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Climate change and development are closely intertwined. Poor people in developing countries will feel the impacts first and worst (and already are) because of vulnerable geography and lesser ability to cope with damage from severe weather and rising sea levels. In short, climate change will be awful for everyone but catastrophic for the poor.
Preventing dangerous climate change is critical for promoting global development. And saving tropical forests is essential to doing both. Frances Seymour and Jonah Busch's new book, Why Forests? Why Now?, illustrates how today—more than ever—saving forests is more feasible, affordable, and urgent.
Historically, the responsibility for climate change, though, rested with the rich countries that emitted greenhouse gases unimpeded from the Industrial Revolution on — and become rich by doing so. Now, some of the most quickly developing countries have become major emitter themselves just as all countries are compelled by the common good to reduce greenhouse gas emissions. A major challenge of reaching a global deal on climate change was to find a way for poor countries to continue developing under the planetary carbon limits that rich countries have already pushed too far. That will involve scaling up finance to deploy clean technologies, to adapt to the effects of climate change, and to compensate countries that provide the global public good of reducing emissions, especially by reducing tropical deforestation.
CGD’s research and policy engagement on climate and development has had two aims: to strengthen the intellectual foundation for a viable international accord to come out of the COP 21 in Paris and to provide data, research, and analysis that policymakers and others can act upon even in the absence of an international agreement.
The bank rationalizes its decision to finance coal-fired projects by requiring the use of technologies that are somewhat more efficient than conventional coal-fired plants in developing countries. But this is only a marginal improvement: Large plants that meet the proposed CTF requirements will still be enormous emitters of greenhouse gases. So, as I testified before Congress last summer, funding any coal-fired project undermines the basic rationale for the CTF. This includes plants that are supposedly “CCS (carbon capture and sequestration) ready,” because scalable CCS technology will not be ready for at least a decade, at a cost that may prove prohibitive, with risks that may prove untenable. And we have to start limiting emissions now, not ten years from now. To fulfill its mandate, the CTF must focus on making renewable energy from solar, wind and other sources cheaper than energy from fossil fuels (particularly coal). If this does not happen, poor countries will be very unlikely to develop along the low-carbon growth path that the bank itself now touts.
As my colleague Robin Kraft has recently noted, the bank’s perverse energy policy has now created the ultimate embarrassment for the bank in Gujarat. This Indian state has set a goal of 7,000 MW of renewable energy capacity in the next four years, and a private firm, AES, has announced its intention to install a 1,000-MW solar facility as part of the program. Meanwhile, in the same state, the bank’s International Finance Corporation is investing $450 million in a coal-fired power plant that will emit more than 25 million tons of CO2 per year for at least 25 years!
Consider the tragic irony here: The publicly-funded World Bank is investing in coal-fired power for India, claiming that solar power is “too costly.” Meanwhile AES, a private, profit-seeking firm, is going heavily into solar power for India and planning to make money. This is obviously absurd.
President Obama shows every sign of being serious about international action on climate change. In light of debacles like the Gujarat affair, the President, his climate team, and their Congressional allies will undoubtedly think long and hard about whether US financial support for clean technology should be entrusted to the World Bank’s CTF. And if the U.S. walks away from the table, other countries may well follow. Time is short, but the World Bank can still act to prevent this from happening. In fact, it can start this week -- by deleting coal-fired power (including “CCS ready” power) from the set of candidates for CTF funding.
President Obama clearly wants to break with his predecessor on energy and climate policy. But the American political divide has not disappeared, and it still threatens to derail the Copenhagen climate negotiations next December. Three developments during the past week highlight both the promise and the peril: Secretary of State Hillary Clinton's appointment of Todd Stern to be U.S. special envoy for climate negotiations; President Obama's reversal of the Bush administration's refusal to let California and other states set tighter standards for greenhouse gas emissions from motor vehicles; and the re-emergence of the "Gang of Ten" -- Democratic Senators who represent coal-dependent states in the U.S. heartland and fear that cap-and-trade regulation of carbon emissions will harm their constituents.
