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Principles for a Global Green New Deal

1. November 2019 - 18:43

Principles for a Global Green New Deal

 

 

 

Climate change is the defining issue of our time. From that perspective, a Green New Deal is an enticing prospect; a Global Green New Deal even more so. That must be true: Joe Stiglitz says so. Hang on, though. There are two big problems - and a lot of work for us to do.

The first problem is that ‘New Deal’ and ‘Green New Deal’ appear to be portmanteau terms, signalling a desire to make progress on a range of economic, social and environmental fronts, but encompassing many different pathways. To take just one example, the US Congress Resolution on a Green New Deal sponsored by Alexandria Orcasio Cortes (AOC), and currently in Committee, makes no mention of nationalisation; the UK Labour Party Conference Resolution (UKLP), entitled a Socialist Green New Deal, commits to take energy and rail into public ownership. It is certainly a good thing that the precise configuration of policy should adapt to local circumstance. But a sceptic might conclude that the portmanteaux open to reveal very different sets of clothes. I will have more to say later on a comparison of AOC and the Labour Party.

The second problem is that very few of the new deal options on offer deal satisfactorily with the interdependencies associated with a truly global transition. Developing countries should be provided with finance and technology to support their own domestic transitions, yes; but rarely is there a serious discussion of limits to global growth, global redistribution, the constraints on trade-led development, or the competitive pressures a new deal might unleash. There is a risk that some developing countries will be left floundering and disadvantaged as rich countries adjust.

These two problems lay down a challenge: to design a framework for a truly global but locally appropriate green new deal. That is no easy task, and will need a collaborative effort, but here are some thoughts to kick us off. The focus is on climate change. In brief,

  1. There are technical and policy issues hidden within the global climate framework, to which developing countries need to be alert. Developed countries cannot continue to offshore emissions, and need to take responsibility for faster, deeper cuts in both their national emissions and total footprint. Cuts will need to be even faster, if burden-sharing is to allow some room for short-term emissions growth in poorer countries. And proposals to off-set emissions need careful analysis.

  2. The term Green New Deal can, as noted, be a portmanteau term, covering a range of policies and approaches. Having a range of preoccupations is positive, if it means that policy-makers consider the full implications of action on climate change: the transition costs, for example, the lifestyle implications, and the impact on losers. However, is it necessary to distinguish the ‘climate must-haves’ from the ‘climate like-to-haves’? The issue of different approaches is more complicated. A ‘Socialist Green New Deal’ will perforce differ from a market-based Green New Deal. A key lesson: assess proposals on a New Green Deal in wider philosophical or ideological context.
         
  3. A Global Green New Deal is not just about adding up a series of national transitions. It needs to address the issue of who has the right to emit within limited carbon budgets, and the spill-over effects of one country’s actions on another. The ‘entry-level package’ is about finance and technology transfer, but other questions about growth and trade need to be central. So far, coverage of those is insufficient.
       
  4. A collective effort is needed to define the parameters of a Global Green New Deal, a Brain Trust for the twenty-first century, drawing on expertise in both North and South, and from both the development and climate communities. Experimentation will be the order of the day. However, three tests can be applied.  Is climate action SDG compatible, maximising synergies and avoiding making the achievement of other SDGs harder? Is it bottom-up, building climate compatible development planning into national strategies? And does it recognise the urgency of climate action?

On climate change

First, then, climate change may be the defining issue of our time, but there are some serious cracks in current approaches. We know that a rapid reduction in emissions is needed globally, faster than ever because so much time has been wasted. The UN Environment Emissions Gap Report summarises the data. Emissions are still rising, by over 1% a year, when they should be falling. The latest estimates are that reductions amounting to over 50% are needed from 2020-2030 if the world is to be on a least cost pathway to 1.5 degree warming. That compares to a globally leading 2% a year in the UK since 1990. The current national pledges only promise about a tenth of what is needed to 2030. And meanwhile, as many as seven G20 countries are not on track to meet even those modest commitments. It is not surprising that the spotlight is shining on the revisions countries will make to their Nationally Determined Contributions in 2020: how many will pledge to reach net zero, and by when? The UN Secretary General called for countries to commit to net zero by 2050.  The pressure is on from Groups like Extinction Rebellion, who want net zero by 2025.  The climate talks in Glasgow at the end of next year will be pivotal.

Behind those headlines lie some deep problems. Some are technical. For example, the Integrated Assessment Models used in calculating least cost pathways do not take account of the impact of extreme weather events. If those were endogenised, then the rates of reduction required would be even higher.  Similarly, the cost of deviating from the least-cost pathway needs to be factored in, including costs associated with the increased frequency and severity of droughts, floods, storms and sea level rise. There also needs to be very careful analysis of the negative net emission requirements of some models, dependent on technologies which do not yet exist or have not yet been proved at commercial scale.

Other issues go to the heart of the policy-making process which drives the global climate negotiations.

