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Obama and climate change

One of President Obama’s most immediate challenges will be to formulate his domestic climate change policy – a challenge that will demand all the political skills the new administration can muster. This should not, however, distract him from the pressing needs on the international climate front, where action may have a lower political cost and generate greater goodwill. Above all, the USA needs to signal good intent by pledging a high level of support for climate change adaptation in the developing world.

The role of rich Countries in supporting climate change adaptation
One of the most urgent issues on the international climate agenda, now and until the United Nations Framework Convention on Climate Change (UNFCC) meeting in Copenhagen in December 2009, is the development of an international financial tool to help developing countries adapt to climate change. Given that most global warming is caused by rich countries with high emissions, and that the impact is felt most keenly by poor countries that not only have the lowest emissions, but are least able to deal with it, large scale funding from rich countries for adaptation is a moral imperative.

To date, however, fundraising efforts have been embarrassingly trivial and amount to, at best, no more than token political gesture. The USA has yet to make even that gesture, failing to contribute to any of the existing multilateral funds that support adaptation in poor countries.

Why the paltry focus on adaptation?
The international climate debate has primarily focused on mitigation (cutting emissions to prevent climate change) rather than adaptation (dealing with the consequences once the change in climate occurs). This may be because of the ‘local’ nature of adaptation, as opposed to the global scale of mitigation efforts; the difficulty in measuring the benefits of adaptation; the complexity of trying to separate adaptation funding from more conventional development assistance; and the valid logic that we should take preventive measures before reactive ones. Most importantly, perhaps, there is not much commercial capital to be made from funding adaptation in the least developed countries (LDCs). The reality is that many of these countries are already feeling the effects of climate change, through increased climate variability in storms, typhoons, droughts, flooding and so on – linked to climate change caused by the behavior of the rich world.

The role of adaptation finance in US policy

Despite failing, to date, to support multilateral adaptation funds, the USA took an important step in 2008 with the proposed Lieberman-Warner Climate Security Act. The bill would establish a country-wide cap-and-trade system, with 26.5% of emissions allowances ‘auctioned’ in 2012, steadily ramping up to 69.5% by 2031. Under this system the USA would receive a number of greenhouse gas units to release and/or trade. The funding principle of this scheme is to auction a certain share of these units to generate revenue, rather than giving them out free to domestic firms that have to comply with emission reductions. A portion of auction revenue (from 1% in 2012, increasing gradually to 7% by 2050) would be directed toward a newly-created fund to support climate change adaptation plans in LDCs. Unfortunately, the bill failed to pass the Senate in June 2008, and the proposed fund is dead in the water for the time being. However, the Lieberman-Warner Act can serve as a blueprint for future proposals and the USA has an unparalleled opportunity to lead the international effort to fundraise for adaptation.

How should funds for adaptation be created?

Should the funds come from taxpayers through domestic revenue streams (like most overseas development aid) or through action in the carbon market (such as the national-level auctioning of emissions allowances proposed in the Lieberman-Warner bill), or more broadly through carbon or international travel-related taxes or levies? A mechanism that avoids reliance on domestic revenue streams and instead uses the carbon market or international travel-related taxes or levies, can generate revenue for adaptation in a way that is truly international, automatic and autonomous, without relying on the political whims of donor countries. There have already been many proposals circulated around for such a mechanism, as summarized (in Section II) for the Africa Partnership Forum on Carbon Finance in Africa.

Is the time right to scale up adaptation finance?
With the US ringing alarm bells about the unparalleled prospect of a ‘trillion-dollar deficit for years to come’, is this the wrong time to request additional funding for developing countries? Certainly, opinion polls have shown that support for international development shifts according to how citizens in rich countries feel about their economy. Given that adaptation funding is closely aligned with international development aid, there is strong cause to predict a similar wax and wane of public opinion. Even if finance is created through autonomous sources like the carbon market, rather than through taxpayers, there is likely to be significant political pushback from industries that would bear the carbon tax burden. However, if political support can be raised, the US endorsement of such a financial mechanism would give developing countries access to billions of dollars that are badly needed to help them adapt to climate change.

Reframing our understanding of adaptation finance
As our director Simon Maxwell said in his piece Doing Development in a Downturn, it is important to reframe how we approach financial assistance to developing countries. There are very clear and real links to be made between adaptation needs in the developing world and the present and future concerns of people in rich nations. Ignoring international calamities, particularly those for which the rich world is responsible, will undoubtedly have direct ramifications for our own lives.

We need to shift the way we frame adaptation finance as a political issue. It is clear that we can no longer afford to view this as an altruistic effort but rather in an attempt to protect our own self interest. It is to be hoped that the new President of the USA will have the vision to recognise the mutual benefits of funding for climate change adaptation.