As the G-20 Summit approaches, Michele de Nevers is focused below on climate finance, Todd Moss has three hopes for energy access, and Liliana Rojas-Suarez shares how the G-20 could help expand financial access.
Under the rubric of “buttressing sustainability,” the Turkish presidency has placed development at the center of its G-20 agenda, with a special focus on climate change finance. As G-20 leaders assemble this weekend, with the UN climate summit in Paris just two weeks later, the conversation will undoubtedly focus on how rich countries can make good on their 2009 Copenhagen commitment to mobilize $100 billion for developing countries by 2020.
How can G-20 leaders make the Paris summit a success?
Here are three suggestions:
1. Don’t treat climate finance like it’s aid
Climate finance is not a charitable transfer. Funding for mitigation, to help developing countries invest in low-carbon growth that will contain future carbon emissions, is a global public good. And funding for adaptation, to ensure climate-resilient growth, should be seen as a transfer from richer countries to poorer countries to compensate them for the disproportionate costs they will incur. Most international climate finance may come from public aid budgets, but it is not aid.
There is, however, a lot to learn from aid. G-20 leaders should insist that their climate negotiators in Paris heed the hard lessons learned over several decades about what makes traditional aid more effective. This means channeling climate finance through recipient countries’ own budgets and systems; making recipient governments primarily accountable to their own citizens for measured results (and not just to donors for tracking money); ensuring full transparency to citizens in donor and recipient countries, including timely publication of disbursements and systematic reporting of results; and providing simple approaches to reduce the high transactions costs and the lack of predictability associated with traditional aid programs.
2. Provide adequate funding to adaptation finance
In meeting the 2009 pledge that rich countries made in Copenhagen to mobilize $100 billion per year in climate finance for developing countries, G-20 leaders should make a special commitment to ensure that adequate adaptation finance is in place. The estimated additional economic cost to developing countries to adapt to climate change is likely to be less than the massive (but highly uncertain) estimated cost of mitigation, but meeting them is no less necessary — the deadly impacts of climate change will affect poor communities and poor countries, who are least equipped to deal with them, worst.
The Green Climate Fund has already committed to put 50 percent of its resources toward adaptation. This is a good start. If adaptation transfers are to be effective and sustained at the high levels over the next several decades, the habits, culture, and practices of traditional aid programs need to be set aside (see number 1). A policy paper on adaptation finance by CGD president Nancy Birdsall and me explains how.
3. Free the Green Climate Fund (and implement performance payments)
G-20 countries should free the Green Climate Fund from the strictures that hamper the effectiveness of the multilateral development banks (MDBs). Leaders should instruct their representatives on the GCF board to avoid the traps of risk aversion, cumbersome procedures, and micromanagement that constrain the effectiveness of many of the MDBs. MDB practices, the legacies of 60 years of policy evolution, accrete like barnacles and are hard to remove. The GCF, being new, has a chance to rethink them from scratch. The GCF must move quickly to help developing countries avoid locking in high-carbon growth paths. G-20 leaders should therefore encourage the GCF to take a higher-risk, higher-reward approach relative to MDBs.
G-20 leaders should also encourage their representatives to the GCF to support the use of performance payments that can provide incentives to fund mitigation and pay for verified results, particularly for reduced deforestation. Halting forest clearing should be a key ingredient in a global climate mitigation strategy; without it, tropical deforestation will release 169 billion tons of carbon dioxide to the atmosphere from 2016 to 2050. That’s one-sixth of the remaining carbon that can be emitted before Earth’s temperature is likely to rise more than 2°C.
Performance payments to curb deforestation can complement the traditional financing instruments that already support capacity building, institutional development, and governance reforms in the forestry sector. The GCF has a unique opportunity to make its grants and loans highly effective by leaving the financing of “readiness” investments to others and just paying for verified results. Performance agreements can create an incentive that creates demand for capacity in, for instance, measurement, reporting and verification of actual forest cover. Performance agreements enhance country ownership by allowing recipient countries to devise their own strategies and policies to achieve results, rather than negotiating detailed plans, strategies and program designs with funders (again, see number 1 above). Early evidence from the few countries where such programs are in place, summarized in a recent CGD working group report, indicates that performance agreements can bolster national political commitment by signaling international support.
As G-20 leaders head to the shores of Antalya, they will face competing demands to focus their short time together on a range of pressing issues. They should be sure that development and climate finance stay at the top of the agenda.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.