The money spent on fossil fuel subsidies should be reallocated to climate change mitigation and adaptation. Eliminating fossil fuel subsidies would reduce GHG emissions and increase climate change funding. The difficulty of achieving adequate multilateral climate financing appears likely to continue for several reasons. The lack of agreement evident in the Report of the High-level Advisory Group on Climate Change Financing, a group charged with advising on rather than deciding on these issues, is symptomatic of the larger problem of making developed countries responsible for financing climate change mitigation and adaptation in developing countries. Moreover, while fossil fuel subsidy reallocation seems a logical place to find financing, the G20 avoidance of compliance with their joint commitment on this issue is an indication of how difficult this task may prove to be. The slow response of the World Bank to climate change is another indication of how difficult change can be. At some point, developing countries will have to assume greater responsibility for financing their national climate change strategies, but should draw upon the growing expertise of institutions such as the World Bank. Financial difficulties in developed countries, combined with growing wealth in developing countries and the increasing risk of climate change causing damage, in developing countries in particular, means that the current approach will have to change. Developing countries could start by reallocating their fossil fuel subsidies to finance their mitigation and adaptation efforts, with a particular focus on helping the poorest. In this chapter, we have provided two examples: financing adaptation for subsistence farmers and financing access to clean energy in poor rural communities.
Multilateral cooperation and financing will continue to be an essential element in climate finance. The WTO will have to adapt subsidies rules, via judicial interpretations on a case-by-case basis or via a negotiated response to agreements reached in other multilateral organizations. The increasing number of actors in climate finance activities will require more coordination and adaptation of roles among institutions such as the World Bank and the Green Climate Fund. The activities of these institutions will have to be coordinated with those of the private sector participants as well.
The United States and China, in particular, need to take on the leadership roles that are necessary to promote multilateral change and to use unilateral measures judiciously to create incentives for multilateral progress. The US and China have a large share of world CO2 emissions. China’s growing economic and technological clout makes it well placed to take on a leadership role, particularly with respect to the approach of developing countries to climate finance and technology transfer. The United States plays a key role in various spheres of international affairs, where its leadership is essential to move forward.
The United States is the largest donor country (even though per capita it is near the bottom end of the OECD countries). It plays a large role in CO2 emissions. The current US contribution to global emissions is about 20 percent.75 It has the biggest share of voting rights at the World Bank, at 16 percent of the total votes. At the IMF, the United States has 17 percent of the votes—roughly the same as all of Asia combined (whose population is more than 12 times that of the United States).
However, the United States is a country where less than half the population believes that climate change is caused by human activities, in contrast to neighboring Canada, where 61 percent believe that climate change is caused by human activities. As a result, a large number ofUS politicians deny a human role in climate change. This, in turn, has an impact on (1) the foreign aid directed to climate change, (2) activities to reduce emissions, and (3) funding activities of large international agencies such as the World Bank and the IMF. Nevertheless, in the aftermath of Hurricane Sandy, and with the release of the 2013 Draft Climate Assessment Report, there are signs that the United States is preparing to take on a leadership role with respect to climate change. US leadership on climate change could serve as an important catalyst for not just climate finance, but wider actions on climate change as well.