News

Financing Reef Destruction?

Rey Edward — Mon, 06 May 2013 21:28:43 -0400

A new study from an Australia NGO tells how Chinese financing will potentially devastate the Great Barrier Reef.

Yes, you read that correctly. The Great Barrier Reef – home to endangered sea turtles, blue whales, sea snakes, and fragile coral reefs – is being destroyed in exchange for coal ports and LNG plants.

China, Australia, and the US Export Import Bank have placed financial bets on transforming the Great Barrier Reef into a noxious highway for coal exports to Asia. China Development Bank, China ExIm Bank, and Bank of China, along with the “Big 4” Australian banks, are financing the construction of a string of LNG plants and coal export terminals that are smack in the middle of the world famous reef. Industrialization along the coast, in addition to vessel pollution and potential spills, would critically degrade the world’s largest reef system, jeopardize the local economy, and worsen climate change.

In the study, the Australian NGO Market Forces details the role banks play in profiting off the reef’s destruction while the creatures and people of the Great Barrier Reef pay for it. The report comes at an interesting time when the BRICS countries – including Brazil, Russia, India, China, and South Africa – have just announced their plans for a joint development bank. The BRICS countries are keen to position themselves as green minded leaders who pioneer sustainable development. However, the latest news of China’s role in financing the fossil fuel projects, as well as allegations of corruption among the Indian companies building them, reflect a double standard.

As I wrote in the South China Morning Post over the weekend:

"Despite the obvious cultural and environmental concerns of building dirty facilities in the reef, however, major Chinese banks, such as China Development Bank, the Export-Import Bank of China, and Bank of China have all approved financing for the projects.

In financing these projects, they are violating China's own policies: first, they are running foul of the banking authorities' green credit directive by failing to require its clients to adhere to international best practices in environmental safeguards. Second, they are violating the recently released guidelines on environmental protection in overseas investments by failing to protect the local environment."

As the economic powerhouse behind BRICS, China is in a perfect position to lead by example and demonstrate its commitment to sustainable practices. Unfortunately, it has failed to step up to the challenge so far.

Click here to take action!

Photo Courtesy of Australia Conservation Foundation

New Chinese guidelines are a step in the right direction, but don’t go the distance

Rey Edward — Thu, 02 May 2013 15:20:40 -0400

Earlier this year, China’s ministries of Commerce and Environmental Protection jointly issued new guidelines for the environmental practices of Chinese companies doing business abroad. The new guidelines are an important step toward improving China’s global green reputation – but ultimately fail to go far enough in compelling Chinese firms to abide by environmental or social safeguards.

China’s ministries issued this new policy to standardize environmental protection practices of Chinese companies operating abroad, and it is the latest in a string of policies aimed at regulating Chinese enterprises investing overseas. The guidelines are broad, including calls for companies to respect the historical and cultural heritages of their host countries, to monitor pollution and make the results public, as well as protecting the rights and job opportunities of non-Chinese workers.

But they do not provide enough concrete guidance, nor are they backed up by real governmental muscle. For example, the guidelines say enterprises should set up a system of communicating with local governments, environmental regulators and the general public. They require companies to develop emergency plans, carry liability insurance, and carry out restoration should their operations degrade the environment. These are necessary and important steps indeed, but the guidelines fail to specify how companies should meet those requirements.

Neither are the new guidelines backed up by mechanisms to ensure and enforce compliance. There is no mention of an office in charge of monitoring and ensuring implementation of the guidelines, nor assessing penalties in cases of noncompliance. The lack of clear, concrete compliance mechanisms or instructions leaves a gap between rhetoric and implementation -- a gap the Chinese government does not seem keen to fill.

So if the guidelines are vague and unlikely to be enforced, why issue them? Perhaps the guidelines are meant to primarily reassure host countries that China is standing by its pledge to reject the legacy of Western exploitation masked as development. Yet the record of overseas Chinese investment speaks much more loudly than Beijing’s policy pronouncements.

In Gabon, Peru, Zambia, and other places, Chinese-financed projects have been tainted by a colonialist tendency. Even today, there are signs that Chinese companies are adopting imperialistic and uncomfortably paternalistic attitudes towards local communities. In Burma, Chen DeFang , the president of the Chinese mining company Wanbao that is at the center of a dispute over a controversial copper mine, acknowledged the company’s mistake: failing to consult with local communities. In an interview with The Wall Street Journal, Chen DeFang said the Burmese people did not yet understand the benefits of the project: “Sooner or later they will say: ‘Thank you, Mr. Chen.’”

