Financing for Development Priorities Today

By Jomo Kwame Sundaram

KUALA LUMPUR, Malaysia, Jan 7 2025 (IPS) - The forthcoming fourth United Nations Financing for Development conference must address developing countries’ major financial challenges. Recent setbacks to sustainable development and climate action make FfD4 all the more critical.

FfD4

The FfD4 conference, months away, will mainly be due to efforts led by the G77, the caucus of developing countries in the UN system. The G77 started with 77 UN member states and has since expanded to over 130.

The 1944 Bretton Woods conference outcome was primarily a compromise between the US and the UK. In 1971, when its Bretton Woods obligations threatened to undermine its privileges, President Richard Nixon refused to honour the US pledge to deliver an ounce of gold for US$35.

Over two decades later, President Bill Clinton promised a new international financial architecture. It rejected Professor Robert Triffin’s characterisation of international monetary arrangements after the early 1970s as an incoherent ‘non-system’.

Foreign aid

Several issues are emerging as G77 priorities for FfD4. In 1970, wealthy nations at the UN agreed to provide 0.7% of their national income annually as official development assistance (ODA).

This was much lower than the 2% initially proposed by the World Council of Churches and others. Only 0.3% has been delivered in recent years, or less than half the promise.

Most ODA conditions reflect the priorities of donors, not recipient countries. New aid definitions, conditions, and practices undermine ‘aid effectiveness’, reducing what developing nations receive.

Despite breaking its ODA promises, the new European Parliament voted overwhelmingly to contribute 0.25% of national income to Ukraine. By early December 2024, Europe had provided well over half the USD260 billion in aid to Ukraine!

Some European nations now insist that only mitigation qualifies as climate finance. Although most developing countries are tropical and struggling to cope with planetary heating, little assistance is available for adaptation.

Debt

More recently, developing countries’ new debt has been more commercial and conditional but less concessional. With the transition to the Sustainable Development Goals (SDGs) in 2015, the World Bank encouraged much more commercial borrowing with its new slogan, ‘from billions to trillions’.

Following the 2008 global financial crisis, Western countries adopted unconventional monetary policies, eschewing fiscal efforts. Quantitative easing enabled much more borrowing, which grew until 2022.

However, most Western governments did not borrow much. Some private interests borrowed heavily, often for unproductive purposes, with some using cheap funds to finance shareholder buyouts to get more wealth.

Meanwhile, many developing countries went on borrowing binges as creditors pushed debt in developing countries in various ways. Rapidly mounting government debt would soon become problematic.

From early 2022 until mid-2024, interest rates rose sharply, ostensibly to counter inflation. The US Fed and European Central Bank raised interest rates in concert, triggering massive capital outflows from developing countries with the poorest worst affected.

Taxation

The Global South has long wanted the UN to lead negotiations on international taxation arrangements to provide more financial resources for development. However, the Organization for Economic Cooperation and Development (OECD) rich nations’ club has long undermined developing countries’ interests.

The OECD achieved this by misleading finance ministries in developing countries. It bypassed foreign ministries that had long worked well together on contentious Global South issues. With the OECD making up new rules for the world, developing country finance ministries signed on to a biased tax proposal on which they were nominally consulted.

At the FfD3 conference in mid-2015, the OECD blocked Global South efforts to advance international tax cooperation. An independent international commission proposed a minimum international corporate income tax rate of 25%.

Treasury Secretary Janet Yellen counter-proposed a 21% rate, the US minimum rate. However, at the G7 meeting he was hosting, Boris Johnson pushed this down to 15% while adding exemptions, reducing likely revenue.

Instead of distributing revenue as with a corporate income tax on profits from production, the OECD proposed revenue sharing according to consumption spending, much like a sales tax.

Poor countries would receive little as their population can afford to spend much less, even if they produce much at low wages. Rather than progressively redistribute, OECD international corporate income tax revenue distribution would be regressive.

Dollar

The US dollar remains the world’s principal currency for international transactions. US Treasury bond sales enable this, subsidising the world’s largest economy. Trump recently threatened the BRICS and others considering de-dollarization.

The leading BRICS proponents of de-dollarisation, Brazil and South Africa, have failed to persuade the other BRICS to de-dollarize. Instead, China’s central bank has issued dollar-denominated bonds for Saudi Arabia.

Special Drawing Rights (SDRs) should be issued regularly to augment discretionary IMF financial resources. This can be done without Congressional approval, as happened after the 2008 global financial crisis and the COVID-19 outbreak.

