G20 Background Policy Brief

March 2012

Green Growth and Climate Change

Please address comments and questions to: John Ruthrauff Director of International Advocacy InterAction jruthrauff@interaction.org 1.202.552.6523 Sue Pleming Senior Director, Communications InterAction spleming@interaction.org 1.202.341.6523

The G20 has a key role to play in reaching political agreement on climate change and on how to scale-up financing for developing countries to address climate change. A G20 agreement on climate change would help to drive negotiations under a number of multilateral bodies, including the UN Framework Convention on Climate Change (UNFCCC), the International Maritime Organization (IMO), and the International Civil Aviation Organization (ICAO). According to estimates, addressing climate change will require several hundreds of billions of dollars each year. In 2009, developed country leaders agreed to jointly mobilize $100 billion per year in public and private finance to help developing countries fight climate change. Sufficient public financing will be essential to ensure that funding reaches poor countries and communities where there is little incentive for private investment. Additionally, public funding can catalyze financing actions that help developing countries prepare for the impact of climate change and actions that will reduce greenhouse gas emissions as well as leveraging private sector investments. Governments must ensure sufficient public financing starting in 2013, when the "fast-start finance" period agreed upon in 2009 ends: scaling up tenfold from $10 billion in public finance per year to $100 billion per year by 2020. Removing fossil fuel subsidies, as agreed to by the G20 in 2010, will help to free up resources governments can redirect to urgent needs such as food security, climate action and poverty alleviation. Given the challenges of increasing finance from traditional government sources, especially in the context of the global economic crisis, other innovative sources of funding must also be quickly agreed to and implemented.

Comments and questions on specific recommendations should be addressed to the following individual(s): Keya Chatterjee Director, International Climate Negotiations World Wildlife Fund Keya.Chatterjee@wwfus.org 1.202.495.4742

Summary of Recommendations
To this end, the leaders communiqu should include language that: 1. Supports limiting the increase of global average temperatures to as far as possible below 2 degrees C, and ensuring that by 2050 emissions are at least 80 percent below 1990 levels. 2. Calls for the ICAO (International Civil Aviation Organization) and IMO (International Marine Organization) to develop revenue-raising, market-based mechanisms (emissions trading systems or levies) for the international maritime and aviation sectors by the end of 2013, with revenues used for international climate finance; and supports ensuring "no net incidence" (i.e., burden) on developing countries economies.

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3. Commits G20 members to concrete steps to create and implement a global financial transaction tax that would help fund a number of global priorities, including climate change and poverty alleviation programs in the Global South. 4. Commits G20 members to develop action plans with clear timelines and transparent reporting on implementation of their commitments to reform fossil fuel subsidies. 5. Revises the G20 criteria for selecting regional projects proposed by the G20 High Level Panel on Infrastructure to emphasize environmental and social sustainability as threshold criteria, recognizing that infrastructure operations have profound social implications, including genderdifferentiated impacts , and lock in patterns of carbon emissions for generations.
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Raising Finance and Reducing Greenhouse Gas Pollution from the Aviation and Shipping Sectors The international aviation and shipping sectors are major, fast-growing and unregulated sources of greenhouse gas (GHG) emissions. Measures to price these emissions could produce mitigation benefits while raising significant revenues. Because these emissions are not formally attributed to any country, there is a strong case that any revenues should be used for international public good purposes such as supporting developing countries to adapt to climate impacts and reduce greenhouse gas emissions. There is a growing recognition of the contribution these sectors could make in helping developed countries meet the goal agreed in the Copenhagen Accord and Cancun Agreements of mobilizing $100 billion per year by 2020 to support adaptation and mitigation activities in developing countries. Last year, the G20 asked the World Bank and International Monetary Fund (IMF) to examine the feasibility of raising climate finance from such measures, resulting in a report that details the revenue that could be 2 raised from these sectors. Bill Gates, in his personal capacity, also proposed raising revenue from these 3 sectors at the G20. Both the IMF and Gates reported noted that levies in the shipping and aviation industries could both reduce emissions and generate up to $37 4 billion each year. The International Chamber of Shipping has also expressed support for a mechanism that would raise resources for climate change. Previously, the UN Secretary Generals High-Level Advisory Group on Climate Finance (AGF) found that up to $18 billion per year could be raised from the shipping industry and up to $6 billion a year from the aviation industry, assuming a carbon price of $25/tCO2. In 2011, the G20 asked finance ministers to report on progress made on climate finance at the G20 in 2012, squarely putting climate finance back on the G20 agenda. Financial Transaction Tax A financial transaction taxa modest tax of that could be levied on all financial market transactions, including stocks, 2

Background on Climate Finance

Consistent and vigorous enforcement of foreign bribery International investments to deal with the increasing challenges of climate change and extreme weather variability are essential to help meet the basic needs of people in extreme poverty and protect critical forest areas and biodiversity. These investments promote global security and minimize instability, especially in the most vulnerable countries. They can reduce costs by mitigating the need for disaster relief and avoiding costly interventions. Such investments also enhance international economic opportunities for US businesses and workers, address global hunger and health challenges, as well as protect decades of US investments in global development and conservation. These funds should be new and additional, and should complement strong overall conservation and development assistance and must not lead to cuts in longstanding food security, education, health, biodiversity and water programs. While the recent economic crisis and large government deficit are important issues that need to be solved, investing in adaptation, clean energy, and forest protection can contribute to their solutions.

