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Tender Notice for the Supply and Installation of One (1) Photovoltaic System at the Kalinago Carib Reserve Community in Dominica

The Caribbean Community Climate Change Centre (CCCCC) has received grant funding under financing from the European Union (EU) under contract No. FED/2011/267-392 for the implementation of an action entitled:  Support to the Global Climate Change Alliance (GCCA) under the 10th EDF Intra–African Caribbean Pacific Financial Framework in the Caribbean. The CCCCC intends to utilize part of the proceeds from this grant to award contracts for the Supply and Installation of One (1) Photovoltaic System at the Kalinago Carib Reserve Community in DOMINICA.

Peruse the Procurement Notice and Tender Dossier

Deadline for submission of tenders is at 2:00 p.m. April 30, 2015, Belize time. Any tender received after this deadline will not be considered.

Tender opening session is 2:15 p.m. on April 30, 2015 at the following location:

Caribbean Community Climate Change Centre
Second Floor Lawrence Nicholas Building
Ring Road,
Belmopan,
Belize

Tenders should be sent to:

Mr. Joseph McGann Programme Manager
EU-GCCA Project
Caribbean Community Climate Change Centre
Second Floor Lawrence Nicholas Building
Ring Road,
Belmopan,
Belize

Gold Standard Sustainable Cities Framework

The Gold Standard Cities Programme is developing ground-breaking solutions that will unlock the finance needed by cities around the globe for low carbon development.

Urbanization and climate change will be defining issues of the 21st century. Half of the world’s population resides in cities and it is expected that by 2015, the world will have over 350 cities with more than one million inhabitants each.

Cities are already feeling the impacts of climate change and they will increasingly be susceptible to rising sea levels, inland flooding, frequent and stronger tropical cyclones, periods of increased heat and the spread of diseases. To mitigate climate change and to adapt to these impacts, it is estimated that by 2050 more than a trillion U.S. dollars in investment will be needed for cities but currently, less than 2% of climate finance is channeled into urban projects due to a lack of reliable monitoring, reporting and verification on project performance and outcomes. Further, the World Bank estimates that of the 500 largest cities in the developing world, only about 4 percent are credit worthy in international financial markets, making it next to impossible to access finance for low carbon development.

The Gold Standard Cities Programme is a ground-breaking results-based finance framework through which cities can develop, audit and verify urban programmes – in order to catalyse and scale up the currently missing investment.

Supported by WWF, initial work used suppressed demand methodologies to determine that slums in Delhi emit 6.1 million tons of CO2 annually which can be reduced to 2.8 million tons by the implementation of renewable energy and energy efficiency technologies.

Establishing this baseline for slum areas was not only cutting edge research but a critical pre-requisite for climate finance to flow. Without a baseline it is impossible to verify emission reductions – the whole premise of results based climate finance. Until now, this has been a key barrier to funding urban low carbon and pro-poor development through climate finance.

The results-based finance framework, developed initially for Delhi, has been designed to be replicated in cities around the world, giving investors confidence that they have a global benchmark with which they can measure urban low carbon and sustainable development outcomes.

Major cities in China, the Middle East and Turkey are in the process of joining The Gold Standard Cities Programme.

For more information about The Gold Standard’s work with sustainable cities, please visit:

New funding structures to deliver clean energy and development in cities

Financing cities of the future: Tools to scale up clean urban development

The Cities Climate Finance Leadership Alliance – to stimulate investment into low carbon and climate resistance urban infrastructure