First some good news: Todd Stern's appointment. The implications are clearly spelled out in his recent Center for American Progress paper, co-authored with Kit Batten and John Podesta, co-chair of the Obama transition team:
… we can provide the global leadership that is desperately needed to manage the impact of climate change in the developing world …. The United States is a large part of the problem … At the same time, most of the growth in emissions going forward will be generated by developing countries. …. It is thus clear that rapidly industrializing countries -- China chief among them -- will have a big role to play in containing climate change. The United States will simply have no credibility with other nations unless we have vigorously addressed the problem at home. As we are putting our own mandatory system in place, we will need to re-engage vigorously in the diplomatic arena.
This paper echoes themes in recent CGD research, my chapter in CGD's publication, The White House and The World: A Global Development Agenda for the Next U.S. President, and a CGD post on transition climate policy right after the election.
As Stern, Podesta and Batten note, the sequence is critical here: Developing countries will only move toward meaningful emissions limits if the United States moves first. The initial signs are certainly positive: President Obama has just empowered a coalition of Pacific and Northeastern states to enact their own (tighter) limits on vehicular greenhouse gas emissions. These "green" states are willing to move first, because they are much less dependent on fossil fuels than their "brown" counterparts in the country"s interior. The White House has also posted President Obama's intent to enact a national cap-and-trade program. And key Democratic leaders in Congress are poised to go along. Yesterday's New York Times cites Representative Henry A. Waxman, Chair of the House Energy and Commerce Committee, as expecting to move a climate bill out of his committee by Memorial Day, and Senator Barbara Boxer, Chair of the Senate Environment and Public Works Committee, has stated that that "the writing is on the wall that legislation to combat global warming is coming soon."
Now here's the rub: The U.S. political divide on energy and climate policy has not disappeared -- in fact it has re-emerged within the Democratic Party itself, in the Gang of Ten who represent brown states. It's worth listening carefully to two leaders:
Senator Sherrod Brown of Ohio:
"If we pass a climate bill the wrong way, it will hurt American jobs and the American economy, as more and more production jobs go to places like China, where it’s cheaper."
Senator Debbie Stabenow of Michigan:
"My message over all is that for us to support what needs to be done in addressing global warming we need to demonstrate that, in fact, jobs are created. It’s not a theoretical argument. We have to come up with a policy that is manageable on the cost end … and that treats states equitably and addresses regional differences.”
Their sentiments have been echoed by other Senators from Virginia, West Virginia, Indiana, Michigan, Arkansas, Missouri, Nebraska, South Dakota, North Dakota, Colorado and New Mexico.
This divide is not new. During the latter days of the Bush administration, it looked so stark that I posted a speculation about two American delegations at Copenhagen -- a rump delegation representing green states, and an official delegation with a dominant constituency in the brown states. Now the political shoe is on the other foot, and the national administration is in a de facto alliance with the green states. But the path to Copenhagen passes squarely through the brown states, and a gate controlled by the Gang of Ten. They are not likely to open it unless the President addresses two key concerns:
The cost of cap-and-trade: As I have argued in a recent post and public CGD dialogue with David Gergen, the President needs to confront the conventional cost argument head-on because it is simply wrong: A recession is exactly the right time to introduce cap-and-trade, because it will be cheap. Rather than waiting for good times to return, we should immediately adopt a cap-and-trade system with two key features: 100% auction of permits and the initial cap set at the pre-recession emissions level. This will bring all major carbon emitters into a uniform national system while ensuring both economic efficiency and a very low auction price during the worst of the recession, because the cap will exceed emissions until the recession eases. Once that occurs, the reviving economy will intersect with a shrinking emissions cap to produce a steady increase in the auction price. As carbon emissions get more expensive, market forces will inexorably reduce them.
