US Financial Support of Green Climate Fund is in America's Interest
- Nov 26, 2014 7:00 pm GMT
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The U.S. and other countries have pledged initial resources to help the Green Climate Fund (GCF) spur emissions reductions in developing countries and assist the most vulnerable in adapting to the impacts of climate change. The U.S. pledge of $3 billion is a serious commitment to helping achieve a strong climate agreement next year. The U.S. joins other countries that have already pledged to the GCF and more countries are expected to pledge in the coming days. This new fund is in America’s interest. It helps spur global action on climate change that is damaging the U.S. and countries around the world, it helps companies tap into the growing demand for clean energy, and minimizes the need for even greater investments to clean up the mess of extreme weather damages around the world.
“This powerful signal shows that President Obama is serious about helping reduce global warming pollution, both at home and abroad. Coming on the heels of the landmark U.S. and China climate agreement, this is another important piece of the puzzle for a strong agreement next year in Paris.”
The U.S. pledge of $3 billion to the GCF is an outgrowth of the fund launched by President Bush and Treasury Secretary Hank Paulson in 2008. In 2008, Secretary Paulson penned an op-ed in the Financial Times with his counterparts in the U.K. and Japan that detailed the need for a “Clean Technology Fund”. This Fund was later expanded to support a broader array of efforts to address climate change including adaptation and deforestation. Secretary Paulson pledged $2 billion to this new fund and subsequent Members of Congress from both parties voted for annual appropriations bills to mobilize the necessary U.S. funding to meet this pledge. In response to the pledge from the U.S. to the GCF Former Secretary Paulson said:
“I was also pleased to see the President’s leadership at the G-20 Summit in Brisbane today through the U.S. pledge to join other countries through an investment in the Green Climate Fund. This fund is conceived of the same principles that governed the Climate Investment Fund, which I helped to establish as Treasury Secretary. It sought to leverage market forces to incentivize the development and deployment of new clean technologies in China and other developing nations, which will create American jobs and help us deal with the massive risks of climate change. Believing this was in our national interest – both economically and environmentally – President Bush received bipartisan support for his $2 billion commitment to that fund in 2008 – and I urge our lawmakers to support this parallel effort through the Green Climate Fund.”
The GCF is an important component of global efforts to address climate change since it is one part of an effort to help mobilize even larger financing in efforts to address climate in developing countries. In Copenhagen countries pledged to help mobilize $100 billion in funding to support action in development countries. The GCF is one part of this effort to expand public financing and steer private finance towards a low carbon economy. Countries around the world have been aiming for an initial resource mobilization of over $10 billion. To date $8.6 billion has been pledged to the GCF thanks to contributions from fourteen countries including Mexico, South Korea, Germany, U.S., U.K., France, Japan, and Norway. More countries, including Canada and New Zealand, are expected to pledge at the international pledging conference on November 20 and larger amounts may be pledged from some countries that have already pledged.
The initial resources to the GCF are in line with the level of investment that the U.S. and other countries have dedicated for other major global challenges such as recent contributions to the Global Fund to Combat Aids, Tuberculosis, and Malaria where countries made a fourth round of pledges totaling $12 billion – with the U.S. contributing $4-5 billion.
The U.S. contribution is in America’s interest as the GCF will help:
Spur global clean energy deployment, creating new markets for renewable energy and energy efficiency companies. Leading U.S.-based companies are already tapping into the growing clean energy market and more are poised to join. U.S.-based companies have already taken advantage of the predecessor funds ranging such as Iowa based Clipper Wind securing a purchase of 27 wind turbines thanks to a wind project in Mexico supported by the Clean Technology Fund.
The GCF will help speed up these markets by working with key countries to develop tangible projects that will help transform markets for wind, solar, energy efficiency, and geothermal around the world. For example, a GCF clean energy project will include resources for transformative renewable energy projects that combine small public-sector investments in a particular large-scale renewable energy project (e.g., a wind or solar farm), financial tools that help leverage large private sector financing for the project, and necessary policy reforms to ensure that this project spurs wide-scale renewable energy deployment beyond the individual project. You can see some elements of this in the World Bank managed Climate Investment Funds where every $1 of public financing from the fund has spurred almost $6 of other financing from the private sector and the budgets of the recipient countries.
Increase the resilience of the most vulnerable countries to the impacts of climate change, avoiding much larger costs. Countries around the world are already feeling the impacts from extreme weather events caused by climate change and these impacts will get worse if critical steps aren’t taken. The U.S. is always one of the first to respond to such disasters as witnessed with the response to the recent typhoon in the Philippines and Ebola in Africa. And evidence from disaster response around the world shows that spending $1 today helps avoid around $7 of investments needed after the disaster hits. Upfront and early funding to assist countries strengthen their resilience will help countries avoid damages from climate change.
Reduce deforestation emissions through efforts such as ensuring deforestation-free supply chains. Deforestation is a major driver of climate change throughout the world. There are emerging signs of progress with key countries such as Brazil significantly reversing their forest loss in recent years and major companies committing to end deforestation in their supply-chain by demanding products that aren’t driving deforestation. The GCF will help such promising efforts into lasting reforms in key countries that will (hopefully) end deforestation by 2020.
The GCF is structured to help deliver critical change on-the-ground. It includes a number of strong and innovative structures including:
- targeted efforts to help mobilize large private financing flows through innovative financing tools – i.e., there is a dedicated private sector facility and advisory board integrated from day-one that will hopefully unleash the hundreds of billions of private finance that is sitting on the sidelines;
- leveraging existing financing infrastructures so that there is no need for a large bureaucracy, unnecessary institutions, or duplicative efforts;
- strong financial safeguards including an independent evaluation unit to ensure that funding is spent well;
- contributions from a new group of countries including financing from several major emerging economies and maybe even the private sector; and
- a clear focus on only funding actions that have a huge impact and truly transform the dynamic on the ground in key countries.
Strong and sustained U.S. investments in the GCF will help to unleash these benefits, ensure that the fund delivers, and support the most vulnerable countries in their efforts to reduce climate pollution and adapt to the impacts of climate change. It is an idea that has support from a bipartisan and diverse group of American leaders and organizations.
This is a strong U.S. pledged contribution that should be strongly supported by the U.S. Congress.
Photo: Clipper Windturbines installed in Mexico; Walmart, on Flickr.