If China truly wishes to show itself as a superior alternative to Western development, creating formal mechanisms to enforce this new overseas investment policy would be a perfect place to start. On the other hand, by failing to manage the actual performance of overseas investments, including ensuring that locally impacted communities have appropriate channels for resolving their grievances, China runs the risk of not only tarnishing its global reputation, but also damaging its diplomatic relationships with foreign countries. This is already happening in African countries that have grown wary of Chinese investment.

The guidelines are an encouraging example of how China is pioneering innovative policies at the frontier of sustainable development. Certainly, in comparison to other countries, China has taken the lead in the race to curb the negative impacts of its overseas companies. But to get the finish line, reality must replace rhetoric.

Photo Courtesy of The Economist.

Free trade in frankenfish? Trans Atlantic free trade agreement could be a monster

Bill Waren — Fri, 26 Apr 2013 22:22:12 -0400

“Frankenfish is a 2004 monster movie dealing with genetically engineered fish in the bayou.”

-Wikipedia

“European Union… measures governing the importation and use of GE (genetically engineered) products have resulted in substantial barriers to trade.”

U.S. Trade Representative, 2013 report on sanitary measures

In his 2013 State of the Union message, President Obama announced that the U.S. would move forward on negotiations with the European Union for the Trans Atlantic Trade and Investment Partnership, a trade deal that raises a raft of serious environmental concerns.

Based on the model of past U.S. trade agreements, statements by officials, and published documents including a U.S.-E.U. “High Level Working Group” report outlining the objectives for negotiations, it appears that the goal is to grant transnational corporations and governments expanded “rights” under the Trans Atlantic agreement to challenge government regulations before international tribunals. In its short report, the working group proposes a deal that would focus on environmental and other regulations alleged to interfere with free market efficiency, rather than traditional trade issues such as lowering tariffs. The HLWG report explicitly recommends going beyond even World Trade Organization standards in the areas of intellectual property rights, sanitary measures, and so-called “technical barriers to trade” that already vitiate environmental protections.

The U.S. Trade Representative is widely expected to use U.S.-E.U. negotiations to subvert regulations on genetically engineered products, food safety, and synthetic biology, among many others. At the same time, USTR is expected to push for provisions in the agreement that encourage patents on human, plant and animal genes and use of cost-benefit analysis rather than the precautionary principle when setting environmental regulatory standards.

GE products: intellectual property and sanitary measures provisions

If based on the HLWG report, this Trans Atlantic free trade agreement (TAFTA) could open the door wide for gene patents, as well as trade in genetically engineered food and even products based on synthetic biology. This could threaten ecosystems, public health, and the livelihoods of small farmers, among other unintended and even frightening consequences.

The history of successful U.S. suits in the WTO challenging European policies on genetically engineered organisms and food safety under the sanitary measures agreement should be a warning. The working group’s report suggests establishing an even more rigorous review of sanitary measures in TAFTA than that currently employed under WTO rules. This could put GE and food safety regulations at even greater risk in TAFTA litigation.

Friends of the Earth believes that governments on both sides of the Atlantic should have more, not less freedom to regulate in this area. Genetic engineering of commercial products presents many known and more suspected risks to people and nature. GE products should be subject to government regulation based on the precautionary principle: in other words, the burden of proof for demonstrating a new product or technology’s safety should fall on those who would introduce it into the marketplace.

Food safety: sanitary measures provisions

Similarly, Friends of the Earth is concerned about how other food safety disputes would be treated under a WTO-plus regime for sanitary measures. Among the many areas of concern are EU food safety measures targeted as trade barriers in a 2013 USTR report, including restrictions on imports of beef treated with growth hormones, chicken washed in chlorine, and meat produced with growth stimulants (rectopamine). Another 2013 report also targets France in particular for its 2012 ban on use of materials produced using BPA in contact surfaces for food for infants and pregnant women. .