Fairness: The President must acknowledge that the Gang of Ten are right: Working families could be severely impacted by post-recession energy price hikes under cap-and-trade, particularly in the brown states. In a recent paper, I have shown that their concerns played a major role in undermining the Warner-Lieberman cap-and-trade bill in the last Congress. Fortunately, the solution is both clear and politically feasible: Set aside a major share of permit auction revenues and divide the money equally among all Americans. This will ensure that poor working families are fully compensated for energy prices hikes associated with cap-and-trade (see Why Warner-Lieberman Failed and How to Get America's Working Families behind the Next Cap-and-Trade Bill.
Thanks to President Obama's new initiatives, we now have a clear path toward Copenhagen and real hope for a successful outcome. But before Todd Stern and other new appointees arrive in Copenhagen, they will have to get past the Congressional gatekeepers: the Gang of Ten and their potential allies among brown state Republicans. And this will require a cap-and-trade system that is:
Economically efficient, which means 100% auction of emissions permits right from the start, as candidate Obama advocated;
Low-cost at the outset, which means starting now and setting the first cap at the pre-recession emissions level, thus ensuring low permit prices while US industry adjusts to the system;
Fair to working families, which means rebating enough permit auction revenues to fully compensate them for energy price hikes from cap-and-trade.
President Obama can do this -- it's not even hard by comparison with looming problems like health care, social security and the deficit. And the need is urgent, because we won't get to Yes in Copenhagen without it.
Eldis, the online aggregator of development policy, practice and research at the Institute of Development Studies in Sussex, is conducting a survey to identify "the most significant new piece of development research of 2008." This strikes me as having roughly the same statistical validity as American Idol does for when it comes to finding new singing talent. Still, as with Idol and other talent shows, the entertainment value of a popularity contest is hard to dispute!
The survey asks for title, author, publisher and link. I know you want to play, so here's some possible suggestions! Just click on the survey link and copy and paste one of the answers below.
What is it going to take to get the World Bank to change course on renewable energy? Here at the Center we’ve been trying to help get the bank to be more aggressive on renewables for nearly a year. But inertia is a powerful force, and despite shifts in thinking by individual bank staff, the institution itself is still moving very slowly. But what if a major client and a competitor joined forces on renewables?
It turns out that this is happening in India. According to the Business Standard, the state of Gujarat is reportedly making a big push into renewable energy over the next few years, with plans to add 7,000 MW of renewable energy generation capacity. The state government will buy power from renewable energy producers at fixed prices, (known as feed-in tariffs in utility parlance), thereby easing financing of these capital-intensive renewables projects. This has attracted memoranda of understanding for photovoltaic and solar thermal investments worth some $9.2 billion.
Among these is an agreement with AES Corporation, one of the largest American energy firms, which will reportedly invest $1.2 billion in a 1,000 MW solar project. Expected to be operational by 2010, this will be one of AES’ largest plants – of any type – and the largest solar installation in the world.
And then there’s the bank, which is stuck providing unneeded financing for the massive Tata Mundra Ultra Mega coal-fired plant – also in Gujarat – through the IFC, its profit-driven private sector arm. Given that there are nine other ultra mega plants coming online in India, the IFC’s argument that it’s helping India pilot the technology is a bit disingenuous.
If a major shareholder-owned company like AES sees enough potential in solar to drop $1.2 billion in one project, you have to wonder why the IFC isn’t doing the same. India is launching its next green revolution, and if the bank isn’t careful it’s going to miss out on a lot of green jobs.
Director of the Center for Public Leadership at the John F. Kennedy School of Government at Harvard University, editor-at-large at U.S. News & World Report, and a senior political analyst for CNN, David Gergen joined CGD president Nancy Birdsall, and CGD senior fellows who authored essays in our recent book, The White House and the World: A Global Development Agenda for the Next U.S. President, for a lively discussion of the prospects for improved U.S. development policy under President Barack Obama.
Join Nancy Birdsall, David Gergen, and CGD senior fellows who are authors of essays in our newest book, The White House and the World: A Global Development Agenda for the Next U.S. President , for a lively discussion of the prospects for improved U.S. development policy under President Barack Obama.