One issue concerns how imported and exported emissions are to be handled, when most developed countries consume more than they produce, and most developing countries produce more than they consume. Is it right that the UK, for example, should be able to claim success in reducing emissions, when one key reason is that nearly half of the carbon the UK ‘consumes’ is generated in other countries in the process of making the goods we import – and this has risen, not fallen? Should the carbon content of these imports be removed from, say, the China account, and entered on the UK account? It is a mystery that footprints do not feature more prominently at the UNFCCC, and elsewhere – though attention is beginning to be paid to imported emissions, and associated questions of measurement, reporting, certification, regulation and taxation.

Another issue which dares not speak its name, apparently, is whether poor countries have a right to increase emissions, at least in the short term, because they have not contributed in the past to the high levels of CO2 in the atmosphere. Today, not surprisingly, rich countries emit more per capita than poor ones, even allowing for the fact that some of their contribution is off-shored to countries like China. The global average is about 7 tons/capita. However, the US has emissions of 20 tons/capita, Russia about 17, China about 9, the EU 28 about 9, but India only about 3. Meanwhile, India has a per capita income in PPP terms of about $US 8,000, the EU $US 44,000, and US $US 63,000. If a fair ‘burden-sharing’ approach allowed India to increase emissions, as it would, then developed countries would have to cut faster to compensate. Averchenkova and colleagues explored this issue in 2014. They concluded that burden-sharing approaches ‘are likely to be unrealistic in terms of political economy because they fail to take into account the national self-interest of countries through consideration of national benefits of climate action’. A better approach would be to focus on the benefits of climate action for all countries. Nevertheless, ‘‘burden-sharing’ could help to provide an initial assessment of domestic commitments . . .’.

The COP in Glasgow will not resolve the technical or policy issues hidden within the global climate framework, but developing countries need to be alert to the consequences. In particular, they need to demand much more ambitious plans from developed countries, including with respect to their overall footprints. They will need to review commitments to carbon neutrality, be alert to the difference between ‘zero’ and ‘net zero’, look carefully at offset options, and probably be sceptical if commitments are made which require negative emissions later in the century. They will want to review burden-sharing options in terms of the global carbon budget. And they will certainly want to make sure that the costs of preparing for and responding to extreme weather events are properly considered.

On the elements of a Green New Deal

The all-encompassing nature of current new deal proposals has origins in the diverse package of measures put in place during Franklin D. Roosevelt’s original New Deal, in 1933-34 and again in 1935-36. Covering Relief, Recovery and Reform, the package included major public works, but also trade liberalisation, financial sector reform, labour rights, and social security. The package was informed by the work of a Brain Trust (think-tanks take note!) and evolved over time, as some measures worked and some did not (c.f. Adaptive Development!). Interestingly, the programme did not rely heavily on deficit spending: federal expenditure remained at about 3% of GDP through the 1930s, and only rose (to 40% of GDP) when the US entered the Second World War. It is also interesting to note that the programme was highly political, in the sense of being contested at different points and on different issues from both right and left. And it ran into many legal problems in the Supreme Court. Key issues included federal versus state expenditure, the power of big business, income and wealth distribution, balanced budgets, segregation, tariffs, and rural versus urban interests: a normal day at the office, then, or in FDR’s case, a normal decade plus, in the life of any Government leader.

The idea of a Green New Deal has its origins in the financial crisis of 2008, over ‘comfort food and wine’, in the flat of Ann Pettifor, and with the participation of other left-of-centre and green thinkers. The first manifesto, published in July 2008, described a ‘triple crunch . . a combination of a credit-fuelled financial crisis, accelerating climate change and soaring energy prices, underpinned by an encroaching peak in oil production’. It proposed ‘two main strands. First, . . .  a structural transformation of the regulation of national and international financial systems, and major changes to taxation systems. And, second, . . . a sustained programme to invest in and deploy energy conservation and renewable energies, coupled with effective demand management.’ Specific measures included investment in renewable energy, insulation of homes, higher fossil fuel prices, and a series of financial measures, including a clamp-down on tax havens, and de-merger of banking and financial groups.

In the years since 2008, the Green New Deal Group itself has made further proposals, and there have been many others. Ann Pettifor has a new book on the Green New Deal, for example, as does Naomi Klein. Google has 15 million results for “Green New Deal”. As an illustration of the range of policies on offer, and no more than that, I have compared the AOC and UKLP versions. A side-by-side comparison can be found here. Both are ambitious and wide-ranging, with considerable overlap, but many points of difference, and some important omissions:

  • Both aim for net zero emissions by 2050, but with AOC including all Greenhouse Gases, and the UK Labour party only CO2. At the Labour Party Conference, there was a debate about adding the word ‘net’, with labour unions wanting protection for industrial jobs.  

  • Both speak of a just transition. In the case of AOC, this is ‘for all communities and workers’, and with a special focus on groups described as ‘frontline and vulnerable communities’. In the case of UKLP, there is an explicit commitment to ‘a workers-. . . (and) state-led programme of investment and regulation, based on public ownership and democratic control, . . .  that reduces inequality and . . .the cost of which would be borne by the wealthiest not the majority’.   
     