Cost-benefit analysis & the precautionary principle: regulatory coherence provisions

The HLWG report calls for the U.S.-E.U. deal to include a cross-cutting discipline on regulatory coherence “for the development and implementation of efficient, cost-effective, and more compatible regulations for goods and services.” In all probability, this recommendation by the HLWG contemplates something similar to the draft regulatory coherence chapter of the Trans Pacific Partnership agreement, a proposal that greatly concerns Friends of the Earth.

The leaked draft of the regulatory coherence chapter of the Trans Pacific Partnership trade agreement encourages countries joining the pact to conduct regulatory impact assessments or RIAs when developing regulations, including environmental measures, which have more than a minimal cost burden on business and the economy. Cost-benefit analysis to determine the net benefit of environmental regulations, specifically, is encouraged.

In the view of Friends of the Earth the cost of environmental and other government regulations should not be ignored, but it ought to be looked at with a wider perspective. Calculations of seemingly definitive “ratios of benefit to costs” should be considered with balanced skepticism. Identifying and quantifying the costs of environmental regulation can be inflated by assumptions, bias of the analyst, and flaws in data gathering. Quantifying the benefits of environmental regulation can be difficult, for example because public health data is not as comprehensively collected as economic data. Or, it can be impossible: an attempt to attribute a price to the intrinsic value of human life, living things and nature itself. In our view, cost-benefit analysis, in many circumstances, can be at odds with a fundamental principle of environmental regulation: application of the precautionary principle in the face of an immeasurable environmental risk and inescapably uncertain outcomes.

An excellent example of an environmental issue involving uncertain outcomes that requires application of the precautionary principle, not cost-benefit analysis, is regulation of synthetic biology. While genetic engineering involves the exchange of genes between species, synthetic biology involves artificially creating new genetic code and inserting it into organisms. Synthetic organisms self-replicate. No one knows how they will interact with naturally occurring organisms or the consequences for the ecosystem as a whole. Standard forms of risk assessment and cost-benefit analyses used by current biotechnology regulatory approaches are inadequate to guarantee protection of the public and the environment.

Friends of the Earth concerns about TAFTA, more generally

The issues discussed in this first blog post regarding GE products, gene patents, food safety and synthetic biology are only a few of the environmental concerns raised by TAFTA negotiations. Follow-up blog posts will detail many other threats. Friends of the Earth is in the process of producing a comprehensive analysis of issues raised by the launch of TAFTA negotiations, and we will report to you, our readers, in blog posts as we finalize our research findings. To give you a preview of the breadth of environmental issues raised by these negotiations, here are several thematic concerns that Friends of the Earth has about upcoming TAFTA negotiations. In our view:

Environment and labor obligations in TAFTA should be treated in a similar manner to commercial obligations: they should be enforceable through dispute resolution.
In response to climate change, TAFTA should provide governments with policy space, free from the threat of trade litigation, to adopt climate change measures, such as a carbon tax, other tax measures and subsidies to encourage renewable energy, carbon and pollution regulations, and energy efficiency standards, among others.
TAFTA should not facilitate the “commoditization of the commons” -- our natural resources, water, and animal, plant and human genes.
TAFTA should not drive a harmonization down to the lowest common regulatory denominator, especially with respect to regulation of toxic chemicals, food safety, and GE organisms.
Investment disputes, such those related to mining, oil production, water, and energy services, should be adjudicated not before arbitral tribunals biased in favor of multinational corporations, but before domestic courts and administrative bodies.
TAFTA should not be negotiated in secret. A public debate will either make it a better agreement or sink a bad deal.

Robin Hood comes to Congress

Adam Russell — Wed, 17 Apr 2013 17:35:45 -0400

This morning, I joined Representatives Keith Ellison (D-Minn.) and Barbara Lee (D-Calif.) as well as the leaders of Health Gap, National Nurses United, National Peoples Action, Demos and Vocal to announce the introduction of the Inclusive Prosperity Act of 2013 (H.R. 1579).

The concept behind the Inclusive Prosperity Act is simple. When the banks and Wall Street were on the verge of collapse, taxpayers were forced to step in with trillions of dollars to bail them out. As Wall Street executives sit on fat cat bonuses, it's past time for the big banks to repay the American people, starting with a financial transaction tax. Or, as we call it, the Robin Hood Tax.

When enacted, the Inclusive Prosperity Act would implement a fraction of a percent tax on financial transactions. While minuscule, the cumulative impact of the tax would raise some $350 billion in one year, and would help keep communities healthy and whole, both at home and around the world.