Such resources can be committed to the SDGs and climate finance.

But this cannot happen without collective action by the Global South seriously mobilising behind pacifist, developmental non-alignment. Inclusive and sustainable development is impossible in a world at war.

Available online here: Financing for Development Priorities Today

Climate hypocrisy ensures global warming

Anis Chowdhury and Jomo Kwame Sundaram

SYDNEY and KUALA LUMPUR: Rich country governments claim the high moral ground on climate action. But many deny their far greater responsibility for both historic and contemporary greenhouse gas (GHG) emissions, once acknowledged by the Kyoto Protocol.

Climate injustice

Worse, responsibility has not been matched by commensurate efforts, especially by the largest rich economies in the G7, which dominates the G20. Its continued control of international economic resources and policymaking blocks progress on climate justice.

“That is the greatest injustice of climate change: that those who bear the least responsibility for climate change are the ones who will suffer the most”, says Mary Robinson, former Eire President and UN High Commissioner for Human Rights.

On a per capita basis, the US and close allies – Saudi Arabia, the United Arab Emirates, Australia and Canada – produce more than a hundred times the planet-warming greenhouse gas (GHG) emissions of some African countries.

The African population produced about 1.1 metric tonnes of carbon (dioxide equivalent) emissions per person in 2019, under a quarter of the 4.7 tonnes global average. The US emitted 16.1 tonnes – nearly four times the global average.

GHG emissions accumulate over time and trap heat, warming the planet. The US has emitted over a quarter of all GHG emissions since the 1750s, while Europe accounts for 33%. By contrast, Africa, South America and India contributed about 3% each, while China contributed 12.7%.

Wealth inequalities worsen climate injustice. The world’s richest 5% were responsible for 37% of GHG emissions growth during 1990-2015, while the bottom half of the world’s population accounted for 7%!

Poor regions and people take the brunt of global warming. The tropical zone is much more vulnerable to rapid climate change. Most of these countries and communities bear little responsibility for the GHG emissions worsening global warming, but also have the least means to cope and protect themselves.

Thus, climate justice demands wealthy nations – most responsible for cumulative and current GHG emissions – not only reduce the harm they cause, but also help those with less means to cope.

Rich hypocrisy

Wealthy countries have done little to keep their 2009 promises to provide US$100 billion annually to help developing countries. Most climate finance has been earmarked for mitigation. But this ignores their needs and priorities, as developing countries need help to adapt to climate change and to cope with losses and damages due to global warming.

The OECD club of rich countries has been criticized for exaggerating climate finance, but acknowledges, “Australia, Japan and the United States consider financing for high-efficiency coal plants as a form of climate finance.”

It reports climate finance of US$79.6bn in 2019, but these figures are hotly contested. However, ‘commercial credit’ is typically not concessional. But when it is, it implies official subsidies for “bankable”, “for profit” projects.

Many also doubt much of this funding is truly additional, and not just diverted (‘repurposed’) from other ends. Private finance also rarely goes where it is most needed while increasing debt burdens for borrowers.

Leading from behind

At the COP26 Climate Summit in Glasgow in November 2021, US President Joe Biden described climate change as “an existential threat to human existence” and pledged to cut US emissions by up to 51% by 2030.

Biden had claimed his ‘Build Back Better’ (BBB) package of proposed social and climate spending would be a cornerstone of restoring international trust in the US commitment to stem global warming.

At the G7 Summit in June 2021, Biden announced his vision of a “Build Back Better World” (B3W) would define the G7 alternative to China’s multitrillion USD Belt and Road Initiative (BRI).

All this was premised on US ability to lead from the front, with momentum growing once BBB became law. But his legislative package has stalled. Unable to attract the needed votes in the Senate, BBB is ‘dead in the water’.

Putting on a brave face, US Senate majority leader Chuck Schumer promises to bring the legislation to a vote early next year. But with their party’s declining political fortunes, likely ‘horse-trading’ to pass the bill will almost certainly further undermine Biden’s promises.

Meanwhile, breaking his 2020 campaign promise, Biden approved nearly 900 more permits to drill on public land in 2021, more than President Trump in 2017. While exhorting others to cut fossil fuel reliance, his administration is now urging US companies and allies to produce more, invoking Ukraine war sanctions.

Aid laggard

At COP26, Biden promised to help developing nations reduce carbon emissions, pledging to double US climate change aid. But even this is still well short of its proportionate share of the grossly inadequate US$100bn yearly rich nations had pledged in 2009 in concessional climate finance for developing countries.