  • Both lay out ambitious plans for infrastructure, energy and transport. In the case of AOC, the priority is investment in renewable capacity and energy efficiency, combined with repair and upgrading of infrastructure. In the case of UKLP, the plan is similar, but with the addition of public ownership of energy, and taking ‘transport into public ownership and invest in expanded, integrated, free or affordable green public transport’. 
        
  • In terms of industry, agriculture, and jobs, both envisage significant greening, including renewal of ecosystems. Both are optimistic about jobs and the potential to reverse regional imbalances. AOC, for example, calls for ‘ensuring that the Green New Deal mobilization creates high-quality union jobs that pay prevailing wages, hires local workers, offers training and advancement opportunities, and guarantees wage and benefit parity for workers affected by the transition’. It goes on to argue that the Green New Deal should include ‘guaranteeing a job with a family-sustaining wage, adequate family and medical leave, paid vacations, and retirement security to all people of the United States’.   

  • On social provision more generally, both include an element of protection for workers’ rights, including unionisation, and both lay out a wider agenda on services, including (AOC) health care and housing, and (UKLP) ‘universal services’. 
       
  • On trade, an important difference is that AOC calls for ‘trade rules, procurement standards and border adjustments with strong labour and environmental protections’. It says nothing about imported emissions. UKLP, on the other hand, does not reference trade rules, but does say it is important to ‘measure and tackle consumption emissions, not just those produced on UK soil’. It also references migration, which AOC does not.                                                                                                                                                                  
  • Neither document has much to say about carbon pricing (on which see the report of the High Level Commission), and neither explores in any detail what ‘net’ emissions might mean, for example by referencing offset options under the Clean Development Mechanism or its successor, the Sustainable Development Mechanism. Neither has much to say about lifestyle issues, including diet (on which see, for example, the EAT-Lancet Report on Food, Planet, Health, or the recent IPCC Special Report on land). Neither discusses fiscal issues in any detail, including the overall cost and sources of financing. And neither has much to say about the rest of the world – in the sense of understanding what will be the impact on trade of climate actions elsewhere, or how we might work together on new technology.

It would not be fair to AOC or UKLP to consider these resolutions as final and definitive policy platforms. The UK Labour Party, for example, has recently fleshed out proposals to achieve a carbon neutral energy system by 2030. However, the comparison illustrates both the range of preoccupations under the label ‘Green New Deal’, and the fact that different approaches are possible.

Having a range of preoccupations is positive, up to a point, if it means that policy-makers consider the full implications of action on climate change: the transition costs, for example, the lifestyle implications, and the impact on losers. The new commitment in Germany to spend €40 billion to help coal mining areas adjust to the closure of mines is an example of where such thinking can lead. A line of sight needs to be preserved, however. Having a Green New Deal is not an excuse to throw everything on the wish list into the kitchen sink. Is it necessary to distinguish the ‘climate must-haves’ from the ‘climate like-to-haves’?

The issue of different approaches is more complicated. A ‘Socialist Green New Deal’ (copyright UKLP) will perforce differ from a market-based Green New Deal. Nationalisation will be one dividing line. Tax will be another. Regulation versus voluntary codes may be another. There are important arguments, and it is good to have them. They play to wider debates on the future of capitalism: see recent contributions by the likes of Collier, Stiglitz, the IPPR Commission on Prosperity and Justice, and, most recently, Branko Milanovich. A key lesson: assess proposals on a New Green Deal in wider philosophical or ideological context.

On a Global Green New Deal

Entry-level thinking about the global dimension of a green new deal is simply to facilitate transition in every country around the globe. Such thinking is evident, for example, in the AOC call for ‘promoting the international exchange of technology, expertise, products, funding, and services,  . . .  to help other countries achieve a Green New Deal’, and in UKLP to ‘support developing countries’ climate transitions through free or cheap transfers of finance, technology and capacity’.

We know from the work of CDKN and others that this is not enough. Mitigation and adaption at national level are important. But action on climate change, especially in large economies, reverberates around the world, affecting the size of markets for different products, as well as prices, influencing migration flows, and modifying the risk of natural disasters. The effects may be positive or negative: new markets for products like lithium, for example, and new possibilities for industrialisation in producer countries; or, conversely, loss of competitiveness because of the failure to adopt new technology or invest in energy efficiency. One piece of recent research suggests that mitigation in rich countries could benefit developing countries in two ways: all would benefit from the reduced cost of extreme weather events, and oil importers could benefit significantly from lower oil prices. By 2050, GDP in Malawi, Zambia and Mozambique could be between 2 and 6 per cent higher. 

