After 2015: new challenges in development - climate finance

24 March 2011 13:00 - 14:30 GMT+00
Public event
Streamed live online

Chair:

Andrew Shepherd- Director of Chronic Poverty Research, ODI

Speakers:

Jan Vandemoortele- Ex Director, UNDP. 

Simon Maxwell- Senior Research Associate - ODI and Chair of the Climate and Development Knowledge Network

Camilla Toulmin-Director, IIED

Discussant:

Neil Bird- Research Fellow, ODI

Description

There is now an active discussion about the post 2015 development framework with discussions about gaps in the existing framework, how to respond to the changing context including climate change, as well as overall approaches – rationalisation, equity and disaggregation, the need for targets, the process of getting to an agreement. It is clear from current performance that the framework needs shaking up if poverty is to be eradicated. What is not clear is how this shaking up will take place, nor what the outcome will look like.

Among changes in the context, the now strong acknowledgement of the need to respond robustly to climate change is a major potential force which may shake up the development framework. While overall progress on agreeing responses climate change has so far been disappointing, progress has been made on climate financing both in Bali and Cancun, and new channels of public and private finance are emerging. The amounts are predicted eventually to dwarf existing aid flows. More than that, these responses and the whole discussion around climate change potentially shifts the development paradigm. The focuses on low carbon development, emissions reduction, and carbon sequestration, backed with new finance should have implications for the construction of the post 2015 development framework. The meeting will explore what these implications might be. And what links between the two discourses and global policies and processes need to be made.

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This meeting is part of two event series being held at ODI.  Firstly, a series examining the challenges and opportunities of a post-2015 world and what policies will come after the MDGs. The second is a series on climate finance – examining the types of financing, how they are being disbursed and their likely effects upon the poor.

There is now an active discussion about the post-2015 development framework and the gaps in the existing framework, and how to respond to the changing climate and the challenges this bears. It is clear from current performance that the framework needs shaking up if poverty is to be eradicated. What is not clear is how this shaking up will take place, nor what the outcome will look like.

Among changes in the context, the now strong acknowledgement of the need to respond robustly to climate change is a major potential force which may shake up the development framework.  Moreover the development agenda needs shaking up since reducing poverty is proving so intractable in many contexts, but how this will be done is a contentious issue.

Climate change offers a framework to offer a fundamental rethink of traditional forms of development. The amounts of climate finance to tackle climate change are predicted eventually to dwarf existing aid flows. More than that, these responses and the whole discussion around climate change potentially shifts the development paradigm.

This meeting explores what these implications might be and what links there are between development and climate change discourses and the corresponding global policies and processes that need to be made.  Moreover, what do low carbon development and the need for a sustainable green economy mean for poverty reduction?

Jan Vandemoortele opened his presentation with a reflection that the failure to prepare for the economic crisis was a failure to challenge key ideas within the existing paradigm and a lack of intellectual capital to look ahead to unforeseen events.

The summit on the MDGs in December 2010 was an example that policy-makers have not learned from the maxim ‘don’t believe everything you think’ and are still reiterating old discourse.  Namely that if you accelerate economic growth, increase foreign aid and improve governance this is a remedy for even the most protracted acute poverty.

However, the MDGs are situated within a paradigm that perpetuates inequality. Economic and social inequalities within countries and the uneven distribution of vulnerability from the effects of climate change jeopardise progress on the MDGs.  The USD40bn financial commitments to tackle child and maternal health risk being a figleaf to tackle the underlying causes of acute poverty and poor service delivery and are representative of a donorised and dolarised response.

The MDGs, Jan Vandemoortele argues, are an illustration of ‘group-think’, spurred on by a donor-centric mindset.  The USD100bn financial commitment to tackling climate change risk donorising and dolarising the global policy response to climate change.  Rather than letting the market play its part in improving service delivery, certain policy responses are prioritising the status quo rather than fundamental behaviour change.  A notable example is the UK government’s announcement in the 2011 budget to cut tax on fuel prices rather than encouraging energy efficiency and lower energy consumption.