Considering its national income and cumulative emissions, the US should provide at least US$43–50bn in climate finance annually. Others insist the US owes the developing world much more, considering their needs and damages due to US emissions, e.g., suggesting US$800bn over the decade to 2030.

In 2017-18, the US delivered US$10bn to the pledged US$100bn annual climate finance – less than Japan’s US$27bn, Germany’s US$20bn and France’s US$15bn, despite the US economy being larger than all three combined.

President Obama pledged US$3bn to the Green Climate Fund (GCF) – the UN’s flagship climate finance initiative – but delivered only US$1bn. Trump totally repudiated this modest pledge.

At the April 2021 Earth Day leaders’ summit, Biden vowed to nearly double Obama’s pledge to US$5.7bn, with US$1.5bn for adaptation. But even this amount is far short of what the US should contribute, given its means and total emissions.

After the European Commission president highlighted this in September 2021, Biden vowed to again double the US contribution to US$11.4bn yearly by 2024, boasting this would “make the US a leader in international climate finance”.

At COP26, the US cited this increased GCF promise to block developing countries’ call for a share of revenue from voluntary bilateral carbon trading. The US has also opposed developing countries’ call for a funding facility to help vulnerable nations cope with loss and damage due to global warming.

Worse, the US Congress has approved only US$1bn for international climate finance for 2022 – only US$387m more than in the Trump era. At that rate, it would take until 2050 to get to US$11.4bn. Unsurprisingly, Biden made only passing mention of climate and energy in his last State of the Union address.

Climate injustice at Glasgow COP-out

by Anis Chowdhury and Jomo Kwame Sundaram

SYDNEY and KUALA LUMPUR: The planet is already 1.1°C warmer than in pre-industrial times. July 2021 was the hottest month ever recorded in 142 years. Despite the pandemic slowdown, 2020 was the hottest year so far, ending the warmest decade (2011-2020) ever.

Betrayal in Glasgow

Summing up widespread views of the recently concluded Glasgow climate summit, former Irish President Mary Robinson observed, “People will see this as a historically shameful dereliction of duty,… nowhere near enough to avoid climate disaster”.

A hundred civil society groups lambasted the Glasgow outcome: “Instead of a multilateral agreement that puts forward a clear path to address the climate crisis, we are left with a document that takes us further down the path of climate injustice.”

Even if countries fulfil their Paris Agreement pledges, global warming is now expected to rise by 2.7°C from pre-industrial levels by century’s end. Authoritative projections suggest that if all COP26 long-term pledges and targets are met, the planet will still warm by 2.1℃ by 2100.

The United Nations Environment Programme suggests a strong chance of global warming disastrously rising over 1.5°C in the next two decades. Earlier policy targets – to halve global carbon emissions by 2030, and reach ‘net-zero’ emissions by 2050 – are now recognized as inadequate.

The Glasgow UN Framework Convention on Climate Change 26th Conference of Parties (COP26) was touted as the world’s ‘last best hope’ to save the planet. Many speeches cited disturbing trends, but national leaders most responsible for greenhouse gas (GHG) emissions offered little.

Thus, developing countries were betrayed yet again. Despite contributing less to accelerating global warming, they are suffering its worst consequences. They have been left to pay most bills for ‘losses and damages’, adaptation and mitigation.

Glasgow setbacks

Glasgow’s two biggest hopes were not realized: renewing targets for 2030 aligned with limiting warming to 1.5℃, and a clear strategy to mobilize the grossly inadequate US$100bn yearly – promised by rich country leaders before the Copenhagen COP in 2009 – to help finance developing countries’ efforts.

An exasperated African legislator dismissed the Glasgow Leaders’ Declaration on Forests and Land Use as an “empty pledge”, as “yet another example of Western disingenuousness … taking on the role of ‘white saviour’” while exploiting the African rain forest.

Meanwhile, far too many loopholes open to abuse remain, undermining efforts to reduce emissions. Further, no commitment to end fossil fuel subsidies globally – at US$11 million every minute, i.e., around US$6 trillion annually – was forthcoming.

No new oil and gas fields should be developed for the world to have a chance of getting to net-zero by 2050. Nevertheless, governments are still approving such projects, typically involving transnational corporate giants.

Various measures – e.g., ‘carbon capture and storage’ and ‘offsetting’ – have been touted as solutions. But carbon capture and storage technologies remain controversial, unproven at scale, expensive and rarely cost-competitive.