Credit: The Gold Standard

Report Highlights Actions to Limit Disaster Risk in ACP Countries

The Secretariat of the African, Caribbean and Pacific (ACP) Group of States launched a new study today that offers a comprehensive view of the various risks faced across its member countries, as well as valuable efforts to reduce them.
The ACP Compendium of Risk Knowledge, financed by the 10th European Development Fund under the Intra-ACP Cooperation envelope for Disaster Risk Reduction, revealed that disaster risk in ACP countries is considerably higher than in other regions, with 12 countries from Sub-Saharan Africa and one country from the Caribbean amongst the 20 most-at-risk from disasters in the world. The report also notes that over a long period of time, ACP countries on average will lose USD 6.9 billion per year from disasters, representing 2.3% of their total GDP.
“This compendium is telling us that disaster risk management is not the same thing as disaster management. While countries in the ACP have had good experience in managing disaster events in the past, it is now time that we start to proactively reduce the underlying drivers of these risks, to stem this growth of human and economic losses. I believe that political leaders, policy makers and practitioners should use this compendium to understand their risks so that they can judge wisely how best to address them,” said ACP Secretary General Alhaji Muhammad Mumuni. (Full speech of the Secretary General)
  “The study helps in a practical manner to understand the real nature of risks that countries in the ACP regions face. Reducing disaster risks is at the heart of what we need to do to build the resilience of vulnerable populations, promote sustainable development and address climate change,” said Susanne Mallaum, Head of Unit at the European Commission’s Directorate-General for Humanitarian Aid and Civil Protection.
Faced with these growing risks, the report also highlights innovative actions by ACP member countries and communities to reduce these risks, and the benefits of this proactive approach to managing risks, instead of managing disaster events.
For example, Vilankulos, a tourist city in Mozambique, despite being struck by a 200 kph Cyclone Flavio in 2007, had zero casualties due to successful pre-emptive evacuation that was led by former Mayor of Suleimade Esep Amuji. Mindful of the possibility of rebuilding back risks, he then proceeded in rebuilding better homes.
“Building back better after the cyclone had many benefits. Not only did we get stronger homes for the next cyclone, but also when we started giving these resilient homes to homeless women, we saw displaced families coming back together. When you start to reduce risks, even disasters sometimes can bring good news,” he said.
Veronica Gordon, President of the Jerry Town Farmers’ Association in Jamaica, had the same observation. “In our view it is better to invest in risk reduction than disaster recovery,” she said.
The report, co-authored by Lezlie C. Morinière and Luis Sanchez Zimmerman, uses cutting edge science and case studies to map overall risk in Sub-Saharan Africa, the Caribbean and the Pacific Islands.
The report is released to inform the main agendas of 2015 of what it would take to protect sustainable development in ACP countries, starting with the next disaster risk reduction framework, which will be adopted in March at the 3rd UN World Conference on DRR, in Sendai Japan, the Sustainable Development Goals that will be adopted at the UN Summit in September 2015 in New York, and the new climate change agreement that will be adopted in Paris France later in 2015.
The report will soon be available for download in English, French, Portuguese and Spanish.
For more information, please contact ACP Press Officer Josephine Latu-Sanft, ACP Secretariat. Tel +32 2 7430617 or latu@acp.int.

How do agri-food systems contribute to climate change?

Agriculture and food security are exposed to impacts and risks related to the changing climate in several ways. On the other hand, agriculture and food production activities are also responsible for part of the greenhouse gas emissions that in turn cause climate change.

According to the latest conclusions by the Intergovernmental Panel on Climate Change, agriculture, together with deforestation and other human actions that change the way land is used (codename: AFOLU, Agriculture, Forestry and Other Land Use), accounts for about a quarter of emissions contributing to climate change.

IPCC-WGIII-AR5-2014-emissions-by-economic-sectors-fig-TS3 - Crop
Greenhouse Gas Emissions by Economic Sectors. Fig. TS.3, IPCC AR5 WGIII, Mitigation of Climate Change, Technical Summary, 2014

GHG emissions from farming activities consist mainly of non-CO2 gases: methane (CH4) and nitrous oxide (N2O) produced by bacterial decomposition processes in cropland and grassland soils and by livestock’s digestive systems.

The latest estimates released in 2014 by the UN Food and Agriculture Organization [pdf] showed that emissions from crop and livestock production and fisheries have nearly doubled over the past fifty years, from 2.7 billion tonnes CO2e in 1961 to more than 5.3 billion tonnes CO2e in 2011.

During the last ten years covered by FAO data (2001-2011) agricultural emissions increased by 14 percent (primarily in developing countries that expanded their agricultural outputs), while almost in the same years (2001-2010) net GHG emissions due to land use change and deforestation decreased by around 10 percent (due to reduced levels of deforestation and increases in the amount of atmospheric carbon removed from the atmosphere as a result of carbon sequestration in forest sinks).

The current situation, as highlighted by a recent study led by FAO and published in Global Change Biology, sees farming activities more responsible for climate pollution than deforestation. Even thought emissions from agriculture and land use change are growing at a slower rate than emissions from fossil fuels, emissions reduction achieved thanks to better forest and soil management are cancelled out by a more intensive and energy-consuming food production systems. The FAO estimated that without increased efforts to address and reduce them, GHG emissions from the sector could increase by an additional 30 percent by 2050.

