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Financing a Real Deal in Copenhagen

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At the international climate talks going on right now in Copenhagen, Denmark, we have a once in a lifetime opportunity to launch a major assault on global warming. Besides deciding emission targets and the legal structure of an agreement, commitments for long-term financing for developing countries to help green their economies and cope with climate change impacts is one of the most important element of a real deal. The chasm between what's being offered by developed countries ($10 billion a year for 3 years) and what basically the entire developing world is asking for (a long-term commitment of $400-500 billion a year by 2020) must be bridged.

When you consider the enormous need for green economic development for the billions of people in these countries and the projections of the massive costs of climate change adaptation, these numbers are justified. The International Energy Agency's 2009 World Energy Outlook says that investments in low-carbon energy technologies and energy efficiency on the order of $500 billion a year for the next 20 years will be required to reach 450ppm of carbon in the atmosphere. But if we want to avoid "certain death for island nations and certain devastation for Africa" that Sudan's ambassador and the chair of the G77 and China block here says 450ppm would entail, then we'll need substantially more than that.

But this is the same U.S. government that mobilized $11 trillion in a little over a month to combat the global financial crisis, that has committed $3 trillion for war in Iraq. When the US decides to make something a priority, it finds ways to fund it. So when the U.S. delegation here says it can't come up with more money, the whole world hears that it just isn't that big a priority.

But in addition to the commitments developed countries can appropriate through annual budgets and the auctioning of emissions credits, shifting the subsidies that currently go to fossil fuels to clean energy and vulnerable communities is one particularly elegant solution: Stop harming, and start helping.

In 2004, Jonathan Pershing (now the chief US climate negotiator) wrote a paper for WRI estimating that Annex 1 countries spent $57 billion annually on fossil fuel subsidies. In the U.S. alone, $10 billion of taxpayer's dollars still go to support fossil fuels. At the G20 meeting in Pittsburgh, President Obama made an historic pledge to end fossil fuel subsidies. In Copenhagen, he can commit to a date for that phaseout and pledge to redirect those subsidies into climate finance. Developed country fossil fuel Is there a better source for climate finance than shifting corporate giveaways to big oil and coal?

There are at least three other large potential sources of funding available:

  • Revenues from regulation on international aviation and shipping, the fastest-growing sector of global emissions, which the chair of the negotiations in Copenhagen says is possible to get done here. This could generate an estimated25-37 billion a year.
  • "Special Drawing Rights", the same mechanism that was used to create new money internationally to save the banking system. George Soros has proposed that100 billion in pre-existing SDRs be used to provide about7 billion annually for climate finance, and the World Future Council has another proposal to create a1 trillion dollar fund using new SDRs with likely much higher annual figures.
  • A Global Financial Transaction Tax, small taxes on all foreign exchange transactions of major currencies could generate an estimated at60-100 billion annually according to Project Catalyst and are gaining traction in the negotiations.

President Nicolas Sarkozy and Prime Minister Gordon Brown have committed to working together on these innovative mechanisms, particularly revenues from regulating international aviation and shipping and the global financial transactions taxes. But they will not be able to get it done alone.

Our elected representatives and their appointees have only days to get this right and agree to a well-designed, public funded effort to prevent catastrophe. If the US took leadership on this issues, it could be the game-changer that breaks the climate deadlock and unleashes a clean-energy future, not just for us, but for the whole world. Feel free to let the President know how you feel here.

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