How Foreign Climate Aid Benefits the United States

The Environmental and Energy Study Institute (EESI) and the Henry M. Jackson Foundation held a briefing discussing benefits to the United States from deploying foreign aid to vulnerable regions to help them become more resilient to climate change impacts. The briefing also explored the inner workings of the Green Climate Fund (GCF), a multi-lateral effort to mobilize $100 billion in public and private financing for adaptation and mitigation projects in developing nations.

Financial assistance for vulnerable countries is one of the most powerful tools available to the international community in reducing the risks posed by severe weather disruptions connected to drought, flooding, and food insecurity. Given the global role of the United States in delivering humanitarian aid and responding to crises, equipping countries to be more self-sufficient and resilient in the face of the growing pressures from climate change would save taxpayer dollars, while strengthening America's diplomatic standing and national security. The United States has pledged $3 billion to the GCF, and has delivered a third of that total to date.

 

Highlights

 

Dr. James Bond, former Senior Advisor to the Executive Director, Green Climate Fund

• Dr. Bond made the case for climate finance, while describing the challenges and solutions at work in this sector today. During his presentation, he shared that the developing world will need $430-450 billion in annual financing to meet its climate adaptation and mitigation goals. Currently, just 8-12 percent of that total is being financed (the world as a whole needs $700 billion a year, with about 59 percent of that total being met). Furthermore, 93 percent of those funds are put towards mitigation measures, underscoring the need for a more balanced approach to include adaptation.
• Developed countries have currently pledged $10.3 billion to the Green Climate Fund (GCF). That may seem little compared to the needs of developing countries, but the Fund hopes to leverage its assets by a factor of ten with private financing.
• Dr. Bond also called for the increased engagement of the private sector as a funder and investor. Part of the GCF's role is to change the behaviors of private investors by lessening the risk of projects located in developing and vulnerable countries. The high risk profile of the investments in question tends to be a greater obstacle than any lack of money. Oftentimes, there is merely a perceived risk by potential investors, but they lack the credible information to tell the difference. Dr. Bond stated the GCF has the power to fix these market failures and provide long-term financing to combat climate change and promote clean energy.
• The GCF has one of the deepest sets of financial mechanisms for working with its diverse partners of any international fund, making it highly versatile and effective. The fund's direct funding model proved to be the most practical for dealing with international externalities and far-flung projects. The GCF is designed to encourage developing economies to make smart investments that will feed into climate mitigation and adaptation outcomes and benefits.
• Dr. Bond insisted that staying involved in climate finance is good business for the United States for two reasons. First, the global climate problem cannot be solved without global cooperation: if the United States makes an effort to help developing countries, it will encourage them to make an effort to cut their emissions. Addressing climate change will reduce costly climate impacts for all. Second, the Green Climate Fund is helping develop a new asset class, climate-friendly infrastructure in emerging economies. If the United States wants to be part of this new business, it needs a seat at the table—and funding the GCF will provide that seat.

 

Anton Hufnagl, Environmental and Urban Affairs Officer, Embassy of Germany

• Hufnagl covered Germany's domestic and international climate efforts and where they fit into broader climate aid trends. A core policy for Germany is a national decarbonization plan titled the "Energiewende," which has led them to become the first major industrialized nation to achieve renewable energy development on such a scale. However, Mr. Hufnagl emphasized that despite these successes, no country can solve climate change on its own, and international collaboration is essential.
• Germany is pursuing its own mid-century decarbonization plan as a way to reduce greenhouse gas emissions, while sending a strong signal to energy and infrastructure investors operating over the long-term. Issuing such national clean energy policies provided Germany's industries with room to plan and helped initiate the phase-out of coal-fired power plants as newer, cleaner technologies gained favor with the private sector. Systemic investments in renewable energy, resilient investments abroad, and an awareness of the connection between climate impacts and security were named as priorities.
• In 2009, developed countries pledged to provide $100 billion in annual climate aid to developing states by 2020. In 2016, a road map for achieving this goal was agreed upon during the United Nations climate conference in Marrakech, Morocco. Germany announced it will double its climate aid from 2014 levels, to a total of $4-5 billion by 2020. Germany has now reached its goal of 0.7 percent GDP for its contribution to development assistance.
• Germany has delivered $1 billion to date to the Green Climate Fund and hopes to make the GCF as efficient as possible. Germany has also sought to bring in more private sector investment through special loan facilities and partnerships.

 

Brad Johnson, President, Resource Mobilization Advisors

• Johnson provided insight on how the private sector views the GCF and on ways to continue to improve the fund. He noted the importance of the GCF's impacts on U.S. markets, as well as its effectiveness in diminishing investment risks. The GCF can help introduce more long-term, local-level financing. All things being equal, international customers for clean energy technologies tend to prefer U.S. technologies—from reliable American companies with extensive customer support—over other providers, and by facilitating financing, the GCF could help U.S. industry expand its markets.
• Johnson called attention to the significant untapped markets in developing nations for U.S. companies that produce renewable energy and energy efficiency products. Johnson also called for greater international coordination among development agencies and multilateral financing institutions in order to continue to improve the ways the GCF operates.

 

Bios

 

Dr. James Bond specializes in energy, infrastructure, and climate change issues in emerging economies. For over three years, he served as a senior advisor to the GCF's executive director in Songdo, South Korea. Dr. Bond is also a Managing Director at Public Capital Advisors and has held numerous leadership positions spanning a multi-decade career at the World Bank Group.

Brad Johnson is President of Resource Mobilization Advisors, an international consulting firm that designs, facilitates, and implements private-sector financing of environmental infrastructure projects in emerging markets. RMA works extensively with project developers, investment funds, multilateral development banks, commercial lenders, and donor agencies to mobilize affordable financing for local environmental projects.

Anton Hufnagl manages a diverse portfolio including climate, environment, and urban development at the German Embassy in Washington, DC. In the year of the German G20 presidency and the upcoming COP23 in Bonn, his focus is on international climate policy. He previously worked for Germany's Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety in Bonn and J.P. Morgan in London.