In a recent study published on Nature Climate Change, scientists pointed out that “the intensification of agriculture (the Green Revolution, in which much greater crop yield per unit area was achieved by hybridization, irrigation and fertilization) during the past five decades is a driver of changes in the seasonal characteristics of the global carbon cycle”.

As shown in the graph below, livestock-related emissions from enteric fermentation and manure contributed nearly two-thirds of the total GHG agricultural emissions produced in the last years, with synthetic fertilizers and rice cultivation being the other major sources.

 According to another report by FAO (“Tackling climate change through livestock”, accessible here in pdf), the livestock sector is estimated to emit 7.1 billion tonnes CO2-eq per year, with beef and cattle milk production accounting for the majority of the sector’s emissions (41 and 19 percent respectively).

Emission intensities (i.e. emissions per unit of product) are highest for beef (almost 300 kg CO2-eq per kilogram of protein produced), followed by meat and milk from small ruminants (165 and 112kg CO2-eq.kg respectively). Cow milk, chicken products and pork have lover global average emission intensities (below 100 CO2-eq/kg). However, emission intensity widely varies at sub-global level due to the different practices and inputs to production used around the world. According to FAO, the livestock sector plays an important role in climate change and has a high potential for emission reduction.

Together with increasing conversion of land to agricultural activities and the use of fertilizers, increasing energy use from fossil fuels is one of the main drivers that boosted agricultural emissions in the last decades. FAO estimated that in 2010 emissions from energy uses in food production sectors (including emissions from fossil fuel energy needed i.e. to power machinery, irrigation pumps and fishing vessels) amounted to 785 million tonnes CO2e.

FAO latest data show that in the past two decades around 40 percent of GHG agricultural outputs (including emissions from energy use) are based in Asia. The Americas has the second highest GHG emissions (close to 25 percent), followed by Africa, Europe and Oceania.

Agricultural emissions plus energy by continent, average 1990-2012. FAOSTAT database
Agricultural emissions plus energy by continent, average 1990-2012. FAOSTAT database.

According to FAO, since 1990 the top ten emitters are: China, India, US, Brazil, Australia, Russia, Indonesia, Argentina, Pakistan and Sudan.

Agricultural emissions plus energy by country, average 1990-2012. FAOSTAT database
Agricultural emissions plus energy by country, average 1990-2012. FAOSTAT database

The need for climate-smart agriculture and food production systems becomes even more compelling when considering the shocking level of waste within the global food system. According to the first FAO study to focus on the environmental impacts of food wastage, released in 2013 (accessible here in pdf), each year food that is produced and gone to waste amounts to 1.3 billion tonnes.

Food wastage’s carbon footprint is estimated at 3.3 billion tonnes of CO2 equivalent released into the atmosphere per year, to which must be added significant amounts of agricultural areas (1.4 billion hectares, globally) and water (250km3) used annually to produce food that is lost or wasted.

How to meet global food needs (with global population projected to reach 9 billion in 2050) without overexploiting soil and water, and with lower emissions contributing to climate change (whose impacts in turn affect water and food security) is the greatest farming challenge of of today’s and tomorrow’s world.

Credit: Best Climate Practices

New WPP Video: A Future of Floods and Droughts as Climate Changes

The Water Partnership Programme (WPP) published a new video that shows how climate change affects the Middle East, Latin America and Central Asia. The video looks at how climate change impacts the poor and most vulnerable populations. It is a free resource for those in the climate change community who want to raise awareness on the issue. The WPP works globally to counter the effects of climate change by supporting water-related programmes that promote innovative tools to help countries build resilience and prepare for an uncertain future.

EU Commission Proposes Elements for Global Partnership to Shape Post-2015 Development Agenda

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The European Commission (EC) published a Communication identifying overarching principles and key components of a global partnership to support the post-2015 development agenda, to inform EU positions ahead of the Third Financing for Development (FfD3) Conference and the Post-2015 Summit, and to contribute to the preparation of the 21st session of the Conference of the Parties (COP 21) to the UN Framework Convention on Climate Change (UNFCCC).

The Communication, titled ‘Global Partnership for Poverty Eradication and Sustainable Development After 2015,’ is based on previous Conclusions of the EU Council on a transformative post-2015 agenda. It notes that “the EU and its Member States will continue to develop more detailed common positions during the negotiations, so as to enable the EU to speak with one voice.” It is addressed to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions.

