would these funds necessarily reflect equity considerations. To ensure sufficiency and equity for financing mitigation, it is proposed that the total volume could be augmented through measures such as the Mexican Climate Change Fund. Such a mechanism could be constructed to maintain equitable contributions on an ongoing basis.

Political will and decision-making

The purpose of this report is to set out a way of thinking to help assess the financing proposals now before us. In the end, it is political intention and feasibility that will determine whether some or any of these mechanisms will be adopted. However, the need is so great and the cost of failure so immense, that we hope there is a determination to agree a mix of instruments in Copenhagen and that this report can assist in that decision-making.


Selected Recent Climate Change Reports

(1) J. P. Thompson, Climate Change in Africa, December 2008
http://www.africafiles.org/atissueezine.asp?issue=issue9
http://www.africafiles.org/printableversion.asp?id=19552

"Climate change is having a disproportionate effect on Africa: the impacts are more devastating than elsewhere and the people have contributed less to cause it. This editorial highlights the problem of carbon dioxide emissions and discusses the role of deforestation. It is a potent example of opportunities squandered by the skewed, profit-driven mitigation strategies of the North, which fail to include local African knowledge and input. Without a more holistic, bottom-up approach, the fate of millions is extremely bleak."

Clearly written 8-page summary article, with references. The first of a multi-part series with case studies focusing on East Africa, Cameroon, and gender.

(2) African Ministerial Conference on the Environment (AMCEN)
3rd Special Session, Nairobi, 25-29 May, 2009
http://www.unep.org/roa/Amcen/Amcen_Events/3rd_ss/default.asp

The conference issued the Nairobi Declaration as a basis for a common African negotiating position at the Copenhagen climate change conference. The full text of the declaration is available at http://tinyurl.com/m98lb3

Among the points stressed in the 5-page declaration:

  • Expressing concern at the scientific conclusions contained in the fourth assessment report of the Intergovernmental Panel on Climate Change, particularly as they relate to the social, economic and environmental impacts of climate change in Africa and noting that, while Africa has contributed the least to the increasing concentration of greenhouse gases in the atmosphere, it is the most vulnerable continent to the impacts of climate change and has the least capacity to adapt,
  • 11. To urge developed countries to set ambitious targets to reduce their emissions, by 2020, of at least 40 per cent below 1990 levels, and, by 2050, by between 80 and 95 per cent below those levels, to achieve the concentration of 450 ppm of carbon dioxide equivalent in the atmosphere;
  • 13. To reaffirm that Africa, in the context of environmental justice, should be equitably compensated for environmental, social and economic losses and to emphasize that Africa requires substantially scaled-up finance, technology and capacity-building for adaptation and risk management.
  • 15. To urge that the financial resources required to tackle climate change should be new and additional, adequate, predictable, sustainable and provided primarily in the form of grants and other innovative financing mechanisms and instruments, such as debt-for-nature swaps;

(3) In Search of Shelter: Mapping the Effects of Climate Change on Human Migration and Displacement
CARE International, UN University, Columbia University
May, 2009

http://www.care.org/getinvolved/advocacy/migration_report.asp

"The negative impacts of climate change are already causing migration and displacement. The exact number of people that will be on the move by mid-century is uncertain. However, the scope and scale could vastly exceed anything that has occurred before. The International Organisation of Migration (IOM) estimates that there may be 200 million environmentally-induced migrants by 2050. ... People in the least developed countries and island states will be affected first and worst."

This 36-page report includes overview of issues and section on West Africa and the Nile Delta as two of the case studies.

(4) Anthony Costello et al., "Managing the health effects of climate change", Lancet (Published May 13, 2009)

http://www.thelancet.com/climate-change

41-page report, 19M pdf

The warming of the planet now represents the greatest public health threat, surpassing infectious diseases, water shortages and poverty, according to a team of researchers at the University College London Institute of Global Health Commission.

Researchers focus on key areas that connect climate change to health outcomes: changing patterns of disease and mortality, food, water and sanitation, shelter, extreme events and population migration. Effects of climate change on health, they conclude, will affect most populations in the next decades and put the lives and wellbeing of billions of people at increased risk.

(5) Links to articles on Climate Change from Choike, a web portal dedicated to improving the visibility of the work done by NGOs and social movements from the global South. Includes recent articles from Third World Network, Carbon Trade Watch, and other groups.
http://www.choike.org/2009/eng/informes/268.html

Includes a call to "repay the climate debt" and a primer on climate debt.
http://www.choike.org/2009/eng/informes/7531.html

(6) G8+5 Joint Academies' Statement
http://royalsociety.org/document.asp?tip=0&id=8595

The national scientific academies of Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Russia, South Africa, United Kingdom and the United States have issued a joint statement calling on their governments and the upcoming Copenhagen Conference to take decisive action of climate change.

The statement highlights that climate change is happening even faster than previously estimated and that changes to energy strategies will be key to addressing the issue. Among other measures, it calls on all governments to agree emission reduction targets to deliver approximately 50% reduction in global emissions from 1990 levels by 2050;


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

AfricaFocus Bulletin can be reached at africafocus@igc.org. Please write to this address to subscribe or unsubscribe to the bulletin, or to suggest material for inclusion. For more information about reposted material, please contact directly the original source mentioned. For a full archive and other resources, see http://www.africafocus.org


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