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bonds, foreign exchange, and derivatives, is backed by a number of G20 leaders, most notably German Chancellor Angela Merkel and French President Nicolas Sarkozy According to the Austrian Institute for Economic Research, a global financial transaction tax of 0.1% could generate between US$410 billion and US$1.06 trillion per year, a portion of which could go to help developing countries confront climate change. A FTT serves not only to generate significant new finance, it also helps reduce risky financial transactions which have a destabilizing effect on the global economy. The International Monetary Fund (IMF) has found that implementing and administering a financial transaction tax is feasible, and in fact many G20 countries have some 5 form of an FTT. The administrative costs of collecting a financial transactions tax could be relatively low. While there was no agreement at the 2011 G20 to implement a FTT, the 2011 communiqu acknowledged the initiatives in some of our countries to tax the financial sector for various purposes, including a financial transaction tax, inter 6 alia to support development. While global implementation of a FTT would be ideal, it is not necessary. In fact, a European Parliament Resolution in favor of an FTT noted that the EU should promote the introduction of an FTT at global level; failing which, the EU should implement an FTT at European level as a first 7 step. Green Growth and Fossil Fuel Subsidy Reform The 2008 financial crisis and the continuing fallout has demonstrated that inadequate regulation and the misallocation of capital can have devastating impacts on human enterprise and well-being. Yet today, we are treating the worlds finite natural capital in a similarly dangerous way, with significant ramifications not only for global supply chains but also for food, water and energy security as resources are depleted or polluted. The present approach threatens to accelerate a global environmental, economic and social crisis, instead of seizing upon the immense potential of green, sustainable growth and development.

The G20 can respond positively by supporting the transition to a green economy, building on the work of the UN Conference on Sustainable Development scheduled for June 20-22 2012 in Rio de Janeiro. Above all, this implies achieving long-term food, water and energy security for the world's people. Ways of doing this include: 1. Revising the G20 criteria for selecting regional projects proposed by the G20 High Level Panel on Infrastructure to emphasize environmental and social sustainability as threshold criteria, recognizing that infrastructure operations have profound social implications, including gender-differentiated impacts , and lock in patterns of carbon emissions for generations. 2. Moving toward a standard set of metrics to measure environmental performance alongside economic growth (GDP); this can notably be done by reinvigorating the UNs System of Integrated Environmental Accounting (SEEA) and the World Banks Global Partnership for Wealth Accounting and the Valuation of Ecosystem Services (WAVES); Involving Ministries of Economy/Finance in the Rio+20 process and Summit in advance of the G20 meeting in Mexico.
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Fossil fuel subsidies reform and clean energy access Fossil fuel subsidies are very costly; they significantly increase global and local pollution; and they are socially regressive as they benefit the wealthiest most. Fossil-fuel subsidies reform can free up valuable fiscal resources that can be redirected to fund sustainable development, support clean energy access for low-income households, reduce greenhouse gas emissions and trigger significant investments in renewable energy. At the G2o Summit in Pittsburgh, Heads of States committed to reform fossil fuel subsidies, a significant positive step. In spite of this bold pledge, however, little has yet been implemented and country reports have been difficult to compare in the absence of an international benchmark and definition of what actually constitutes a fossil fuel subsidy. We urge the G20 to further implement their commitments to reform fossil fuel subsidies, notably by: 3

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Ensuring that all fossil fuel subsidies not narrowly targeted to promote energy access for the poorest are phased out as soon as possible and redirected to international climate finance. This phasing out must begin with production subsidies in the developed countries which should be eliminated immediately.

While the statement is not designed to be a consensus position of the contributors, it has been endorsed by InterAction leadership. The recommendations were developed by a team of task force members who are listed below. ActionAid Heinrich Boell FoundationNorth America InterAction Oxfam America World Wildlife Fund

End Notes
1 Gender-differentiated impacts: the impact of differentiated rights, roles and responsibilities of men and women. 2 http://www.g20-g8.com/g8g20/root/bank_objects/G20_Climate_Finance_report.pdf 3 http://www.thegatesnotes.com/Topics/Development/G20-ReportInnovation-with-Impact/ 4 http://www.reuters.com/article/2011/11/29/climate-durban-shippingidUSL5E7MS4M420111129 5 International Monetary Fund, Taxing Financial Transactions: Issues and Evidence, Chapter 8 of Financial Sector Taxation: The IMF's Report to the G-20 and Background Material, September 2010. http://www.imf.org/external/np/seminars/eng/2010/paris/pdf/090110.pdf 6 Cannes Summit Final Declaration. para. 82. http://www.g20.utoronto.ca/2011/2011-cannes-declaration-111104en.html 7 European Parliament resolution of 8 March 2011 on innovative financing at global and European level. http://www.europarl.europa.eu/sides/getDoc.do?pubRef=//EP//TEXT+TA+P7-TA-2011-0080+0+DOC+XML+V0//EN 8 Gender-differentiated impacts: the impact of differentiated rights, roles and responsibilities of men and women.