As overarching principles of a global partnership, the Communication highlights, inter alia: national ownership and leadership; cooperation at all levels and with all stakeholders, building on experience with the Millennium Development Goals (MDGs) on developing a Global Partnership for Development, and with other international partnerships; shared responsibility, mutual accountability and respective capacity; integrating the three dimensions of sustainable development in a balanced manner and making trade-offs between different objectives; and focusing on achieving measurable, concrete and sustainable results.

It calls for the partnership to be based on human rights, good governance, rule of law, support for democratic institutions, inclusiveness, non-discrimination, and gender equality. Emphasizing the need for transparency and information-sharing for all stakeholders, it calls for promoting more effective and inclusive forms of multi-stakeholder partnerships, operating at all levels and involving the private sector and civil society, including social partners, academia, foundations, knowledge institutions and public authorities.

The Communication identifies means of implementation as a key element of the global partnership, and discusses its various components, including: an enabling and conducive policy environment at all levels; capacity development; mobilization and effective use of domestic and international public finance; stimulating trade to eradicate poverty and promote sustainable development; using science, technology and innovation as important drivers of implementation; mobilizing the domestic and international private sector; and harnessing the positive effect of migration. It also stresses the need for a strong framework for monitoring, accountability and review at all levels.

The Communication conveys strong EU support for the UN Secretary-General’s call for all developed countries to meet the UN target of 0.7% of Gross National Income (GNI) for official development assistance (ODA), and expresses its agreement on concrete timetables to meet these commitments. It remarks that high-income countries should respect the UN target of 0.15% of GNI for development assistance to the Least Developed Countries (LDCs), and that upper-middle income countries and emerging economies should commit to increasing their contribution to LDCs, and set targets and timelines accordingly.

The Communication highlights the need to provide a stable enabling environment for the private sector, “including establishing a level playing field for competition” and encouraging sustainable investments. It also mentions the primary responsibility of each country to maximize the potential of trade for inclusive growth and sustainable development through good governance, sound domestic policies and reforms, so as to create a stable regulatory environment that is favorable to the private sector and investment.

The annex of the Communication lists a series of possible actions that could contribute to the effective implementation of the post-2015 agenda, and proposed actions to be carried out specifically by the EU.

Credit: Climate Change Policy & Practice

IN DEPTH – What’s the role of the 2015 agreement in mobilising climate finance?

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The path towards the next agreement on climate change expected in Paris at the end of the year passed through the UNFCCC ADP 2.8 session in Geneva from 8 to 13 February. According to an informal note by the Co-Chairs of the Geneva session, the objective was to “mak[e] available a negotiating text for a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all Parties before May 2015″. The following analysis aims at underlining the role that the 2015 Climate Agreement to be adopted at COP 21 in Paris could play in mobilising climate finance. It was first published under the ICCG Reflections Publication Series. The full document is available in pdf.

The role of the 2015 agreement in mobilising climate finance

The improved coordination, greater coherence and enhanced transparency of the institutional climate finance arrangements are key issues under the 2015 climate agreement because they could contribute to mobilising increased levels of climate finance.

Enhanced transparency of climate finance is pivotal throughout the timeframe from initialising pledges and commitments to disbursing finance. Acquiring more consistent and reliable information on climate finance could help build trust among various stakeholders, including investors and the public sector. More transparent information could also help improve efficient and effective use of international climate finance, and therefore contribute to raising further international climate finance flows.

Measurement, reporting and verification (MRV) is an essential tool under the UNFCCC to produce and disseminate information on outcomes from particular climate finance instruments or funds, and therefore to ensure transparency. But there are still some challenges and gaps of MRV provisions and methodologies regarding the mobilisation and use of international climate finance. These challenges range from a lack of common definition of climate finance, the fact that not all types of climate finance are required to be reported, the problem in tracking private adaptation finance, and difficulties in attributing specific climate finance flows to certain countries.

To cope with these challenges, the Standing Committee on Finance was requested by the COP 20 in Lima, “as part of its ongoing work on measurement, reporting and verification of support, and with a view to recommending improvements to the methodologies for reporting financial information, to consider the findings and recommendations of the biennial assessment in its annual report to the Conference of the Parties for its consideration at its twenty-first session; and also, “in the context of its ongoing work, including the preparation of the biennial assessment and overview of climate finance flows, to further explore how it can enhance its work on the measurement, reporting and verification of support, based on best available information on the mobilization of various resources, including private and alternative resources, through public interventions.