From an environmental and justice perspective, the Inclusive Prosperity Act recognizes the enormous human and economic toll that climate change will take in the United States and in developing countries. It opens the door for a portion of this extremely promising, untapped revenue source to be used to help the world’s poor confront the climate crisis, a crisis which they did not cause.

This isn’t a new idea. France has dedicated a portion of the revenue from its financial transaction tax to help poor countries combat climate change. And 11 European Union countries are in the process of implementing a regional financial transaction tax. The United States, the world’s biggest economy and the country most responsible for causing climate change and the financial crisis, should follow suit.

The Inclusive Prosperity Act calls into question Washington’s political will to do something that challenges Wall Street and demonstrates that there is not actually a scarcity of public funds for global public goods.

Congressman Ellison and the co-sponsors of the Inclusive Prosperity Act have the political will to challenge Wall Street. Friends of the Earth is proud to endorse and support their efforts. President Obama should do the same. It is well past time for Treasury Secretary Jack Lew to not only stop trying to tamp down on other countries’ effort to establish a Robin Hood Tax, but to actually come out publicly in favor of it.

PS- If you are in Washington, DC this weekend, please join Friends of the Earth and our colleagues at the Robin Hood Tax Rally outside of the World Bank on Saturday, April 20 at 12:00.

Robin Hood Tax legislation introduced, could generate billions of dollars to fight climate change

Lisa Matthes — Wed, 17 Apr 2013 09:57:41 -0400

WASHINGTON, D.C. -- Friends of the Earth U.S. joined Congressman Keith Ellison (D-Minn.) on Capitol Hill today to support the introduction of the Inclusive Prosperity Act of 2013, which would establish a tax on financial transactions, popularly known as a Robin Hood Tax. The tax would generate hundreds of billions of dollars in revenue annually for critical needs such as healthcare, education, job creation and the international fight against HIV/AIDS and climate change. Erich Pica, president of Friends of the Earth U.S. had the following to say in response to the bill:

“Friends of the Earth U.S. wholeheartedly endorses the Inclusive Prosperity Act and urges its passage into law. By making Wall Street pay its fair share, this legislation would help shore up funding for services that keep people and our communities healthy and whole, both at home and around the world.

“This forward-looking legislation recognizes the enormous human and economic toll that climate change will take in the United States and in developing countries. Like a similar proposal in France, it opens the door for a portion of this extremely promising, untapped revenue source to be used to help the world’s poor confront the climate crisis.

“As the Inclusive Prosperity Act demonstrates, there is not actually a scarcity of public funds for global public goods; it is a question of political will. Trillions of dollars were rapidly made available to pay for wars and Wall Street bailouts, but what about the climate crisis?”

At no more than half-a-penny per transaction, the Robin Hood Tax is a micro-tax on Wall Street trading that would curb harmful speculation and raise hundreds of billions of dollars of new revenue to pay for urgently-needed public goods and services, like helping the poor cope with the threats to public health and food shortages caused by our changing climate. It would apply to financial transactions such as the trading of stocks, bonds, derivatives and other financial instruments -- most of which are traded not by people, but by computers in a matter of micro-seconds.

Forty countries have implemented financial transactions taxes, more than one thousand economists have endorsed the FTT and 11 European nations are in the process of implementing a regional FTT.

Momentum for the Robin Hood Tax will continue with a rally and march beginning at noon on Saturday, April 20, sponsored by the Robin Hood Tax Campaign, of which Friends of the Earth U.S. is a member. The rally will start at Murrow Park (adjacent to the International Monetary Fund and World Bank buildings on Pennsylvania Avenue, between 18th and 19th Streets), followed by a march to the White House and U.S. Treasury Department to demand a Robin Hood Tax. For more information, see www.robinhoodtax.org/get-involved.

Contact:

Karen Orenstein, (202) 640-8679, korenstein@foe.org

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Friends of the Earth fights to create a more healthy and just world. Our current campaigns focus on promoting clean energy and solutions to climate change, keeping toxic and risky technologies out of the food we eat and products we use, and protecting marine ecosystems and the people who live and work near them.

