There's another financial crisis on the horizon -- the climate financial crisis. Working towards the global meeting in Copenhagen this December, the UN's climate negotiations are teetering on the brink of failure. The elephant in the room of these negotiations is how to pay for a global agreement -- and who will pick up the tab.
If the administration does not get ahead of Congress and commit now to financing a global deal on climate change, negotiations will fail. And the cost of inaction and certain failure will be much higher than the cost of action. Once a tipping point is reached, we will face a human and financial catastrophe that will make this recession seem like a golden age of prosperity. And unlike our economy, once the damage is done, the climate will not rebound with a bailout package.
The challenge boils down to this: the developed world -- responsible for today's crisis -- must help pay the costs for the developing world to do the right thing. Those catching up to us -- China and India -- will have to participate too, but developed countries need to lead. The good news is that for $150 billion, the world can get far ahead of the problem. While the long terms costs are likely to be higher, this investment now will set the world on the right course.
At the September G-20 meeting in Pittsburgh, leaders recognized the need to get the financing right by directing their Finance Ministers to report back at the next meeting in November with a range of possible options for climate change financing. They should recommend a global target for climate finance of at least $150 billion annually by 2020 - and commit the United States to funding 30% of that target, or $50 billion, through public financing. Roughly a third of this would be used to help the developing world adapt to the current effects of climate change, another third for helping poor nations adopt clean technologies, and the remainder for other mitigation objectives, such as energy efficiency and forest protection.
To be sure, in the wake of the current financial crisis, such funding will be politically difficult to obtain. Yet, we managed to find $15 trillion for bank bailouts and stimulus plans, $1.3 trillion in tax cuts, and one trillion dollars for the wars in Iraq and Afghanistan. The investment in saving our planet is no less urgent a challenge. The risks to our national security are real, including natural disasters, political upheaval, and further instability in states that could harbor the next Osama Bin Laden. And again, there is some good news. It costs billions, not trillions, and possible sources of public financing already exist, including revenues from the auctioning of allowances under cap-and-trade mechanisms, current climate and energy legislation, bunker fuel mechanisms, and international carbon and currency transaction levies.
But perhaps the most cost-effective way to help the world adopt clean energy and adapt to the effects of climate change is to stop propping up the very industry we should move away from -- fossil fuels. The world's richest G20 economies spend an estimated $300 billion a year to subsidize the industry most responsible for global emissions. In other words -- we have the money, we're just using it the wrong way. Re-directing this money would generate double the amount needed for climate financing -- and it wouldn't cost us a dime. At the September G20 summit in Pittsburgh, leaders asked for a plan to phase out those subsidies, but they won't consider it until June of 2010.
That is too leisurely a pace.
President Obama should press for a plan to be in place before the Copenhagen meeting this December -- preferably by the end of the G20's Finance Ministers and Central Bank Governors Meeting on November 6 and 7. In the meantime, he should move to end our own subsidies and instruct the U.S. agencies that currently provide fossil fuel subsidies internationally to do so, including the Overseas Private Investment Corporation, the U.S. Export Import Bank, and the Treasury Department which works through the World Bank. According to the Environmental Law Institute, this step alone would save us $72 billion, well more than what the United States needs to commit for its fair share of climate financing. Such transfers could break a major deadlock in the negotiations, and bring the developing world on board.
These are all ways to pay for a climate deal now - and at a much lower cost than doing it later. And such a move may be the only way to salvage the faltering Copenhagen negotiations. Should President Obama take the lead, the world will follow. And Congress just might as well.
Nancy Soderberg is a former US Ambassador to the United Nations and President of the Connect U.S. Fund, a consortium of six U.S. foundations promoting key foreign policy goals.
Francesco Femia is a Program Officer at the Connect U.S. Fund, where he focuses on climate and development issues.