The enhanced transparency under the 2015 climate agreement could contribute to mobilising climate finance in these following ways:

  • facilitating dialogue among all Parties to develop methodologies on what financial flows need to be measured, reported and verified under the agreement;
  • Using MRV as a tool to generate and disseminate information on results from specific climate financing instruments and funds;

In the end, more transparent information through international and domestic MRV processes could be useful resources for countries and private investors in making their financing decisions.

Another action that the 2015 agreement could undertake in order to mobilise effective climate finance is strengthening cooperation among international finance institutions. Concretely, the COP under 2015 climate agreement could encourage:

  • consideration for geographic and thematic balance in allocating climate finance;
  • facilitating coordination amongst institutions financing climate projects;
  • enhancing synergies between institutional arrangements outside and inside the UNFCCC.

The need for a more balanced allocation between mitigation and adaptation is clearly pointed out in the 2014 Global Landscape of Climate Finance by Climate Policy Initiative. According to the CPI Report, in 2013 annual global climate finance flows totaled approximately US$ 331 billion. Compared to 2012, mitigation finance has decreased, and finance for adaptation has grown. Adaptation received in 2013, US$ 25 billion (7 percent of total flows) of exclusively public resources, up US$ 3 billion from 2012. Private investments are not captured due to scarce and unreliable data. As already observed, the lack of transparent Information about private investment in adaptation remains one of the most important gaps in the tracking of climate finance. Although mitigation investments decreased by US$ 24 billion compared to 2012, mitigation accounted for 91 percent of total climate finance flows, totaling US$ 302 billion in 2013.

As for the geographic distribution of climate finance flows, they were split almost equally between developing (non-OECD) and developed (OECD) countries, US$ 165 billion and US$ 164 billion respectively. The good news reported by CPI Report about adaptation finance allocation is that about 90 percent of total adaptation finance was invested in non-OECD countries of which only 8 percent came from OECD countries. The East Asia and Pacific region has taken the lead in 2013 as the main destination of adaptation finance and the main recipient of Development Finance Institutions (DFIs).

The COP 21 under the 2015 climate agreement with a view to a better coordination among international financial institutions could encourage coordination among local financial institutions and relevant actors in a specific country, especially for effectively catalysing domestic investments.

As for the last point concerning enhancing synergies between institutional arrangements outside and inside the UNFCCC, the 2015 agreement could request entities under the Convention (e.g. the SCF and the GCF Board) to monitor climate-relevant financial flows channelled outside the Financial Mechanism. COP 20 Decision on the Fifth review of the Financial Mechanism recalls this idea for the GCF: “There is ample room for the GCF to learn from the experiences of other funds in terms of improving the enabling environments in recipient countries. It can do this by linking investments with focused efforts to engage stakeholders within countries in programming, and by providing technical assistance and capacity-building so as to strengthen enabling environments – institutions, policies, and regulations – that support mitigation and adaptation actions in developing countries.”

The 2015 climate agreement could also play a role by facilitating the efficient use of financial instruments and tools. Which financial instrument is best suited for targeting different types of climate activities is highly case-specific. For example, instruments such as grants are very well suited for capacity building and for adaptation measures in most vulnerable countries, whereas concessional loans are best suited for projects with high risk-return profiles such as utility-scale renewable energy projects and power transmission grids. Other financial tools are better suited for attracting private sector finance in more mature markets, such as green bonds and equity.

The importance of a new bottom-up approach

The 2009 Copenhagen Climate Change Conference (COP 15) highlighted how the top-down approach adopted in climate negotiations and climate agreements had been a failure, and launched the new bottom-up approach. This approach has now become even more urgent and should be followed in the negotiations leading to the 2015 climate agreement.

The introduction of the Intended Nationally Determined Contributions (INDCs) at COP 19 in Warsaw was a clear signal that each nation is responsible for pledging its own contributions for post-2020 action. This means that each individual country (INDCs indeed refer both to developed and developing countries’ plans) is being asked to come forward with its own ambitions and plans for carbon reduction. INDCs put forward by countries will form a key input to the negotiations leading towards the 2015 climate agreement. It is worth recalling that the minimum characteristics required for the INDCs are those of comprehensiveness, transparency, and ambition.

INDCs bring together elements of a bottom-up system, in which countries put forward their contributions in the context of their national priorities, circumstances and capabilities, with a top-down system, in which countries collectively aim to reduce global emissions. As a result, INDCs can create a constructive feedback loop between national and international decision-making on climate change.

