TWN Info Service on Climate Change (Sept09/01)
10 September 2009
Third World Network

Investment-led Global New Deal needed to save planet
Published in SUNS #6766 dated 3 September 2009

Geneva, 2 Sep (Riaz K. Tayob) -- Switching to a low-emissions, high-growth pathway to meet development and climate challenges is both necessary and feasible, but the transformation hinges on the creation of a "global new deal" capable of raising investment levels and channelling resources towards lowering the carbon content of economic activity and building resilience with respect to unavoidable climate changes.

This is one of the central messages highlighted by the UN Department of Economic and Social Affairs (UN-DESA) in its World Economic and Social Survey 2009 released Tuesday.

The findings of the Survey were discussed Tuesday at a media briefing on the sidelines of the third World Climate Conference hosted by the World Meteorological Organization.

Introducing the Survey at the briefing, Richard Kozul-Wright, Chief of the Development Strategy and Policy Analysis Unit of UN-DESA, highlighted some key messages from the UN report. He said that lower greenhouse gas (GHG) emissions were necessary and at the same time, rising income levels were also necessary to meet the development goals.

Kozul-Wright said that the only way to achieve the transition was through a low-emissions, high-growth development pathway. History has taught us that separately these challenges are very difficult, but together they involve huge adjustments. If we want low-emissions, high-growth pathways, developing countries cannot be left alone to do it by themselves, he said.

Central to this transition to a low-emissions, high-growth pathway is the transformation of energy services. But there is a series of very large inter-related investments that are needed to shift to this pathway. The focus of the report is very much on the need for investment-led development strategies. In making this transition, a strong argument is made that you cannot rely on markets to achieve this and that a revitalised public policy agenda is essential in the developed and developing countries, Kozul-Wright said.

The core of this public policy agenda is a global agenda for mitigation and adaptation, substantial financial transfer to developing countries, new mechanisms for developing and transferring appropriate technologies, and much more integrated strategies developed at the national level involving a very different type of policy regime that many developing countries have seen in the last two decades.

According to Kozul-Wright, this argument is in line with arguments for a Global Green New Deal, a term which UN-DESA endorses, but which has not received adequate elaboration from the international community. And a much more concerted leadership role, particularly at the multilateral level, has to be central to any meaningful notion of the Global Green New Deal.

Two big areas need to be closed to meet this transition. Firstly, the gap between science and policy remains huge and needs to be closed. Scientists say that we cannot afford ad-hoc incremental responses to the challenge, and that the big damages from climate change will occur in developing countries. Chances are that a warming world will be much more unequal and unjust.

Conventional economic theory that we know is very bad at handling two things - big adjustments and addressing equality issues, said Kozul-Wright. Unfortunately, conventional policy wisdom still drives policy thinking, particularly in the advanced countries. There needs to be a serious break with conventional economic thinking if the low-emissions, high-growth development pathway is to be established.

Secondly, the other gap that needs to be closed quickly is between science and politics. Rich countries have not shown the leadership required of them given the kind of challenge that defines climate change. Leadership by rich countries, both by cutting their own emissions and providing necessary finance, needs to be shown very quickly if this combined challenge is to be met.

Kozul-Wright told journalists that the kinds of adjustments required have been seriously underestimated largely by the advanced countries. And the demands made of developing countries has been larger than is suggested. To make the transition and to have a fairer climate politics, we need to see a shift from an emissions focus to a sustainable development focus, and that is true of both North and South. Sustainability has different meanings in advanced countries - which is full employment and energy security - than for poor countries, which is catch-up growth and energy access.

Kozul Wright said that developing countries emulate the growth path of the developed countries, the carbon-fuel path for energy. It is known that the kind of growth that has emerged from that pathway is uneven and has left the world with massive social and income inequalities. There is no way that the international community can think about freezing those inequities and inequalities whilst it goes about solving the climate challenge. The climate challenge can only be solved at the same time as the inequities in the global economy are reduced and addressed. And that is what common but differentiated responsibility mean.

The UN official expressed unhappiness at the shift from common but differentiated responsibilities to the focus on big emitters, which seems to be characterising much of the current discussion. The more developed countries do to cut their own emissions and provide the necessary support to developing countries, the more developing countries will do to meet the climate challenge, Kozul-Wright said. This recognises that common but differentiated responsibilities are key to any sort of trust-building that has to underpin serious climate negotiations.