As you know, David Gergen has been an influential participant in American public life for 30 years. A best-selling author and advisor to presidents Reagan, Nixon, Ford and Clinton, David is currently director of the Center for Public Leadership at the John F. Kennedy School of Government at Harvard University, editor-at-large at U.S. News & World Report, and a senior political analyst for CNN.
Today Bloomberg News reports that Russia's national monopoly, Gazprom, has shut down all natural gas shipments to the Ukraine as part of an escalating price war that has created an energy crisis in Europe. Immediate concern about access to natural gas from countries in the former Soviet Union highlights worries about the future of energy supplies, and adds greater force to the argument for shifting Europe's energy portfolio toward renewable technologies like solar thermal power from the North African desert.
The current predicament threatens more than just Ukraine. With the looming threat of global climate change, Europe has become increasingly reliant on natural gas as a lower-carbon alternative to coal and oil. It imports 25 percent of its gas from Russia, 80 percent of which passes through Ukraine, according to the Associated Press. The cutoff has suspended all Russian gas supplies through Ukraine to Bulgaria, Hungary, Greece, Turkey, Romania, Serbia, Bosnia and Macedonia. The government of Slovakia has declared a national emergency; declines of 90 percent are reported in Austria and Italy, and 70 percent in France.
Reflecting European leaders' deep worry, European Commission President Jose Manuel Barosso has been quoted by AFP as stating that it is "unacceptable" for Europe's supplies to be taken "hostage" by the Russia-Ukraine dispute. Ongoing disputes with former Soviet-bloc countries and frayed relations with the West have sharpened concerns about Russia's reliability as an energy supplier, prompting the EU to consider further diversification of its energy portfolio.
To help them along, CGD's Kevin Ummel and senior fellow David Wheeler have just published an analysis of large-scale solar thermal power expansion in North Africa (see Desert Power: The Economics of Solar Thermal Electricity for Europe, North Africa, and the Middle East). They find that solar thermal production could meet the power needs of 35 million Europeans by 2020, at a total subsidy cost of about $20 billion. The proposed program would bring North African solar thermal to cost parity with European coal and gas power generation, as well as directly averting about 2.7 billion tons of carbon dioxide emissions during the lifetime of the new facilities. The program would indirectly avert another 2.6 billion tons by driving cost reductions for solar thermal investments outside the program. After completion of the program, cost parity with coal and gas would accelerate the shift to this nearly-limitless source of renewable power.
The EU has seriously considered solar energy from North Africa since 2007 and has noted that such a program would reap many economic and environmental benefits. Moreover, the Union of the Mediterranean, created in July of 2008, was formed expressly to forge stronger relations between Europe and Africa on issues like the environment.
In tough economic times, it is not surprising to see some resistance to the short-run cost of switching to low-carbon energy. But with Russia flipping the switch on Europe's heat this winter, far-sighted policymakers should seize this opportunity to promote North African desert power as a viable, cost-effective renewable energy option for the EU. And the Obama administration would profit from their example, as it considers national installation of a "smart grid" to bring American's own Southwest desert power to our metropolitan energy markets.01/09/09 UPDATE:The New York Times reports a tentative deal has been struck to renew Russian gas deliveries to Ukraine, though negotiations on a final deal are ongoing. The news comes as a Reuters analysis points out the dispute has exposed Europe’s "Achilles heel" on energy security and "the urgent need to tackle long-neglected problems" like outdated infrastructure and renewable energy access. This couldn't be a better time for Europe to move towards a 21st century approach to renewable energy, but will European leaders seize the opportunity?