Although the bottom-up system is positive in terms of raising consciousness on climate change issues, it may be risky for two reasons. The first is that without a defined target the risk of free riding is high, and the second is that it keeps the differentiation of responsibility for poorer countries not having the resources for undertaking climate actions. This risk is reinforced by the fact that the principle of common but differentiated responsibility has been kept in the Lima Call for Climate Action, and also by the consideration that the term “contribution” was the result of a compromise of the terms “commitment” used until then for developed countries and “nationally appropriate mitigation actions” (NAMAs), used until then for developing countries. Moreover, the fact that in COP 20 Decisions there is no mention of the division between Annex I and non-Annex I parties, but only a weak reference to different contributions “in light of different national circumstances” is not clear enough and could lead to weakening climate actions.

Conclusions

The need for scaling up climate finance has been widely acknowledged by all Conference of the Parties’ countries, and this is recognised by the central debate at COP 20 around the role of the Green Climate Fund (GCF), with its initial capitalization under way, and its Private Sector Facility that will be a very useful tool for catalizing a significant multiplier effect in attracting private finance.

The recognition of the growing role of private finance, also due to constrained public budgets, encourages even further the strengthening of enabling environments conducive to private investors, better coordination at various levels, and the improvement of transparency by enhancing Measurement, Reporting and Verification (MRV) systems. Also, the role of Public-Private Partnerships should be strengthened and officially recalled in the climate agreement as one of the most useful tool for attracting private finance. Among more direct measures, the 2015 climate agreement could play a very important role in mandating the operating entities under the Convention, i.e. the GCF and the GEF, to prioritise some part of their funding to specific regions or countries, or issues where climate finance would not be directed automatically.

The 2015 climate agreement should definitely cope with this lack of transparency and better clarify the differentiation of responsibility in all fields of climate action, both in mitigation and adaptation. Moreover, the agreement should forge a clear link to the new set of Sustainable Development Goals (SDGs) that the world’s governments are currently negotiating and that will be adopted at the “UN Summit for the adoption of the post-2015 development agenda” next 25-27 September in New York. The climate agreement and the SDGs should be seen as complementary, and lead to important opportunities for mutual benefits in areas such as the transition to a low carbon society, climate adaptation and resilience, and the new financial flows needed for both mitigation and adaptation actions.

Furthermore, a review of financial and insurance standards to promote long-term finance should be encouraged. Both Basel III and Solvency II should be reviewed to allow for a further mobilisation of private finance, especially towards needed energy infrastructure investment, which is usually long-term. Estimates by UNCTAD show that in climate change mitigation, and in particular in relevant infrastructures for renewable energy generation and research and deployment of climate friendly technologies, the total annual investment required between 2015 and 2030 is in the range of 550-850 US$ billion, and the annual investment gap is still very high, at 380-680 US$ billion.

In conclusion, although it is true that at COP 20 the debate was more on distributional issues i.e. how much will developing countries receive and how much will they contribute, rather than on efficiency issues and that “the Green Climate Fund will be far from covering both the required investments in adaptation, particularly in developing countries, and the costs to support the transition to a low-carbon economy”, this reflections aims at highlighting some potential positive actions that the 2015 climate agreement could concretely undertake in the way forward to the longstanding debate on climate finance.

(Image: UN event on “Mobilizing Long-term Climate Finance for Developing Countries”, 2011. Photo credit:UN Climate Change/Flickr)

Credit: Climate Policy Observer

Register for the “Youth Action on Climate Change” Workshop

The World Youth Foundation in collaboration with Ministry of Youth and Sports Malaysia, Malaysian National Commission for UNESCO, United Nations Environment Program (UNEP), Pembangunan Pertanian Melaka Sdn Bhd and various other agencies is organizing an International Workshop on Climate Change “Youth Action on Climate Change”, tentatively scheduled to be held on 21st – 24th May 2015 … Continue reading

Will fiscal policy help move us towards a green economy?

The Green Growth Knowledge Platform recently held a conference in Venice that brought the importance of implementing properly designed green fiscal reforms to the attention of academics and policy-makers. The primary objective is environmental protection and climate change control, but also the setting of fairly uniform regulatory and taxation frameworks to avoid competitiveness concerns in those countries adopting more stringent environmental policies. Or to avoid excessive social problems in developing countries, because social impacts of green fiscal reforms are of often as important as the environmental ones.