There are also wider questions. For example, as discussed above, the issue of who has a right to emit within the remaining carbon budget. And is global growth sustainable, or should we either be agnostic about growth (Kate Raworth) or think about ‘de-growth’ (Jason Hickel)? Remember that the latest UK Labour Party policy paper on development committed (in 2018) to ‘reducing the importance of growth as an objective for UK-funded development programmes’. The test, then, of work on a Global Green New Deal is whether these issues are taken into account.

There is a stream of work on a global green new deal, though smaller than that on a green new deal: only 74,500 Google hits, compared to 15 million. An early example, perhaps the earliest, is a report coordinated by Edward Barbier for the UN Environment Programme in 2009, ‘Rethinking the Economic Recovery: A Global Green New Deal‘. The main purpose was to insert an environmental element into then discussions about global recovery from the food, fuel and financial crises. A Business as Usual recovery, based on fiscal stimulus, would worsen environmental burdens. Instead, a Global Green New Deal (GGND) would rest on three pillars:

  1. Revive the world economy, create employment opportunities and protect vulnerable groups.

  2. Reduce carbon dependency, ecosystem degradation and water scarcity. 

  3. Further the Millennium Development Goal of ending extreme world poverty by 2015.

The policy package contained many familiar elements: removal of fossil fuel subsidies, retro-fitting buildings, investment in renewable energy, low carbon transport, and payment for ecosystem services, all backed up by increased aid. There were limited proposals on trade and finance, including reducing non-tariff barriers on clean technology. The report concluded that

‘A GGND is not just about creating a greener world economy. It is about ensuring that the correct mix of economic policies, investments and incentives reduce carbon dependency, protect ecosystems and alleviate poverty while fostering economic recovery and creating jobs. Reviving the world economy is essential, but measures that focus solely on this objective will not achieve lasting success. Only through the national actions and global cooperation envisioned in a GGND will the world sustain its economic recovery by addressing the imminent challenges posed by climate change, energy insecurity, growing freshwater scarcity, deteriorating ecosystems, and above all, worsening global poverty.’

The UN Department of Economic and Social Affairs (UNDESA) also produced a report on a GGND in 2009, ‘A Global Green New Deal for Climate, Energy, and Development’, described as ‘A big push strategy to drive down the cost of renewable energy, ramp up deployment in developing countries, end energy poverty, contribute to economic recovery and growth, generate employment in all countries, and help avoid dangerous climate change’. The main focus was on renewable energy.

I would say that both these reports fail to pass the test of dealing with interlinkages and disruptions on a global scale. Two more recent contributions, respectively from UNCTAD (concentrating on finance) and the World Bank (concentrating on trade) come just a little closer.

The UNCTAD Trade and Development Report for 2019 is sub-titled ‘Financing a Global Green New Deal’. Climate issues are subsumed within a general and familiar narrative about faltering growth, debt dependency, over-financialisation, hyperglobalisation, and looming threats associated with disputes over trade and intellectual property. The key idea, though, is that

‘beyond the immediate risks that could stall the global economy are a series of macrostructural challenges that predate the Global Financial Crisis and have gone largely unattended since then. Four stand out because of their high degree of interdependence: the falling income share of labour; the erosion of public spending; the weakening of productive investment; and the unsustainable increases in carbon dioxide in the atmosphere.’

This is classic ‘new deal-ism’, linking issues in order to provide comprehensive solutions. In this case, the key response is to ‘reclaim policy space and act to boost aggregate demand’. Governments must

‘tackle high levels of income inequality head on, adopting more progressive fiscal arrangements, and directly targeting social outcomes through employment creation, decent work programmes and expanded social insurance. But they must also spearhead a coordinated investment push, especially towards decarbonization of the economy, both by investing directly (through public sector entities) and by boosting private investment in more productive and sustainable economic activities.’

To support all this, the main focus of UNCTAD’s recommendations are in the area of international finance: coordinated capital controls, action on illicit financial flows, better taxation of multinationals (especially digital), and more and better ‘public banks’.

The 2020 World Development Report on Trading for Development in the Age of Global Value Chains has a chapter on the environment. Its key findings are summarised as follows:

  1. Global value chains (GVCs) are a mixed blessing for the environment. Scale effects— which refer to the rapid growth of GVC economic activity—are bad for the environment, whereas composition effects—which refer to how tasks are distributed across the globe— have ambiguous effects. Technique effects—which refer to the environmental cost per unit of production—are positive for the environment. 

  2. GVCs are associated with more shipping and more waste in the aggregate than standard trade. Both have environmental costs.

  3. One important concern has been that industries might migrate to jurisdictions where environmental regulations are lax, but that concern is not borne out by the data. Rather, by locating production where it is most efficient, GVCs can lower the net resource intensity of global agricultural production.   

  4. The relational aspect of GVCs can attenuate environmental concerns. Knowledge flows between firms can enable the spread of more environmentally friendly production techniques throughout a GVC. The large scale of lead firms in GVCs can accelerate environmental innovation and push for higher standards. 

  5. GVCs also facilitate the production of new environmentally friendly goods. Products such as solar panels, electric cars, and wind turbines are produced at lower costs in GVCs and help reduce the environmental costs of consumption.