The Glasgow outcome did not include any commitment to fully phase out oil and gas. Meanwhile, the language on coal has been diluted to become virtually toothless: coal-powered plants will now be ‘phased down’, instead of ‘phased out’.

Offsets off track

Offset market advocates claim to reduce emissions or remove GHGs from the atmosphere by some to ‘off-set’ emissions by others. Thus, offsetting often means paying someone poor to cut GHG emissions or forcing them to pay someone else to do so. With more means, big business can more easily afford to ‘greenwash’.

Carbon offset markets have long overpromised, but underdelivered. As they typically exaggerate GHG emission reduction claims, offsetting is a poor substitute for actually cutting fossil fuel use. Meanwhile, disagreements over offset rules have long stalled international climate change negotiations.

Buying offsets allows GHG emitters “to keep polluting”, albeit for a fee. Highly GHG emitting activities by wealthier individuals, companies and nations can thus continue, after “transferring the burden of action and sacrifice to others” – typically to those in poorer nations – via the market.

For Tariq Fancy – who managed ‘sustainable investing’ at BlackRock, the world’s largest fund manager – the market for offsets is a “deadly distraction”, “leading the world into a dangerous mirage, … burning valuable time”.

Meanwhile, most established offset programmes – e.g., the United Nations’ REDD+ programmeor the Kyoto Protocol’s Clean Development Mechanism – have clearly failed to meaningfully reduce GHG emissions.

More than 130 countries have committed to achieve net-zero by 2050. But net-zero targeting has actually allowed the world to continue kicking the can down the road, instead of acting decisively and urgently to verifiably cut GHG emissions.

Hence, it is seen as a cynical “scam”, “nothing more than an expensive cover-up for continued toxic emissions”. Trading non-verifiable offsets – supposedly to achieve net-zero – allows continuing GHG emissions with business almost as usual.

Loss and damage?

Vulnerable and poor nations have argued for decades that rich countries owe them compensation for irreversible damage from global warming. In fact, no UN climate conference has delivered any funding for losses and damages to countries affected.

Rich countries agreed to begin a ‘dialogue’ to discuss “arrangements for the funding of activities to avert, minimize and address loss and damage”. Representing developing nations, Guinea expressed “extreme disappointment” at this ruse to delay progress on financing recovery from and rebuilding after climate disasters.

Developed nations account for two-thirds of cumulative emissions compared to only 3% from Africa. Carbon emissions by the wealthiest 1% of the world’s population were more than twice those of the bottom half between 1990 and 2015!

Low-lying small island nations – from the Marshall Islands to Fiji and Antigua – fear losing much of their land to rising sea levels. But their longstanding call to create a ‘loss and damage’ fund was rejected yet again.

South Pacific island representatives have expressed disappointment at lack of funding for losses and damages, and the watered down language on coal. For them, COP26 was a ‘monumental failure’, leaving them in existential peril.

Although historical responsibility for GHG emissions lies primarily with the wealthy countries, especially the US and the European Union, once again, they have successfully evaded serious commitments to address such longstanding problems due to global warming.

Climate injustice

For the UN Secretary-General, “[o]ver the past 25 years, the richest 10% of the global population has been responsible for more than half of all carbon emissions, and the poorest 50% were responsible for just 7% of emissions”.

The World Bank estimates that, if left unchecked, climate change will condemn 132 million more people into poverty over the next decade, while displacing more than 216 million from their homes and land by 2050.

Meanwhile, poorer countries – who have contributed least to cumulative GHG emissions – continue to suffer most. To address climate injustice, rich countries – most responsible for GHG emissions and global warming – must do much more.

Their finance for developing countries ought to be much more ambitious than US$100bn yearly. Financing terms should be far more generous than currently. Also, funding should prioritize adaptation, especially for the poorest countries most at risk.

Related IPS commentaries

Carbon tax over-rated. 9 Nov. 2021.

https://www.ipsnews.net/2021/11/carbon-tax-rated/

Will Glasgow fix broken climate finance promises? 2 Nov. 2021.https://www.ipsnews.net/2021/11/will-glasgow-fix-broken-climate-finance-promises/

Much more climate finance now! 12 Sep. 2017. http://www.ipsnews.net/2017/09/much-climate-finance-now/

Big business capturing UN SDG agenda? 11 Dec. 2018. http://www.ipsnews.net/2018/12/big-business-capturing-un-sdg-agenda/

Climate deal needs enough public financing. 3 Dec. 2015.

http://www.ipsnews.net/2015/12/climate-deal-needs-enough-public-financing/