How to Stretch a Penny (Ask Robin Hood)

Karen Orenstein — Thu, 11 Apr 2013 18:17:03 -0400

Though a number of wealthy countries attending a State Department-convened climate finance ministerial meeting on mobilizing private money have been trying to escape their obligation to use public funds to help the world’s poor confront the climate crisis (which, incidentally, the poor did not cause), Robin Hood found them today and demanded to be heard. He and his many supporters stood outside the hotel where the elite group had gathered in Washington, D.C. and loudly called for the implementation of a Robin Hood Tax (a.k.a. financial transaction tax), an extremely promising, untapped source of revenue that would raise hundreds of billions of dollars to create jobs; provide education, housing and global healthcare; and fight climate change.

Passers-by witnessed an epic tug-of-war between people and the planet on one side, and big banks on the other. It was the walruses, polar bears, Robin Hood and ordinary folks versus the fat cat bankers. They were struggling over a tiny tax on big banks, symbolized by a giant penny.

Spokesperson for Wall Street tycoons

According to a spokesperson representing Wall Street and City of London tycoons standing on the right side of the rope, “If I lose the money, I will not be able to fly in my private jet. Oh wait, that’s not true. I will still have enough money to fly in my jet. I might make way less money! Oh wait, actually there’s no data to back that up. I will not be able to afford healthcare! Oh wait, actually if there was a Robin Hood Tax, healthcare would be affordable for everyone. Well, dammit, I just don’t want to give up any of my pennies!”

At which point, Robin Hood retorted, “But, Banker, the Robin Hood Tax is waaaayyyy less than a penny!”

Mr. Hood was correct. At no more than half-a-penny, the Robin Hood Tax is a micro-tax on Wall Street trading that would curb harmful speculation and raise hundreds of billions of dollars of new revenue to pay for urgently-needed public goods and services, like helping the poor cope with the threats to public health and food shortages caused by our changing climate. It would simply levy a teeny tiny fee on financial transactions—most of which are traded not by people, but by computers in a matter of micro-seconds—involving stocks, bonds, currency exchanges and derivatives. As Robin Hood likes to say, “It’s small change for the banks but big change for the people.”

Throughout the tug-of-war, Robin Hood’s supporters – even those of the animal kingdom – could be heard chanting:

No more budget cuts on our backs;

Fight climate change with a Robin Hood Tax!

Public money’s good,

Says Robin Hood;

Robin Hood Tax now!


Representative from Norwegian ministry addresses those gathered

As they dispersed, Robin Hood’s supporters expressed cautious optimism that their message was well-received. After all , they had interacted with ministry representatives from the U.S., U.K., Poland, Japan, Canada and Norway. Norway’s representative even joined in the fun to show his support for Robin Hood.

Rather than focusing on how to guarantee high returns for Wall Street and the City of London, the U.S. and other countries should finally start taxing them to help pay for global public goods and services, like meeting the adaptation and mitigation needs of ordinary people in developing countries, especially the poorest and most vulnerable.

President Obama’s budget capitulation

Lisa Matthes — Wed, 10 Apr 2013 11:17:31 -0400

WASHINGTON, D.C. -- Today, President Obama released his fiscal year 2014 Budget. For the first time the President’s Budget is calling for $1.2 trillion in cuts to the government, including billions from Social Security and Medicare. Friends of the Earth President Erich Pica issued the following statement in response to the President’s Budget.

"Today, President Obama passed up the opportunity to lay down a positive vision of how our country can maintain its commitments to the Americans whose hard work built our country. Instead he proposed to balance the ledgers with significant cuts to the programs that working Americans depend on.

“Yet again, President Obama proved he is an excellent negotiator -- with himself. It is past time that he learned not to negotiate when he is alone at the table. The Republican House offered up a more draconian version of the Ryan Budget that the American people rejected in November, and President Obama rewarded the House’s intransigence by proposing billions in cuts to the same social safety nets they want to weaken.

“The election is over and President Obama cannot run again, so he has no excuse for acting like a milquetoast. Obama’s budget priorities have made it clear that he is more concerned with protecting corporations than working Americans.

“We can do better. Instead of cutting environmental protections and benefits for seniors, we should be raising revenue by making polluters pay for their pollution. In his address this morning, President Obama reiterated his commitment to deal with climate change, but his budget does not call for the steps that are necessary. Enacting a meaningful price on carbon is perhaps the single most important step we can take to avoid climate disaster, and it could also raise funds to strengthen our government."

