Aid, Environment, and Climate Change

ReCom Position Paper

Finn TarpUNU-WIDER

Channing ArndtCopenhagen University

The AnthropoceneExample 1: Global Mean Surface Temperature Anomaly

Environment and Development:Defining Challenges of the 21st Century

Environment:

• Global warming,• Fish stock declines,• Biodiversity and mass

extinctions,• Deforestation, and• Land degradation.

Development:

• 1.3 billion absolutely poor people on the globe.

• 36 low income countries

• 47 fragile states

Climate change is of potentially transcendent importance.

The Dawn of Foreign Assistance(living conditions in the 1960s)

• Per capita income in Asia of about $150 (2000 prices).

• Likely a majority of the world’s population absolutely poor.

• Life expectancy in Africa and Asia of about 45 years.• Infant mortality rates in Africa and Asia of about

140 deaths per 1000 births.• Primary school enrollment rate in sub-Saharan

Africa of about 33%.

Growth in Per Capita GDP

Poverty Headcount(USD 1.25 per day)

Infant Mortality Rate

Other Observations

• Substantial improvements in life expectancy and educational attainment.

• Population growth in developing countries dropping from 2.4% to about 1.3% today.

• Malthusian calculus on track to being defused.

• ReCom research shows aid materially contributed to these gains.

• The aid system confronts the issues of today with a substantial wealth of experience and a track record of working towards the resolution of complex problems.

The New Faces of the Development Challenge

• To the extent the aid system was designed at all, it was designed to improve the livelihoods of poor people in poor countries.

• But,– The number of countries categorized as low income

has fallen from 63 in 2000 to 36 today.– Three out of four absolutely poor people now live in

middle income countries.– More people live in states characterized as fragile

than in states characterized as low income.

Environmental Challenges Overlay These Development Challenges

Environmental Challenges Overlay These Development Challenges

Greenhouse gas emissions in CO2 equivalent per year by region

Environment and Development

• Inter-locking issues (focus on climate change)– Developing countries (mostly middle income

countries) are home to most poor people.– Developing countries (mostly middle income

countries) currently account for the majority of emissions and the very large majority of emissions growth.

– Developing countries most vulnerable to warming.

• Natural for development funds and institutions to engage.

Responses of the Aid System

1. Shift the composition aid2. Launch new institutional initiatives3. Reform existing institutions

At the same time, much emphasis has been placed on appropriate modalities.

We consider each of these four in turn.

Response of the Aid System (1)

Ratio of dirty to environmental aid flows

Adaptation to Climate ChangeUNU-WIDER Results• Climate change is unlikely to preclude growth and

development prospects prior to 2040.• Uncertainties bedevil adaptation and associated aid policies

(drier or wetter future?).• General emphasis on flexibility and robust policies that

provide benefits across a broad array of outcomes– Human capital– Functional institutions.

• Specific emphasis on agricultural research, regional river basin management, and vulnerability of infrastructure to extreme events.

• Notable confluence between the adaptation agenda and the development agenda.

Response of the Aid System (2)

• New Institutional Initiatives:– Reducing Emissions from Deforestation and Forest

Degradation (REDD),– Clean Development Mechanism (CDM),– Global Environment Facility (GEF), and– Green Climate Fund (GCF).

• These initiatives currently constitute a substantial share of the global response to climate change, particularly with respect to mitigation

Assessment of Initiatives

• To a large degree, all four of the initiatives are predicated on the existence of active carbon markets (GHG pricing).

• This public policy basis for emissions reductions is largely absent. Consequently,– International efforts to meet the mitigation challenge have

fallen short by a considerable margin.– It is difficult to evaluate whether these initiatives could help

catalyse a process of transformation at the scale required while leaving space for achievement of development goals.

• With appropriate public policies in place, the fundamentals behind these four initiatives appear to be sound.

Greenhouse gas emissions in CO2 equivalent per year by region.

Response of the Aid System (3)

Reforms of existing institutions

• Focus here on agriculture. Agriculture is:– critical for growth and poverty reduction; – impacted by climate change; – potentially a source of low emissions energy via biofuels; – a significant source of emissions through inputs, production practices and land

use change; and – a potential emissions sink through reforestation and sustainable land

management.

• Developing country agriculture is critical globally– Much greater underlying capacity to expand production.– Growth in population and diet upgrading, and hence growth in demand,

centred almost exclusively in developing countries.

Reforming Agricultural Institutions

• Important contributions, such as the Green Revolution in Asia, have been made.

• Nevertheless, there are strong needs for reform. For example, an independent evaluation of FAO stated:

The Organization is today in a financial and programme crisis that imperils the Organization’s future in delivering essential services to the world.

• There is need for institutional re-think and reconfiguration in agriculture.

Aid Modalities

• In low income countries, aid is often relatively large and local capacity weak.– Aid ideally promotes integration via, for example, programme and

budget support.

• In middle income countries, aid is relatively small and local capacity is better.– Aid roles in “soft assistance” such as technology development and

dissemination and in leveraging private and domestic public investment should be more pronounced.

– The potential returns to these forms of assistance may be very high.

– The political will to supply aid to middle income countries may be low.

Lessons

1. Continued assistance to poor countries is necessary, recognizing that these countries are likely to be more difficult cases.

2. The attention the aid system devotes to middle-income countries should increase due to:

• the concentration of absolutely poor people in middle-income countries and

• the key role that middle-income countries must play in combating global environmental problems

This assistance should mainly take the form of demand driven “soft assistance” that enhances local capacities.

Lessons (continued)

3. The role of aid and aid institutions in the provision of global/regional public goods should be maintained or enhanced.

• Information• Agriculture• Water and transboundary river basins• Technology• Research

4. Prepare to assist with the transformations required to confront global environmental issues while providing inputs for the development of appropriate public policies at global and national levels

• The fundamental ideas behind REDD, CDM, GEF, and GCM remain valid and appealing.

Lessons (continued)

5. Independent tracking of emissions at the country level.

• Global greenhouse gas emissions should peak at or before 2030 and then decline thereafter.

• Difficult to achieve without adequate monitoring.• This is an auditing function best placed in a newly

created, specialized, independent and technically competent institution.

Getting the Level of Ambition Right

• Aid has helped to improve living conditions of billions of people, but, looking forward: Can aid save the planet?

• NO. However, past and present experience indicates that aid can do a lot to continue to improve living conditions and to confront environmental challenges.

• This is especially true with:• Continued reconfiguration of the aid system to meet 21st

century challenges• Appropriate global public policies• Supportive national public policies