Other initiatives are worth noting.

The C40 cities group have recently declared for a Global Green New Deal, ‘putting inclusive climate action at the centre of all urban decision-making to secure a just transition for those working in high-carbon industries and correct long-running environmental injustices for those disproportionately impacted by the climate crisis – people living in the global south generally, and the poorest communities everywhere’.

On trade and supply chains specifically, many are working on tracking and reporting on carbon emissions along supply chains, with some policy-makers proposing border carbon adjustments, or taxes on imported carbon. Others are working to tackle supply chain sustainability. Examples include the Fashion Industry Charter for Climate Action, the G7 Fashion Pact, and the One Planet Business for Biodiversity Initiative. The UK has set up a Global Resource Initiative task force on greening the UK’s supply chain. Other commitments were made at the UN Secretary General’s Climate Action Summit in September 2019.

No doubt there is more to be dug up on the debate about a GGND. It would be sensible, for example, to triangulate with separate debates on Green Growth, Just Transition, or Deep Decarbonisation Pathways. For the time being, though, there remain many gaps.

 

On the way forward

What comes next? Frankly, it feels like a big ask at this point to set down the content of an alternative Global Green New Deal.

If FDR were still with us, he would no doubt set up a twenty-first century Brain Trust to help adjudicate on the big questions identified above: allocating emission rights, painting a picture of green growth, separating the must-haves from the like-to-haves, and dealing with the global dislocations associated with climate action. This needs voices from both North and South, and from the climate and development communities: really, a new, reinforced CDKN.

FDR would also emphasise that the best is the enemy of the good, and that the way forward is to get started, experiment and learn from experience. Remember that there were 15 Bills passed through Congress in the first 100 days of his first administration, but that not all innovations worked, and not all survived. As a disciple of Robert Chambers, that seems eminently sensible to me: adopt process rather than blueprint planning; start small and grow; embrace failure; etc . .

Nevertheless, there are some principles at stake, some tests of whether a new approach is right:

First, SDG and climate compatible development planning both need to be bottom up, recognising local circumstances. For climate action, I have argued elsewhere that countries need to incorporate climate compatible development into development planning and industrial strategies, beginning with improved country diagnostics. Aid programmes need to follow.

Second, SDG compatibility. Climate change itself is an SDG (Goal 13) and links strongly to others, including SDG 7 on energy. There are wider links to other SDGs, including on income, inequality, democracy, and the like. The SDGs cannot be treated as a simple check-list, however, and it is unrealistic to expect that compatibilities can be found across the board. It seems reasonable to ask that cross-checks be made, that synergies and co-benefits should be maximised and that a kind of ‘do no harm’ principle should apply, that action on climate does not make achieving other SDGs more difficult.

Third, urgency. The UNEP Emissions Gap Reports make clear how fast and deep emissions cuts need to be to 2030 if Paris temperature targets are to be reached on the least cost pathway. Commitments to zero or net zero by 2050 imply continued, sustained effort, well beyond the potential quick wins like closing down coal. Will proposals for a Global Green New Deal be able to demonstrate that emissions globally will fall at the required pace?

Mage: 123RF. Image ID : 27099710

Kategorien: english

Climate action: why developed countries should track imported emissions, and how to make certification and labelling work for developing countries

13. September 2019 - 8:36

Climate action: why developed countries should track imported emissions, and how to make certification and labelling work for developing countries

 

By Aarti Krishnan and Simon Maxwell

Developed countries are making progress in reducing carbon emissions – and Government regulation of the private sector is playing its part. In the UK, for example, and alongside other measures, the requirement to report energy and carbon emissions has recently been extended to a wide range of quoted and unquoted companies and limited liability partnerships. This is intended to help improve energy efficiency, support companies in cutting costs, and at the same time reduce carbon emissions. Many hundreds of companies have signed up to measurement and certification, and sometimes offset, schemes, like the footprint label from the Carbon Trust, the carbon neutral label from Natural Capital Partners, or Carbon Smart certification from Carbon Smart. The scope and coverage of such schemes is expanding, as indirect emissions and life cycle issues are recognised.

Missing in current policy: imported emissions

There is, however, a large gap in current policy: it does not take account of the emissions embodied in imports, and thus of total consumption emissions. These have been growing in size and relative importance in most developed economies. In the UK, once again, the latest figures show that between 1997 and 2016, territorial emissions fell by over a quarter but imported emissions rose by 20%, with the net result that the UK’s total carbon footprint fell by only 9%. Imported emissions now account for 45% of the UK’s footprint (Figure 1). Policy-makers are paying attention. For example, the Science and Technology Committee of the UK House of Commons recently concluded that ‘the Government should do more to increase the prominence of consumption emissions’. The incoming President of the European Commission, Ursula von der Leyen, has also highlighted the issue.