Contact:
Ben Schreiber, 202-222-0752, bschreiber@foe.org

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Friends of the Earth fights to create a more healthy and just world. Our current campaigns focus on promoting clean energy and solutions to climate change, keeping toxic and risky technologies out of the food we eat and products we use, and protecting marine ecosystems and the people who live and work near them.

Pro-poor Climate Finance: Is There a Role for Private Finance in the Green Climate Fund?

Karen Orenstein — Tue, 09 Apr 2013 16:03:16 -0400

New Report from Friends of the Earth U.S. and Pan African Climate Justice Alliance

This week in Washington, DC, U.S. Special Envoy for Climate Change Todd Stern is organizing the Ministerial Meeting on Mobilizing Climate Finance. This invitation-only event, hosted for finance and climate ministries of select donor countries, typifies the extraordinary emphasis rich governments are placing on private finance as the solution to meeting developing countries’ climate needs. Unfortunately, they are trumpeting the private sector as a solution without first thoroughly investigating whether or not the real needs of ordinary people in lower income countries actually can be met through supporting private financiers and companies. It is with this in mind that Friends of the Earth U.S. and the Pan African Climate Justice Alliance are releasing the report, Pro-poor Climate Finance: Is There a Role for Private Finance in the Green Climate Fund?

Policymakers concerned with international climate finance, particularly board members of the nascent Green Climate Fund, should first be asking the question posed in our report: what are the needs of developing countries, especially the poorest and most vulnerable, as they confront the climate crisis? Only then can we consider whether private finance and support for the private sector help equitably and effectively meet those needs, and uphold the requirements of the GCF Governing Instrument and the United Nations Framework Convention on Climate Change.

Rather than lionize the role of the private sector, our report instead de-constructs ideological notions of “leveraging” private finance and examines the track record of the private sector, private financiers and development finance institutions in developing countries. It concludes that private finance will be especially difficult to deploy responsibly in low and lower-middle income countries, as well as in marginalized communities in all developing countries. Further, private climate finance cannot be a substitute for direct public finance; adaptation in particular is likely to offer few commercially profitable opportunities for private financiers.

It recognizes that micro, small and medium enterprises (MSMEs) are the most important economic actors and provide most of the employment in developing countries, and that directing finance towards these enterprises can be extremely difficult. Most MSMEs focus on subsistence, with high informality rates, low returns and low investment volumes. As a result, international donors and financiers often ignore them. Without rigorous and well-articulated effort to address this dynamic, the GCF would be likely to do the same in its support for the private sector. When development finance institutions have tried to respond to the challenges of working with MSMEs, they have tended to use financial intermediaries to deploy funds. (Financial intermediaries may include commercial and investment banks, private equity and venture capital funds, microcredit institutions, insurance and other financial institutions.) But extensive evidence demonstrates that a reliance on financial intermediaries frequently results in deeply inadequate monitoring and transparency, poor development outcomes, compromised environmental and social standards and serious deficiencies in accountability to affected communities and other stakeholders.

The report concludes that the GCF should approach private companies and financiers slowly and with a high degree of caution, and only engage them to the extent that they can guarantee compliance with high standards on environmental, social and development effectiveness; implement robust processes designed to address financial, social and environmental risks; and produce effective mitigation and adaptation outcomes.

We hope that Mr. Stern and other government representatives attending the climate finance ministerial can seriously take into account the findings and recommendations of Pro-poor Climate Finance: Is There a Role for Private Finance in the Green Climate Fund? The focus of the meeting should start and end with how policymakers can support quality livelihoods for pastoralists in Tanzania, for example, or wastepickers in India -- rather than how to guarantee high returns for Wall Street and the City of London.

Civil society and entrepreneurs call on World Bank to clean up energy lending

Lisa Matthes — Wed, 03 Apr 2013 11:41:04 -0400

WASHINGTON, D.C. -- Over 55 development, faith, human rights, community, and environmental groups from more than 20 countries teamed up today to ask World Bank President Jim Kim to end Bank support for all fossil fuel projects unless the projects are solely focused on directly increasing energy access for the poor. The letter suggests that absent meeting this demand, donor countries should not provide the Bank with new capital.

Read a copy of the letter.

The letter follows on the heels of a call yesterday from 22 of the world's leading off-grid clean energy entrepreneurs, asking for $500 million in finance to support their sector's delivery of energy access.