Green tax reforms, designed to tax activities that result in environmental damage and excessive natural resource use, to redirect public and private investments from fossil fuel based activities to low carbon alternatives, to fuel green economy development, and to provide markets with the right signals for sustainable long-term investments, may indeed raise production costs in countries adopting them, thus reducing firms’ international competitiveness. Or may imply revenue reductions in important sectors of society.

The 3rd Annual Green Growth Knowledge Platform Conference held in Venice, Italy on the 29-30 January 2015 (you can find all papers presented at the conference here) gathered experts and policy-makers from several countries, particularly developing countries, as well as experts from international organizations, who shared knowledge and forged pathways towards better future implementation of green fiscal instruments.

The conference provided both theoretical analyses and best practices of concrete implementations of fiscal instruments designed to control climate change, natural resource excessive exploitation and local pollution. It also provided a useful exchange of views and suggestions between two communities (scientists and economists on the one hand, policy leaders on the other) that hardly interact. Let us summarize some of the main findings.

A variety of instruments, often country specific

Often the full range of fiscal reforms remains unexplored. As suggested by Franks et. al, this is partly due to governments’ preference for a taxation approach, which enables the scarcity rents to be reinvested in infrastructure. Revenue recycling of environmental taxes also facilitates a reduction in distortionary taxes and can be used to support green R&D.

However, despite the benefits of green taxes, other approaches can often facilitate green economic growth. Governments need to capitalize on the full range of fiscal policy options. For example, some governments have implemented feed-in tariffs to kickstart investments in renewable energy from sources such as solar, geothermal and wind. This is achieved by guaranteeing a tariff for a set period of time (up to 20 years in some cases) and thenphasing out this support over time as the share of renewable energy increases and becomes competitive with conventional fuels. This initial support is essential for redirecting capital flows from carbon based energy because, as Vona and Verdolini show, long-term investments have already been placed in existing fossil fuel infrastructure, which implies that changes in energy production will be slow and nearly impossible to achieve without a trigger.

In addition to feed-in tariff options, governments are also developing targeted financial programs that support the purchase of energy efficient appliances. These schemes, while important, require understanding and working with behavioral norms. For instance, Nadia Ameli shows that the application of these programs to households is more effective if the residents are landlords or are from high-income backgrounds.

These more innovative schemes are not confined to the more financially-secure developed countries. Indeed, the Tunisian government used US$24 million of public funds to promote the use of solar water heaters. In Mauritius, one of the pioneers of traditional fiscal reform through environmental taxation, we see the development of a number of green fiscal measures, including an excise duty on petroleum products and a charge on energy inefficient products. These policies have been able to elicit changes in both consumption and production behavior. As a positive side effect, the revenue generated as a result of these fiscal policies is equivalent to 2.6% of the country’s 2013 GDP.  This capital can be used to further support green economic growth.

The adoption of green fiscal instruments is not limited to the energy sector. Another crucial area is water. Here fiscal measures can play a critical role in ensuring sustainable water supplies through incentivizing water efficiency, stimulating investment in water supply infrastructure, ensuring affordability of water services and countering the unchecked pollution and abstraction of water sources. In fact, the use of taxing (along with tariffs and transfers) can ensure that the cost of the environmental externalities associated with water use is internalized and that water is therefore appropriately priced. On this note,encouraging news comes from Philippines where a wastewater effluent fee was introduced in Manila in 1997. This fee aimed to counter the extreme degradation of the Laguna de Bay watershed that was being used as a dumping ground by nearby industries. As a consequence of the fee, industries changed their production processes to reduce the volume of effluent that was discharged into the watershed.

 

3rd Annual Green Growth Knowledge Platform Conference held in Venice, Italy on the 29-30 January 2015

Removing subsidies

There is a growing realization that the transition to a green economy will not be achieved if countries continue to hide the true cost of current consumption patternsby subsidizing fossil fuels. This withdrawal of support has freed up capital that can now be spent in more efficient and beneficial ways. Often these savings can be redirected to fund social development, such as improved health, education and living standards. In Kenya, for instance, as Alice Kaudia convincingly explained, the government improved the country’s electricity network through the funds made available by removing fossil fuel subsidies.

Divesting from fossil fuel sources, particularly in cities and transport-intensive areas, not only encourages movement towards a green economy, but has direct positive impacts on health. This, in turn, means that governments will have to spend less on national health care. So even more public savings can be made. Shifting from these fossil fuel investments is especially important in developing countries. This is because, even though climate finance mechanisms are attempting to make development and climate mitigation compatible, fossil fuel subsidies are so vast that the climate finance given is almost insignificant.