 

 

 

 

 

 

 

 

 

 

 

Source: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/794557/Consumption_emissions_April19.pdf

Rising consumption is the main cause of rising greenhouse gas imports

It is important to emphasise that the main driver of rising imported emissions is increased consumption, itself driven by rising population and income. Deindustrialisation and the shift of industrial production to developing countries may also play a part in some cases. That suggests a priority is to manage consumption and consumer behaviour, a big topic in itself, and one with important implications for developing countries. For example, if the Oxfam campaign to buy only second-hand clothes in September were to succeed in curbing long-term demand, that would impact on jobs in exporting countries like Bangladesh or Vietnam. Similarly, if long term demand for imports of extractives from Africa to the EU were reduced, African countries could stand to lose over 20% of their total export value.

And energy efficiency needs to improve

Independently of action on developed country consumption behaviour, however, action is also needed to reduce the carbon intensity of imports – as also of domestic production in both developed and developing countries. Energy efficiency is a key element. The carbon intensity of production has been falling fast in countries like India and China, but is still significantly higher than in OECD countries: not surprising when coal still plays such a large part in many emerging economies.

Certification and labelling can play a part

An important question remains. Should reporting, certification and even labelling be extended to imports? And if that were to happen, what would be the impact on developing countries?

Certification and labelling might well be thought to be plausible and popular drivers of carbon reduction in developing countries. In addition to the internal benefits, companies can benefit from external validation and reputation enhancement. Consumers can also benefit if carbon certification and labelling help them make better choices. Fair Trade certification is an example of a scheme which delivers benefits to both consumers and producers - via guaranteed prices, premium payments which can be used to improve productivity, and support to producer organisation.

Overcoming the pitfalls

There are pitfalls in implementing certification.  Experience across many sectors shows that certification can be costly and time-consuming, especially for poor producers and countries. Further, these groups can find themselves as having standards or reporting requirements imposed, with little scope for participation or ‘voice’, and often with different priorities to those they themselves would choose. There is a risk of a top-down ‘green squeeze’ on the suppliers in low and middle income countries. From a consumer perspective, an additional risk is ‘label overload’, with labels for different aspects crowded onto packaging. And from a trade perspective, certification can cause trade distortions and over-burden trade agreements. It may also, in some cases, be incompatible with WTO rules.

If the pitfalls are to be avoided, reporting, certification and labelling of developing country production need to be planned in such a way as to maximise the participation of those involved upstream and downstream in the value chain, and harmonised so as to reduce costs and a multiplicity of reporting and labelling requirements. Certification at the company level will be more straightforward than trying to tie emissions to particular and highly heterogeneous products. It will also be important to tailor certification to the specific circumstances of different sectors. In the UK, for example, the construction industry is an important source of emissions, but one less suited to consumer-facing certification than some other sectors.

And reaping the benefits

There will be benefits. The UK, along with some other developed countries, has committed to net zero carbon emissions by 2050. Many developing countries will need to follow suit if global warming is to be kept to the level agreed in Paris in 2015, well under 2 degrees, and if possible 1.5 degrees. At present, the world is very far from being on track to meet those targets. Indeed, the national plans submitted in Paris promised only about a third of the reduction needed to reach 2 degrees, and only about 10% of the reduction needed to reach 1.5 degrees. The plans themselves are not always being implemented: half of G20 countries have more work to do if they are to come close to meeting their 2015 pledges. New pledges are required by the UNFCCC in 2020, for the period to 2030. Certification could play a part in helping all countries identify carbon hot spots and take decisive action to reduce emissions.

Certification and labelling: better than restricting trade

Certification is not the only option. Technology transfer offers important possibilities, including within companies as a result of foreign direct investment. Overseas aid can also be a useful incentive. In these cases also, however, there are benefits in measuring and reporting on carbon emissions. The Greenhouse Gas Protocol, developed by the World Resources Institute and the World Council for Sustainable Business Development, is used by companies and certification bodies, and by Governments, including the UK. It provides a global framework, alongside ISO and other standards.

If no action is taken, and as the carbon constraint begins to bite, there will be pressure to enforce carbon intensity standards, for example by imposing new tariffs, so-called border carbon adjustments. Indeed Ursula Von der Leyen has proposed BCAs, //medium.com/@teamwarren/trade-on-our-terms-ad861879feca">as has Elisabeth Warren in the US. These will be problematic, adding to trade tensions at a time of increasing protectionism. Better by far for developing countries and their development partners to launch the progressive, step-by-step adoption of new standards and certificates.

Aarti Krishnan is a Senior Research Officer at the Overseas Development Institute

Kategorien: english

India in Africa: serving both profit and wider purpose

16. August 2019 - 10:05

India in Africa: serving both profit and wider purpose

 

 

 

A version of this article was first published in August 2019 in India Global Business Magazine, published by India Inc. See here.

Gather Indian private sector leaders together in one place and it is easy to be impressed: by the size of the businesses, the pace of innovation, and the speed of growth.  This was certainly the case at the India Inc Leaders’ Summit, held in the UK in June.

