The International Monetary Fund, the World Bank and other international groups are expected to present a paper on climate finance at the G20 meeting this Friday in Washington. It recommends a sharp reduction of subsidies for fossil fuels, putting a price tag of $25 per ton on carbon emissions, and collecting a surcharge on bunker fuels to raise money for climate finance.
A draft of the paper leaked this week says the starting point should be a review of fossil fuel subsidies, amounting to $40 billion to $60 billion a year, reports Associated Press’ Arthur Max. Many of those subsidies, however, go to poorer people in less developed countries to help them, for example, to buy cooking gas. Still, subsidy reallocation in advanced and emerging economies could contribute $10 billion a year to a climate fund.
Charging $25 per ton of carbon emissions from the so-called bunker fuels (aviation and shipping) could raise $40 billion a year by 2020. Part of that would have to be earmarked to compensate poor countries for higher import costs, but about $25 billion could go toward climate change, the paper says. It also would lead to a reduction of 5 to 10 percent of the greenhouse gases emitted by aircraft and the merchant marine, the study estimates.
A charge on all carbon emissions, would lead to a 10 percent reduction of global emissions, and raise at least $230 billion. Most of that revenue should be used to reduce other taxes or compensate poor families, but allocating just 10 percent to the climate fund would meet nearly one-fourth of the goal set in Copenhagen to reach $100 billion a year by 2020.
It is a sensible proposal, attuned to the action needed to face the pressing financial problems that will be at the core of the agenda for this weekend Finance Summit. The simultaneous gathering of Finance Ministers, Central Bankers and finance experts, the Board of the World Bank and IMF governors happens amidst another round of global financial turmoil. Climate finance is the least of their worries now, but the fact remains that G20 governments will need to have something new to say about the climate fund in a couple of months, at the Climate Summit, COP 17, in Durban, South Africa.
Last year, investment in renewable energy, energy efficiency, electric cars and other forms of green technology totaled $500 billion, including more than $200 billion in developing countries. Private capital can benefit from public finance through concessional loans or grants, that help to reduce risks and compensate higher initial costs for adoption of new technologies (AP).
Redirecting public subsidies is fully compatible with the debt and fiscal deficit reduction targets most economies will have to meet, in order to appropriately address the debt crisis that has triggered this new round of financial instability. The new green tech sectors are more dynamic and likely to generate more and better jobs than traditional industries. The Brookings Institution has recently released a study on the green economy in the U. U. showing that: it employs more workers than the fossil fuel industry; the newer “cleantech” segments produced explosive job gains and the clean economy outperformed the nation during the recession; it offers more opportunities and better pay for low- and middle-skilled workers than the national economy as a whole.
The social and climate welfare gains of subsidies directed to these industries are higher than the gains from subsidizing fossil fuels.
Tags: climate, Climate Change, COP17, debt crisis, Durban, financial crisis, Green, IMF, renewable energy, subsidies, sustainability, WDB