Are the US and G-20 Finally Leading on Climate?

Update November 17: As expected, the United States and Japan announced their pledges of $3 billion and $1.5 billion, respectively, to the Green Climate Fund at the G-20 summit in Australia.  The United Kingdom is set to announce a £650 million ($1 billion pledge) in Berlin later this week and Canada said it will contribute, although it did not announce how much. Together with pledges from 11 other countries, total pledges amount to $7.5 billion, getting close to the $10 billion target for beginning operations of the Green Climate Fund. Pledges are also expected from Australia (despite the step-back from climate action by the new government), Italy, Norway, and Spain. The agreement reached by the Green Climate Fund board a few weeks ago, which approved a logical framework for REDD+, may spur Norway to pledge given it lays the groundwork for GCF support to forests.

For the United States, the challenge will now be finding the money. The administration says reaching its new emissions targets can be done using existing legal authority, without needing to go to Congress for new laws. However, it is unlikely the administration will find $3 billion over four years for international climate action without requesting a budgetary appropriation from Congress. Emphasizing support for climate resilience in poor countries may be part of a an executive strategy to drum up support in Congress, but getting the money is still likely to be an uphill battle. 

At the meeting of the Group of 20 industrial powers this weekend in Brisbane, Australia, President Obama is expected to announce a pledge of $3 billion to the Green Climate Fund (GCF). The amount exceeds the expectations of the climate world and, together with the joint announcement with China earlier this week, that raises the ambition of the US commitment to reducing emissions, placing the United States firmly back in the game and in a position of leadership heading into the 2015 climate summit in Paris. Japan is also expected to announce its pledge (estimated $1.5 billion) to the GCF in Brisbane. Ironically, these pledges will raise the profile of climate in the meeting when the host (Australia) tried to prevent it from being on the agenda at all. 

The Green Climate Fund is intended to promote low-emission and climate-resilient development pathways by providing support to developing countries to limit or reduce their greenhouse gas emissions and to adapt to the impacts of climate change. Providing funding to developing countries for climate action is seen as a key ingredient for success in the overall climate negotiations.

The US pledge, which would be limited to 30 percent of the total funding for the GCF, is expected to encourage other donors to announce similarly ambitious contributions at the formal pledging meeting in Berlin next week on November 20. The US contribution of $3 billion could imply total pledges reaching as much as $10 billion.

The fact that early reports quote administration officials as saying that the funds would be intended to help the world’s poorest countries address the effects of climate change is significant. The poorest developing countries will suffer the most damaging consequences of climate change and they have been the most outspoken in the climate negotiations about the need for financing from the rich countries, which historically have caused most of the carbon pollution. So the US focus on adaptation, for building resilience in developing economies to the impacts of climate change, will be seen as a good faith effort by the United States to help smooth the path toward a global agreement at the climate summit in Paris next year.

While some developing countries have been pushing for a more ambitious initial funding target for the GCF of up to $15 billion, if the GCF manages to reach $10 billion in pledges in this era of self-imposed fiscal austerity it will be a signal accomplishment. And since the GCF is still in the process of setting itself up as a new financial institution, the amount is probably about right. Initial funding for the Climate Investment Funds, a set of funds created in 2008 to fund climate-smart development, was $6 billion. The CIF funds are implemented through the multilateral development banks, which already have in place robust fiduciary and implementation protocols and had the experience to quickly develop pipelines of potential projects to jump-start investment. Annual disbursements from the CIF total about $250 million. It will take the GCF some time to develop a pipeline of projects and to work out the procedures and protocols for delivering the funds directly to countries or through intermediary channels. So a pledge of $10 billion, which would likely be funded by annual contributions in the hundreds of millions over four to eight years, depending on the donor, seems appropriate to the scale and capability of the nascent GCF. 

Initial funding of about $10 billion would give the GCF time to build a pipeline, undertake commitments, and start disbursing without huge amounts of funding sitting idle in its coffers. One lesson from early experience with climate funds, such as the Norwegian support to Brazil’s Amazon Fund, is that donors need to see their taxpayers’ funds flowing, not sitting undisbursed. 

The US contribution to the Climate Investment Funds was $2 billion, so the $3 billion pledge to the GCF demonstrates a significant increase in support to developing countries. While it will be a challenge, to say the least, for the United States to ensure that Congress appropriates the funding needed to meet its commitment to the GCF, the annual amounts would be roughly on the order of magnitude of the US payment to the CIF so, once it delivers its final disbursement to the CIF, the annual payment to the GCF in support of developing countries would not entail a major change in funding level.

The initial funding for the GCF is also in line with the promise made by rich countries in Copenhagen to mobilize $100 billion in climate funds for developing countries by 2020. The $100 billion is meant to be a combination of public official funds, like the GCF pledges, as well as philanthropic and private funding. With proper policies and support from donors, part of the GCF funding can be used to help to leverage the huge volumes of private investment that will be needed. 

As world leaders head to the G-20 meeting in Australia the good news on the China-US pledges to reduce emissions and the likelihood of solid funding for the GCF may give the group the confidence to take action to fulfill its earlier pledges to phase out fossil fuel subsidies. That would put the G-20 back into the climate game as well.