The traditional theory of the firm sees business as existing mainly to reduce transactions costs or manage uncertainty: in short, to make money. In the best cases, however, the Indian private sector can serve wider objectives: to create jobs and secure livelihoods, support social action, and protect the environment.

These benefits are of value to India. Can they be cemented into best practice? And, as Indian business takes an increasingly global perspective, can there also be benefits for other regions? India, after all, is a large recipient of foreign direct investment, but also, these days, a large provider:  $US 11bn in 2018, according to UNCTAD.

Africa can provide a test bed of Indian business commitment to both profit and wider purpose. It is rich in people and natural resources, and home to several of the world’s fastest growing economies, including Ethiopia, Rwanda, Ghana, and Cote d’Ivoire, all growing at more than 6% per year. At the same time, Africa has the largest current and prospective shortfall in basic development indicators: more than 400 million people living in absolute poverty, a third of children stunted by malnutrition, and a disproportionate share of the population affected by conflict, climate stress and natural disaster. Achieving the Sustainable Development Goals by 2030 is a challenge which needs all hands on deck.

India is already the tenth largest investor in Africa. Much of this turns out to be in Mauritius, for complex tax reasons, apparently; but careful work by Malanka Chakrabarty for ORF shows that total investment in other countries during the period 2008-16 amounted to $US 5bn. She estimates that nearly 600 companies are involved.

The potential to grow is large, not just in the natural resource sectors which currently dominate, but also in manufacturing and services. Africa is undergoing economic transformation, offering many new opportunities. However, what principles should govern Indian investment in Africa? And what should Africa ask of Indian partners? There are three options.

The first option is just to hope for the best. African countries should encourage Indian investment, and hope that a sense of corporate social responsibility will drive a commitment to the SDGs and to high social and environmental standards. Maybe. But experience around the world suggests that is a high risk strategy. Not all businesses hold themselves accountable for taxes paid, safety standards maintained, or the environment protected.

The second option, then, is for Africa to set standards it expects its foreign investors to uphold. Perhaps it can work with Indian and other foreign investors to set these standards? Or, Africa and India can use existing frameworks as a starting point.

For example, the UN Global Compact is described as the world’s largest corporate sustainability initiative, with 10,000 company participants from 161 countries. They all subscribe to ten core principles (Box 1), including the protection of human rights, the elimination of discrimination in employment, and a precautionary approach to the environment. There is also a strong injunction to work against corruption in all its forms. The Compact has 315 active business participants in India, compared to 282 in China, 827 in Brazil, and over 1000 in large European economies like France and Spain. 

 

 

 

 

 

 

 

 

Other possibilities include adopting the Equator Principles, used by 97 financial institutions in 37 countries to manage social and environmental risk in project finance: the IDFC First Bank is the only Indian signatory. Or Africa could encourage inward investors to become B-Corps (Box 2), committed to the principle that ‘all business should be conducted as if people and place matter’ and that ‘through their products, practices, and profits, businesses should aspire to do no harm and benefit all’. There are only three Indian businesses so far that currently subscribe to the B-Corps standards for accountability and transparency.

 

 

 

 

 

 

 

The third option is for Africa and India to work with others in developing new business opportunities, and simultaneously set high standards to which all will adhere. This might be of particular interest to a country like the UK, with strong historical and economic ties in both India and Africa, a strong focus on inclusive economic development in its overseas programmes – and in search of new global partnerships in what looks increasingly likely to become a post-Brexit world. Interestingly, the new UK development minister, Alok Sharma, wrote in 2016 that

‘ . . . liberalism and globalisation . .  have lifted millions out of poverty, broken down barriers between nations and people and strengthened the rules based international system on which we all depend for our security and prosperity. . . (But) while the tide of globalisation has carried many with it, it has also left others trailing in its wake. . . (So) we must also recognise that some things have to change. . .  to support successful businesses while at the same time encouraging them to support a successful society. A society that works for everyone.’

Governments indeed have a role: to set and oversee the rules and standards, but also to provide the public goods which underpin a successful and inclusive private sector: infrastructure, property rights, an effective legal system, well-functioning markets, and, importantly, support to the research and development which underpin innovation.

A partnership between India and Africa, with the involvement of the UK, could deliver all of these. The partnership could support investment, for example by investment promotion agencies working together, or by facilitating credit. There could be new research, linking universities, research centres and think-tanks in different countries.  There could be joint political initiatives, for example on trade facilitation or climate targets. Indeed, the UK’s Department for International Development is supporting an India-UK Global Partnership Programme along these lines.

Renewable energy could be a focus, building for example on the impetus of the International Solar Alliance, launched by Narendra Modi in 2015. 

More generally, climate change could be a candidate, covering mitigation efforts like solar, but also adaptation and wider economic transformation: an approach we have termed climate compatible development. It is notable that the UK Government is leading on climate resilience at the climate summit in September 2019 – and that the UK is hoping to host the landmark climate talks in 2020.

