Innovative Finance: Time for a “Hail Mary” for the Climate

By J. Timmons Roberts, Brown University Center for Environmental Studies/Adaptation Watch

So it’s come down to this, a “Hail Mary pass for the climate.”

At the end of an American football game, the losing team, down by three or four scores with virtually no possibility of winning, often resorts to a “Hail Mary Pass,” in which they line up a few guys to protect the quarterback, send everyone else down into the opposing team’s end zone, and then heave the ball up in the hopes one of their teammates will catch it.

It’s called a Hail Mary because a lot of praying (and seemingly divine intervention) is required for anything good to happen.  Rarely it does; much more likely, of course, is that bad things happen.  But there’s just nothing left to lose, and no more tricks up their sleeves to try anything better.

This is what it’s come to in the climate negotiations.  The game has seemed truly lost since 2009 in Copenhagen, when the effort to extend the Kyoto Protocol past its 2012 expiration date went off the rails.  By including 5 percent average reductions in greenhouse gas emissions among wealthy nations (excluding the U.S.), Kyoto was flawed but widely seen as an initial step in addressing the problem.

In Copenhagen, the binding reduction of climate change gases by the wealthy nations (the Kyoto model) was essentially taken off the table. In exchange for forfeiting a framework that would ensure a safe future, the poor countries were promised enormous sums of cash at a future date.  The system put in place in Copenhagen was called “Pledge and Review,” in which countries got to choose what they wanted to do, and their performance against those pledges were supposed to be reviewed later.  It didn’t mention any particular penalties for bad reviews, so no punishments threaten those who don’t keep their self-chosen promises.  The pledges added up to double the warming understood by scientific consensus to represent the point of risking “dangerous climate change” (3.9 degrees, instead of 2 degrees C as the 2007 IPCC report concluded).

So here we are two years later, as the Durban talks open in November 2011.  Things have gotten far worse, with even the promised cash in serious doubt- we find out that the Copenhagen Promise was truly hollow.   There was supposed to be new “Fast Start Finance,” and some of that money has come forward, but much of it is merely relabeled foreign aid that was being used for other purposes.

The big promise at Copenhagen was the 100 billion US dollars a year that was supposed to be delivered by 2020.  Here we are nearly in 2012, and we have about eight years when funding is supposed to “scale up” from about 10 billion a year to 100 billion.  Another thorny political point, so there is no plan.

One way that’s been talked about is “innovative finance.”  Innovative finance means tapping new sources of international money flows.  It could be a levy on airline travel—just 5-10 Euros or dollars per international flight could raise 8 or 10 billion Euros or dollars per year.  This would make sense, since there’s such a direct connection between the behavior of those of us who fly on airplanes and the impacts that we are causing on poor people in developing countries, where sea levels are rising, droughts becoming more severe, flooding worsening, all because of more intense weather systems that are coming with warming of the global climate.

Then there are other forms of innovative finance, like a teeny tiny transaction tax that would slow down speculation on global currency, without causing major damage to global economies.  Another would be a tax on bunker fuels–those fuels used in international shipping—which are currently untaxed and unregulated.

The idea is that the revenue created from these levies would be paid into a Green Climate Fund that could then be used to pay developing countries to avoid building more coal burning power plants, or to adopt measures to adapt to changing climatic conditions. Of course, all these systems would have to be adjusted so they didn’t hurt the development options and future prosperity of poor countries.

So here we are, it’s the last minute of the game, Kyoto is set to expire next year, and twenty years of negotiations seem on the verge of breaking down.   It’s time for a Hail Mary pass.  Innovative finance is extremely unlikely to be adopted in the climate negotiations.  The G20–the twenty largest economies on Earth–are not particularly interested.  These options are seen as potentially dampening effects on the global economic recovery. Very few big players seem to have a stomach for any serious innovative financing, as the “High Level Panel” set up last year by Ban Ki Moon showed.

Still, there’s really no other way forward, since the real shared sacrifice of reducing emissions is apparently off the table.  The clock is running down in Durban.  The entire assemblage of global institutions established to deal with this critical human issue is about to fall apart.  This Hail Mary might buy a bit of time. Force an over-time period in which maybe we can all come to our senses next year.  It might even create some good-will in the negotiations that might unhinge this gridlock.

We need something to break this deadly deadlock–Let’s put the ball up.

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