We are at the start of what promises to be an unusually difficult year in the global economy. Policy decisions in the United States and other rich world countries will matter immensely for poor and vulnerable people living in developing countries. Fortunately, there are a number of fairly straight-forward policy initiatives that could make life less difficult for poor people in the developing world while also benefiting the majority in high-income countries. With that in mind, here is my partial policy wish list for 2009:
Avoid protectionism. And may the Obama Administration take a positive step: Offer permanent duty-free, quota-free market access for the poorest countries. That rich countries manage to avoid protectionist trade and industrial policies that would exacerbate the global downturn and be particularly disastrous for household income and unskilled workers (in textiles for example) in low-income countries. A U.S. loan to the auto industry is less bad than the French subsidies that are on the table. Simon Johnson has a good idea. He suggests that the G-20 monitor and report on proto-protectionist steps among its members on its Web site. Besides doing no new harm, how about the incoming Obama Administration proposing to the Congress permanent duty-free quota-free access for select low-income countries as suggested by Kim Elliott? That would put trade to work for development (on which the Doha round has been a flop up to now), at virtually no cost to U.S. jobs.
That the Obama Administration act now on global warming, proposing a gas tax-financed cut in the payroll tax. That the U.S. Congress pass legislation by mid-2009 setting a target for reduced emissions of greenhouse gases (at least an 80% cut from 1990 levels by 2050, which is what President-elect Obama has called for and which would be in line with European pledges). This could be via revenue-neutral carbon charges or public auction of emissions rights, the revenue from which could be remitted to help America's working families adjust to the low-carbon economy as David Wheeler has suggested. Charges should be at least $15-$30 per ton of CO2 emissions; at that level, Wheeler claims that renewable energy, such as concentrated solar, becomes competitive. A first step would be instituting a floor on gasoline prices (I would suggest $3.50 to start moving to $4 over a year or so) as Kemal Dervis has proposed and as Tom Friedman has implored. A gasoline tax could be progressive and revenue-neutral if it financed a reduction in the payroll tax; that in turn would encourage job creation which Dani Rodrik wants to see as central to the stimulus package.
Get serious about development as one of the Three Ds. That the Obama Administration strengthen the development leg of the three-legged foreign policy stool (defense, diplomacy and development) which I have noted could be done at a budget cost of less than $10 billion per year, excluding new R&D in clean energy. This amounts to an incredibly big bang for the buck in restoring global respect for the United States, especially when compared to the hundreds of billions we spend on traditional "security" and defense. The $10 billion covers not only reform of U.S. foreign assistance but also development-focused policy fixes to U.S. trade, migration and climate change policy.
Modernize foreign assistance -- and take the lead on universal basic education. That the incoming U.S. administration and the new Congress work together to lay the foundation for a major reform of U.S. foreign assistance programs, and embrace innovations such as our Cash on Delivery (COD) Aid proposal. Also that the United States take leadership creating a Global Education Fund to promote universal basic education, recently proposed by Gene Sperling and others.
Get the facts on global migration. That OECD members agree to ensure that all their 2010 censuses will include three basic questions about the movement of people (including "Where were you born?" and "Where did you live five years ago?") that would enable sound empirical research on migration and development. Such research could help to motivate policy changes that would foster development-friendly increases in the temporary movement of people across national borders, especially people from developing countries who seek opportunities in rich countries (on this issue, stay tuned for the recommendations of our Commission on International Migration Data for Development Research. Meanwhile, read Michael Clemens' recommendations for the incoming Obama Administration and a striking working paper on the wage gaps caused by barriers to movement across international borders.)
Reform governance at the IMF and the World Bank. That the current crisis breathe life back into officialdom’s efforts to reform the IMF and the World Bank, especially to reform their embarrassingly outmoded mid-twentieth century governance arrangements. Specifically, that the announced commissions on IMF and World Bank governance, led respectively by Trevor Manuel and Ernesto Zedillo go beyond the timid incremental fixes of the last couple of years (marginal increases in votes and a third chair on the World Bank Board for African countries). For example, how about getting the United States and Europe to publicly renounce their patronage privileges in the appointment of future heads of the World Bank and IMF, respectively? Or how about instituting special majorities (for an excellent exposition see also) for election of those heads, that would require, for example, a majority of country members as well as a majority of weighted votes?
Is this too much to hope for in 2009? Which of these wishes looks promising to you and which is a bridge too far? Since seven is the magic number for a memorable list, what would you add?