There are other candidates: a personal favourite is development of the food industry, to secure healthy and sustainable diets in rapidly urbanising environments. Delhi, for example, already has a population of around 24 million, enough to make it the 55th largest country in the world, and with a food system ready for rapid modernisation. African cities face a similar challenge, and the UK has extensive experience.

The Kigali Global Dialogue, an annual discussion forum jointly hosted by Rwandan and Indian partners, also identifies public health, education and technology as sectors of future cooperation.

Kategorien: english

Dear Europe

7. August 2019 - 12:22

Dear Europe

 

 

 

This article was first published in June 2019 in Great Insights magazine from the European Centre for Development Policy and Management. See here. It has been lightly edited to reflect the change of administration in the UK.

Dear Europe,

The Brexit Party won the election to the European Parliament in the UK. And we have a new administration for whom ‘hard’ or no deal Brexit features prominently. Many commentators think that the political situation in the UK bodes ill for future collaboration with the EU, never mind future membership. Our partnership in international development could be a victim.

On the other hand, there is a silver lining in the Brexit mess. It is that our collective national breakdown has revealed a hitherto hidden well of emotional attachment to Europe and to the EU. Over a million of us marched in London at the end of March, in favour of Remain. Over six million signed a petition in favour of revoking Article 50. And pro-Remain parties performed well in the election. Certainly, at the march, there were enough EU flags, and enough blue and gold face paint, to suggest a real affection.

That is a bit of a surprise. It has often been argued that the UK differs from other Member States in its attitude to the EU.

For the Continental Members, and no doubt for Ireland, membership has been seen as a matter of values, a matter of culture, a question of identity. This is deeply rooted in memories of war and dislocation, in physical proximity, in family ties, and now in shared institutions. The EU is often the default.

For the UK, membership has been seen as more instrumental, a question of calculus, part of a complex web of international alliances, in which political capital is deployed according to the objective being pursued. In that vision, the EU is not always the right answer: sometimes, NATO might be the better option, or the UN, or the Commonwealth. And sometimes, including with respect to aid, it is better to act bilaterally.

Certainly, calculus has been strongly in evidence in the UK’s approach to working with the EU on international development, including after Brexit. In a succession of policy papers and ministerial statements during the past year, the UK has been keen to explore in what areas the EU Institutions might have comparative advantage, compared, say, to the World Bank or the UN. Humanitarian aid has featured, and peace-keeping, and migration. The UK has consistently emphasised value for money. It has also wanted to make sure it has a seat at the table and a voice in decision-making.

Probably none of that will change if the UK leaves or stays. Indeed, nor should it. Comparative advantage, value for money and voice are all important. But might the pendulum shift gently towards culture, and would it make a difference if it did? Of course, the popular mood is one thing, and the political process is, or can be, quite another. But there may be some interesting options.

Development cooperation cannot stand still. The recent foresight study published for the EU by ESPAS, the European Strategy and Policy Analysis System, points clearly to a world well on its way to a ‘new geopolitical, geo-economic and geo-technological order‘: demography, urbanisation, technical change, and environmental pressure will all play their part.

In this context, the Sustainable Development Goals provide an inspiring vision of ‘the world we want’, but not necessarily a high resolution road map. Development leaders will need to step away from ticking off individual, aid-funded SDG programmes. They have already begun to do so.

The EU’s Global Strategy, for example, already in 2016, emphasised the importance of integrated approaches. In the UK also, new cross-Government funds have been created, for example to deal with conflict and security, and with climate change. Both the EU and the UK have supported the institutions of global governance, for example on climate change. Both have invested heavily in global research. In both cases, poverty reduction is enshrined in law as the ultimate goal of development policy; and will need to be achieved in new ways. These common interests provide the foundation for a productive future partnership.

If the UK leaves the EU, at least with a deal, there will continue to be aid payments to the EU of something like £1.5 bn a year into the mid-2020s, reflecting past commitments to the current Multi-Annual Financial Framework and European Development Fund. A shift in the narrative might see those used as a platform to build further cooperative relationships, either in parallel or by means of direct contributions to Trust Funds and similar instruments. Maybe Ministers will be found looking for ways to strengthen the EU’s voice as a major pillar of the development system. After all, the EU institutions spend more on aid than the World Bank, and almost as much as the whole of the UN. 

If the UK stays, a more ambitious landscape opens up. A new Commission will be appointed in 2019, able to set a new course – and equally important make a new case to the public. The Multi-Annual Financial Framework will be agreed, setting spending limits, including for external action, to 2027. New trade negotiations will begin. More ambitious climate targets will be set. New partnerships will be put in place, not least with Africa. The UK has a track record in all these areas.

A UK motivated by a bit more ‘culture’ as well as its traditional ‘calculus’ could lead the EU in shaping this exciting agenda. At the London march, and also at two marches in 2018, I wore a tee shirt and carried a placard with the following slogan: ‘Global Britain Needs EU Needs Global Britain’. Calculus – and culture.

 

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Kategorien: english