“If President Kim is serious about taking the World Bank in a new direction on climate change and real clean energy access, he needs to put the Bank’s money where his mouth is,” said Sunita Dubey of Vasudha Foundation (India). “The World Bank’s current support for fossil fuel projects does little to promote energy access while doing a lot to exacerbate climate change. That needs to be flipped on its head.”

Since his start as President of the World Bank, Dr. Kim has spoken repeatedly about the severe consequences of climate change for people in developing countries and has been forceful in calls for reducing poverty in those same communities to increase resilience to climate change.
But the World Bank has funded over $18 billion in fossil fuel projects over the last 5 years – nearly half of its energy lending. Adding insult to injury for many affected by severe weather, the institution has indicated that it will continue to fund new large-scale fossil fuel projects, such as the proposed massive coal plant in Kosovo.

The letter, which is signed by development, environment, faith-based, human rights, and community groups, says that the World Bank cannot meaningfully address climate change unless its lending practices do not further exacerbate the climate crisis.

“The Bank argues that lending for fossil fuels is important for achieving development goals for the world’s poorest. But the Bank’s fossil fuel projects consistently fail to target the poor or to ensure that energy benefits reach them. In fact, financing dirty energy projects only adds to the problem of climate change, which disproportionately harms people living in poverty,” said Janet Redman of the Institute for Policy Studies.

The poverty reduction goals at the Bank could better be achieved through improving energy access for the poorest with decentralized renewable energy. The International Energy Agency has shown that investments in off-grid, clean energy need to be ramped up to actually deliver quality energy access.

The civil society and energy practitioner letters come at a time when the World Bank is seeking a replenishment of funds from the U.S. Congress, and at least rhetorically, expansion for energy access.

“As long as the World Bank continues to fund oil, gas and coal – the climate impacts of which directly undermine the Bank’s mission to alleviate poverty – the institution does not merit additional funding for its efforts,” said Elizabeth Bast of Oil Change International.

Contacts:
Karen Orenstein, Friends of the Earth, 202-222-0717, korenstein@foe.org
Elizabeth Bast, Oil Change International, 202-641-7203, ebast@priceofoil.org
Justin Guay, Sierra Club, 202-664-6460, justin.guay@sierraclub.org
Amanda Kistler, Center for International Environmental Law, 202-742-5832, akistler@ciel.org
Janet Redman, Institute for Policy Studies, 508-340-0464, janet@ips-dc.org

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A Paradigm Shift? Really?

Karen Orenstein — Wed, 20 Mar 2013 12:36:38 -0400

The third meeting of the United Nations Green Climate Fund wrapped up last week. Though “paradigm shift” emerged as the new catch-phrase of GCF discourse -- as the fund’s governing instrument calls for a “paradigm shift towards low-emission and climate-resilient development pathways” -- the board meeting was almost anything but.

Follow the money…Wait, there is none!

There is laughably little money being put forth toward the GCF by rich countries, which undercuts a sense of urgency and even a sense of seriousness. As has come to be expected at UN climate meetings (and at most multilateral meetings these days), the U.S. government’s representatives did not disappoint in their disappointing attitude toward the GCF -- although admittedly the U.S. was certainly not alone in their lack of constructive engagement. The U.S. reps were in top obstructionist form, however, when they took the floor to object to the setting of any specific timeline to mobilize resources for the fund. A fund without money, why not? That’s a sure way to keep that horse from getting out of the gate.

GCF board and civil society: We like you, but…

Though the Indian board member at one point did give me hope for progress on GCF engagement with civil society, that optimism was regrettably short-lived. While the situation for active observers improved over the previous meeting, it was more a case of “one step forward, two steps back.” (The GCF allows for two active civil society observers – one from a developing country and one from a developed country – who, at board meetings thus far, sit at the back of the board room at a special table and are given the opportunity to intervene on agenda items.) For example, despite the fact that a number of government representatives advocated webcasting future board meetings (which is especially important for reaching people in developing countries who cannot fly all over the world to attend board meetings), the board rejected this simple proposal. Additionally, the board did not agree to allow alternates or advisers for active observers, making an already difficult task even more difficult. (The two active civil society observers are somehow supposed to represent the views of all of civil society globally – from Indigenous Peoples to labor to farmers.) While some board members supported the idea of a roster of active observers who could speak to various subject matters, in the end, the board didn’t approve that compromise arrangement either.