Kozul-Wright reiterated that the key to marrying the goals of climate and development is an investment-led low-emissions, high-growth strategy. Long-term planning and investment, sooner rather than later, is key to breaking with business-as-usual that seems to guarantee the worsening climate situation. While noting that other factors need to be considered, central to any meaningful investment strategy is the transformation of energy services linked to substantial reductions in carbon emissions, he said.

The relevant technologies exist for making that kind of transition. But the costs of those technologies are significant and high. And progress in adapting these technologies requires a very different policy framework than many developing countries have assumed over the course of the last few decades. Tight macro-economic policies, liberalisation along with stricter intellectual property rights (IPRs) are not the kind of framework we see as necessary to generate the low-emissions, high-growth strategies, he added.

The report, Kozul-Wright said, insists that size matters when it comes to investment-led strategies. It argues for a big push, sooner rather than later, for up-front investments. This is not only to avoid carbon lock-in, but many investments, particularly in energy, have long gestation periods and a fairly significant investment lifetime.

The investment path requires new regulations, a much more significant role for public investment in the initial stages and it will require a significantly reformed financial sector to shift away from short-term decision-making to more long-term strategic thinking about how investment links to wider economic goals and demands.

Key to that kind of transition will be fairly massive international financial transfers to fund that kind of strategy. The figure given in the report is a ball park of one percent of world GDP, currently $500 to $600 billion annually and is what developing countries will need in terms of international support to make the shift sooner rather than later.

The report considers whether financing requires new mechanisms or can be done through existing ones. On that, we are agnostic, Kozul-Wright said, but we do recognize that existing multilateral financing institutions have failed in many respects on the development financing front. And if they are to achieve development and climate goals, they will have to go through significant changes and reforms to be much more effective in providing financing to the investments identified.

There is a difference between the UN approach and the World Bank, and other multilateral financial institutions, which we think are far too heavily wedded to market-friendly approaches to the climate challenge. The need is for a shift to some sort of alternative policy and institutional framework, said the UN official.

In a nutshell, the report argues on the need for a shift to a truly global investment regime, the heart of a Global Green New Deal, to tackle the combined challenges of climate and development. A globally funded investment programme would be the way to meet equity concerns, and to ensure that catch-up growth and poverty reduction remain the key objectives of developing countries, whilst they begin the process of cutting their emissions. We are talking about a new Marshall Plan to tackle climate change, Kozul-Wright said.

The investment should be targeted at renewables, energy efficiency, transportation and forest management. It will also require supplemental support in terms of global research and development programmes, technical assistance to ensure that new technologies are appropriately adapted to developing country situations and a much more flexible approach to IPRs than has so far been on the table.

Also speaking at the media briefing, Martin Khor, Executive Director of the South Centre, underscored six key points.

First, the report reaffirms what everyone now knows is a very serious problem, that is, climate change. Secondly, the solution to the climate problem is difficult and complex because it has to be fair, in a global way, between the developed and developing countries in terms of the actions they have to take. Therefore, it must combine the environmental aspect of controlling emissions with the developmental aspect of developing countries wanting to continue their economic development, although in a different way. The development pathway has to be much less polluting.

Thirdly, the report makes the point with good (supporting) data that developing countries have mainly not been the cause of the crisis, because most of the emissions have been made by the developed countries. Developing countries are the victims of the climate crisis, but they should not be the new victims of a development crisis which is caused either by climate or by wrong solutions to the climate crisis.

Fourthly, said Khor, we have a challenge for the Copenhagen deal of how to allow developing countries to combine the aspiration of economic growth of 6 to 7 percent per year, control emissions and to allocate part of their GNP to adaptation, to counter the effects of climate change. This is the challenge and if we do not meet the challenge in terms of the deal, then there will either be no deal or an unfair deal that we have to live with for years to come.

Fifthly, said Khor, the report does pinpoint that if we are to make this deal of still-growing GNP and carbon emissions going down for developing countries, there will be this huge gap to be filled by finance and technology transfer. He referred to some costs indicated in the report. The annual cost required for the world is $1.2 trillion and for developing countries, about $1 trillion for mitigation to reduce emissions. +