Jan Vandemoortele used the example of Nigeria to show that the MDGs – while they have certainly been a useful framework to improve service delivery in some areas – have failed to promote improved service delivery to the poorest: those to whom the MDGs are directed. Jan’s presentation shows that 47% of children in Nigeria were immunised against measles in 1990 while this figure drops to 44% in 2008. Moreover, in 2008 the top quintiles showed an increase whereas the poorest quintiles have actually seen a reduction in the number of children vaccinated against measles.

While this is an illustration of just one MDG indicator in one country it flags up the challenge of meeting the MDGs where equity is not addressed. As they stand, the MDGs are making progress but evidence shows this is inequitable progress that is bypassing the poorest.  If this trend continues the MDGs will never be met.

Climate finance risks perpetuating the same mistakes if it does not provide an equitable delivery of finance to the poorest.  If climate finance does not consider this there is a risk the poorest will be left behind.

Mr. Vandemoortele used the example of King Shah Jahan of India and Queen Ulrika Eleonora of Sweden and Finland who both reigned in the 17th Century to illustrated the different types of responses to poverty questions.  When faced with how to respond to the loss of his wife to childbirth, the Shah of India built the Taj Mahal.  When Queen Eleonora responded to the loss of family and friends through maternal mortality she set up initiatives to support infant and maternal mortality.  These two examples show the distinct ideological models to tackling the challenges of the MDGs – to provide an edifice to promote economic growth to feed into taxes that will be invested into public services or tackle the issues head-on by creating facilities to host these services.

A post-2015 world needs to reformulate the MDGs as measurable collective targets for both North and South that should promote equity and political accountability through interim 5-yearly targets.  It should not be an exercise in donorship but foster peer and partners review to challenge world leaders and hold them accountable. It should mark an end to dysfunctional business thinking in that if donors give money they are entitled to tell countries how to use that money.

Camilla Toulmin – Dr. Toulmin argued the MDGs are very much a product of the end of the 20th Century thinking where issues were looked at through the eyes of donors and where environment played a very minor role within the overall MDG framework.  Today we are looking forward in a changing world.

However, to date there have been ‘unsatisfactory’ climate talks that have not address the pressures of increasing economic growth where demand and consumption are pushing the limits of the planet’s resources. Notably, biodiversity and nitrogen levels are way above sustainable levels.  Technological innovation is allowing us to continue to push these boundaries out even further, particularly agriculture.

What is needed is effective plumbing and pipework to ensure that green infrastructure and climate finance reach the communities they are meant to target.  Dr. Toulmin used the following analogy to show the problem of the current infrastructure to reach the poorest:  funds are getting stuck in larger canals where water evaporates and or where water is allowed to drip, rather than be channelled, to communities.

Dr. Toulmin suggested the next round of global goals should address inequality, women’s access to services and incomes; rights governance and representation; more resilient livelihood systems include water and energy; and hunger – with the last three overlapping strongly with the climate agenda.

What is needed is a vehicle to move towards real decisions. IIED is part of the Green Economy Coalition www.greeneconomycoalition.org which is a forum for a range of actors to ensure broad-based consultations feed into the debate on climate change and a low-carbon transition.

Climate finance should be thought of as compensation for damage done rather then traditional aid machinery.  At the moment, the MDGs are not suitable for the challenges at hand, having been defined by OECD governments using direct budgetary support.  Truely global sustainable development goals will never be agreed to as they would mark such a radical shift from the context we know.  The best we can hope for is second best targets, but knowing what they are will require collective decision-making to ensure the pipes and plumbing of financial mechanisms can deliver to the people on the ground to help meet the challenges raised in the MDGs.

Simon Maxwell, CBE - Bringing together the environment and development agendas was a key objective of the original Rio summit in 1992, and agreed with Dr. Toulmin that the 2012 Earth Summit represents a big opportunity to develop the joint environment and development agenda further. The Climate and Development Knowledge Network (CDKN) has a similar objective and underlying this is how to simultaneously tackle the MDGs to ensure we manage the risks from climate change.