Honestly, civil society observers at GCF meetings would love to move beyond fighting for the right to participate in GCF goings-on, and dive into the substance of how to make sure the GCF is environmentally sound, equitable, effective, etc., but access to information and an avenue for constructive engagement are prerequisites. If well-resourced NGO representatives are already having trouble providing and receiving input, one can only imagine future scenarios in which affected communities face tremendous obstacles.

The answer to all of life’s problems: private investment

Once again, a number of board members pointed to private investment as the savior to all our problems. We heard over and over again, predominantly from developed country delegates, that the key to unlocking the GCF’s magic is to use it to mobilize private investment to solve the climate crisis. Sure, moving money can be a good thing, but if not done carefully and appropriately, it will undoubtedly go toward lining the pockets of those with already well-lined pockets – bankers on Wall Street and in London, corporate executives sitting in Oslo, and the like.

Before private finance can be seen as a solution in the context of the GCF, the appropriate questions must first be asked – what are the adaptation and mitigation needs of people in developing countries, especially the poorest and most vulnerable, and how can the GCF effectively and equitably meet those needs through mobilizing private finance and supporting the private sector?

In limited circumstances and with a number of stipulations, GCF efforts to mobilize private finance may help. But it is not a “silver bullet,” and it will be especially difficult to deploy in low and lower middle income countries. Further, private climate finance cannot be a substitute for direct public support. In line with the basic tenet of the polluter pays principle, the $100 billion developed countries have promised to contribute for climate finance by 2020 must be made up entirely of public funds. And, as far as how the GCF spends its share of the $100 billion, grant-based financing for the public sector must play a prominent role. Many areas in need of funding, especially adaptation efforts in the poorest countries, simply will not turn a profit.

Further, directing finance towards the private sector has real limitations. Micro, small and medium enterprises (MSMEs) are the most important economic actors and provide most of the employment in developing countries. However, most MSMEs focus on subsistence livelihoods and have high informality rates and low returns. As a result, they are often ignored or bypassed by international donors and financiers. Without rigorous and well-articulated efforts to address this dynamic, the GCF would also be likely to do the same in its private sector support.

GCF board members should be wary of drinking the private sector Kool-Aid so present in today’s political discourse worldwide. Private investment should not be off limits, but it should be approached with serious caution.

For starters, the board should banish the idea of a separate governance structure for the private sector facility[1] within the GCF, and by extension, banish the idea of having private sector board members as part of that governance structure. Despite what some board members seem to be asserting, it is very possible to have private investment experts providing advice rather than making decisions. The GCF cannot be “country-driven” (another popular catch-phrase) if country governments are kept from making decisions. The private sector facility should be a tool available to developing country governments, should they decide to deploy it. Neither multilateral financiers nor GCF board members should decide what’s the best investment for country X. Country X – through a democratic participatory process – must be in the driver’s seat doing the deciding.

Greek gods, additionality and leveraging private finance

Finally, the mythology behind “leveraging” private finance must be deconstructed in order for the GCF board to have a meaningful discussion about private investment. At present, leverage ratios tend to inflate claims of leverage, failing to differentiate between public and private money, counting public funds that are already earmarked and double counting. They also tend to lack financial and institutional/operational additionality (i.e. would the investment have happened anyway, and is the resulting investment better aligned with the aims of the GCF?). Indeed, higher leverage ratios are often not worth bragging about – projects with high leverage ratios tend to show greater discrepancy between what the public institution intends and what the projects actually accomplish; high leverage ratios generally mean that the influence of the public institution is significantly diluted.

The GCF should refrain from using leverage ratios as criteria to guide funding decisions at least until:

A common methodology is established to calculate leverage ratios, and its usage mandated;
Leverage ratios only reflect private, not public, funds mobilized;
Only private flows that are truly additional – both financially and operationally/institutionally – are counted; and
Public actors are not allowed to claim that they have raised each other’s money. If different public institutions support the same project, leverage ratios should be calculated using the amount of private finance that is proportional to their contribution in order to avoid double counting.

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Photo credit: Green Climate Fund board, GCF website, http://gcfund.net/?id=10.

[1] Beyond a few sentences in the GCF governing instrument, the details and workings of the private sector facility are not yet delineated.