As well as removing environmentally damaging subsidies, government can also encourage renewable energy subsidies in terms of technology innovation, adoption and manufacturing incentives. Though the enacting of these subsidies must be carefully designed because they are starting to be touted for their ability to distort international trade. At the conference, Carolyn Fisher analysed how the EU and US have both tabled complaints against China’s subsidization of solar photovoltaic production on the grounds that this support constitutes illegal aid to the companies.

Moreover, while there is some enthusiasm around the subsidization of clean energy, this may not in fact be the solution people are seeking. This is because some subsidies, especially upstream subsidies, tend to pick technology winners. This prevents the take-up of clean energy technology in the most cost-effective and efficient manner since picking the renewable energy options you want to subsidize withholds the funding other renewable energies that could, with the technological development, deliver energy in a cost-effective way.

Barriers to redirecting investments

The fact that developing green fiscal policies not only weans us off our fossil fuel dependency, but also can ensure savings and social benefits leaves you wondering why these measures have not been enacted with greater enthusiasm. Four main barriers have been highlighted at the conference. First, policymakers feel that they are damaging their economic competitiveness if they enact environmentally related policies when other countries do not do it. Second, green fiscal instruments would perhaps be more readily accepted were they to be introduced as part of a broader fiscal reform. Third, it’s often hard to effectively communicate the economic, social and environmental benefits that these reforms would bring.

A final important drawback is that, as with any reform, there will be winners and losers. One of the roles of government is to guarantee support for the affected groups. This is achievable. Indonesia, for instance, subsidized health care, rice production, village infrastructure and provided scholarships to economically-vulnerable groups to prevent against the worse impacts of inflation due to fossil fuel subsidy reform. As Renner et al. discussed in Venice, in Indonesia, and other places facing similar reforms, such protection schemes are essential since fossil fuel energy subsidies incur higher public spending than health, education and social protection combined, suggesting that the removal of subsidies will catalyze political and economic upset.

Green fiscal reforms need to be carefully designed and implemented in line with strong and sustainable governance to ensure that the reforms are effective and able to be maintained. Their design, especially of tax measures, needs to focus on activities that are inelastic in order to reduce welfare loss. Equally, this must be achieved while minimizing the aggregate deadweight loss for any given revenue or government expenditure.

3rd Annual Green Growth Knowledge Platform Conference held in Venice, Italy on the 29-30 January 2015

The way forward

Green fiscal policy clearly has a strong role to play in the transition towards a green economy. Even the limitations it presents are not insurmountable. Governments need, however, to start thinking more creatively, moving beyond using just environmental taxation, in particular in developing countries. See, for instance, Chaturvedi et al. on how India is developing alternative fiscal strategies, including deregulating petrol prices, introducing a coal cess and subsidizing the establishing of common effluent treatment plants.

Even so, more than moving into using a range of environmental fiscal reform methods, we need to stop seeing such reforms in solely an environment sector capacity. The transport sector, for instance, has much to offer in environmental improvements without necessarily terming them as such.

Further, we can explore ways of making such reforms more appealing to the people they will affect. Other approaches need to be used in combination with fiscal reform, such as communication and engagement with the parties concerned as well as improved monitoring. Sirini Withana suggested the use of complementary policies to increase the effectiveness of such reforms. Potential complementary policies might include behavioral change approaches that can incentivize the adoption of energy-efficient and low-carbon energy options.

A session moderated by Elke Weber emphasized the importance of combining behavioral, social and technological changes to stimulate the acceptance of the policy reforms that will lead us towards a low carbon future.

Before all these developments, we must overcome the notion that these decisions will come at a political and economic cost. If anything, this conference has shown that we can no longer use economic disadvantages as a reason for inaction. Solutions are being sought to address this concern and we need to listen to them to effectively start on the path to global green growth.

Credit: International Center for Climate Governance

The Caribbean Weather Impacts Group (CARIWIG) Project Supports Risk-Based Decision-Making (Bookmark for updates)

The Caribbean Weather Impacts Group (CARIWIG) project is supporting risk-based decision-making in the region. The Project is hosting a policy workshop and training at the Savannah Beach Hotel and the University of the West Indies, Cave Hill Campus in Barbados from February 10 to 12. The training will expose senior technocrats and representatives from across Caribbean institutions to … Continue reading

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