Mobilising development and climate finance requires stronger green politics

Europe's World

Climate & Energy

Picture of Erik Solheim
Erik Solheim

UN Under Secretary-General & Executive Director of UN Environment

Smarter and more catalytic development assistance can help mobilise the trillions of dollars required for poverty reduction and sustainable development, according to the OECD’s new Development Co-operation Report 2014. So can slashing subsidies and raising taxes on fossil fuels, with visionary and determined national leadership, as we see in some countries.

Development and climate finance policies are inseparable in real life. What is good for the environment is good for development. Some 1.3bn people in developing countries continue to have no access to electricity at all. Insufficient electricity generation in Nigeria adds 40% to the cost of goods and services. Nigerian economic growth would jump from 7% to over 10% annually with better electricity supplies.  Any green electricity production in developing countries will add to existing levels of energy and be good for development. Climate mitigation programmes are also good for development. Three quarters of all coral reefs are threatened by pollution and ocean acidification caused by climate change. Reefs are invaluable ecosystems in themselves and incredibly beautiful, but they also provide thirty billion dollars’ worth of fish and tourism activities. Reefs also reduce wave energy by 97% and protect over a hundred million coastal dwelling people in Indonesia, India and the Philippines from rising sea levels and more extreme weather.

Many nations spend more on fossil fuel subsidies than their combined investment into health and education sector

Over past decades extreme poverty has been halved and global development has been an unparalleled success story in human history. National leaders choosing the right policies combined with increased and better private investments have made this possible. Such leadership and sufficient resource mobilisation is now needed to fight climate change and support sustainable development.

Sustainable development and green growth will require a greater determination in national leadership on these issues. Revolutions can start from below, there is no need to wait for a global agreement before action is taken at a national level. Nicaragua has decided to shift its entire production of electricity from fossil fuels to renewable energy. China is a global leader in green energy investment such as solar and wind power, and has set up regional carbon trading schemes. Ethiopia is determined to become a middle income country without increasing carbon emissions. Brazil has reduced deforestation by 80% while reducing poverty and achieving rapid growth. Morocco and the United Arab Emirates each pilot renewable energy schemes. We should learn from such successes and invest more public and private finances into ideas that have been demonstrated to work effectively.

Cutting the near $1,900bn spent on tax breaks and subsidies for fossil fuels every year would reduce carbon emissions and mobilise resources for health, education and green energy. An approximate $550bn is spent annually on direct fossil fuel subsidies, most of this sum by developing countries. Many nations spend more on fossil fuel subsidies than their combined investment into health and education sectors. This drains government resources while benefiting richer people with luxury cars and houses. Most leaders would prefer a change, but it is never popular when governments increase prices on petrol without offering anything in return. Development assistance can help governments do what is best for people and the environment. A frontloading finance mechanism would allow developing countries to set up conditional cash transfer programs for the poor and provide better public services before they cut the often popular subsidies on fuels.

Leadership and sufficient resource mobilisation is now needed to fight climate change and support sustainable development

Eventually, oil should be taxed to reduce demand and raise revenues for green development and public services. This September remarkable sign of leadership and solidarity was displayed by President of Denis Sassou Nguesso of the Republic of the Congo in announcing a 10 cent per barrel of oil tax to fight childhood nutrition across the world as part of a Unitaid financing scheme. This is hopefully an example other African nations will follow.  An estimated $600bn could potentially be mobilised by other innovative mechanisms such as carbon taxes and credits given to countries for reducing deforestation.

Smarter private investments will be necessary to green our energy and agricultural systems. Developing countries already receive more than 50% of all foreign direct investments, and the private sector is now becoming a green champion. The Rockefeller Foundation recently joined a coalition of investment funds determined to divest in fossil fuel companies and in preference to clean energy. Pension funds and sovereign wealth funds are sitting on $83,000bn in OECD countries alone but less than 1% of those assets are going to developing infrastructure. An enormous amount of money would be mobilised if funds in OECD countries also divested from fossil fuels and invested one more percent in green infrastructure in developing countries. Development assistance can help encourage further investments by using development assistance to alleviate risk, support financing vehicles and improve regulatory frameworks in developing countries.

Development assistance has been a huge success when partnered with determined leadership and smarter investment. But more and better financing for sustainable development is needed to lift people out of poverty and support the growth of green policies. Effective leadership is emerging on creating greener budgets, and thousands of billions of dollars remain available to be mobilised. Let us just do it.

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