The world is changing to encompass values such as ‘think locally, act globally’ and rapidly invest in the competitiveness of countries to ensure countries are not left behind when the impacts of climate change hit.  China has adapted its economy to be geared towards manufacturing the infrastructure for a green economy while Boliva, with it expansive salt plains with a wealth of lithium, is set to be the new Saudi-Arabia in a post-oil world.

The USD 100bn climate finance commitment by 2020 is significant but marks a compromise between the US and other countries by undervaluing the price of carbon, which when adjusted to inflation sets the price at 2020 to be not much higher than today’s price of USD 20-25.  Climate finance should be a major contributor to a global economy.  Current estimates propose that for every £1 of public money invested in climate finance this should leverage £18 in private climate finance.

Those interested in potential collaboration for climate-compatible development should contact CDKN.

Neil Bird summed up the discussions thus far and argued that much prominence has been given to exploring different sources of finance in support of climate change. Can we expect to see the same in development cooperation financing in the ‘next period of aid’?  Considerable attention has also been given to estimating the costs of climate change actions in developing countries.  Where are the equivalent ‘needs assessments’ for aid?  On governance, there have been strong calls to increase transparency of public funds associated with climate change - will this have a knock-on effect on development spending? However, a concern over equity is not yet well developed for climate finance. There is the start of a discussion on what ‘vulnerability’ to climate change is and how this might influence country allocation and within country distribution.  What can the experience with aid say on this?

Q&A

ODI: Commented that rather than focusing on Dutch Disease, the discourse has changed to Dutch Vigour where well-spent aid can actually reverse poor financial management and public spending.  How does the concept of polluter pays work in practice in climate finance?

Panel responses: Taxes such as a levy on carbon can be utilised, for instance a levy for international air travel.  The way to avoid Dutch Disease is to spread the benefits of innovation.

LSE and former-World Bank.  Comment: conditionality also has a positive side, ensuring genuine equity evaluation.  How is the discourse on the MDGs embracing conditionality?

Panel responses: Conditionality is often perceived as patronising and not empowering but it is not an either/or and should be seen as an opportunity of ownership.

Global Witness.  Comment: the debate on lowering consumption patters are politely avoided. What are the principles we need to get traction on changes to consumption patterns?

Panel responses: people tend to deal with the problem of consumption by blaming it on people in the developing world having too many children when in fact it is that Western consumption habits are 20-50% higher than developing countries. There is a tendency to displace action onto others. In the UK there is a small middle-class response to reducing consumption.  There is a need to find a simple and easy way to measure reduction in consumption and to use a benchmark indicator on equity of consumption. Dr. Toulmin suggested government not procuring from companies that have a bottom:top salary ratio of 1:10.

ODI.  Comment: Using targets for the gini-coefficient is not the right way to tackle the MDGs. There is a need for having targets for the bottom quintile as well.

ODI. Comment: we need to remember that the MDGs were not about development per se but eliminating absolute poverty.  To broaden the agenda would mean moving away from this objective.  Ultimately, countries need to be reducing aid rather than increasing it.  Climate finance may induce aid dependency.

Climate Adaptation Works - Comment: there is a need to use private sector and levies to promote real economic and individual incentives to undertake adaptation and mitigation activities.

Panel’s concluding comments:

Simon Maxwell invited the ODI to create a one page summary of the necessary long-term frameworks and what the MDGs should be.  Camilla Toulmin argued that we need to focus on the sustainability agenda or risk missing a fundamental opportunity to restructure the global system. The green economy discourse is a vehicle to invite private-sector opportunities in the development-environmental agenda. Jan Vandermooterle called for indicators to be less equity-blind to ensure equality of opportunity and outcomes for the poorest.  Countries pay close attention to their country’s ranking on indexes, such as the Human Development Report.  ODI should design simple equity adjusted indicators to measure equity-sensitive progress.