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Mexico’s back-tracking on energy policy, the European Union and the COP26

21. Oktober 2021 - 12:33

As the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow approaches (31 October to 12 November 2021), Mexico’s Congress discusses a controversial proposal to modify the Constitution in the electricity sector. This legislative change would give primacy to the Comisión Federal de Electricidad (CFE), a state-owned company, effectively crowding out private producers and eliminating independent regulators. The discussion takes place in a highly polarised political context, with the government arguing, in full nationalist fashion, for the need to take back control of a strategic sector that was opened to private and foreign investment with the 2013 Energy Reform. The weak and fragmented opposition and environmental non-governmental organisations (NGOs), like Greenpeace, criticise the effects this will have for the private sector, investor confidence and the ensuing litigation by the affected companies, higher prices to the final consumer, and, of course, the environmental implications for the reduction of green-house emissions.

The introduction of electricity generation with renewable sources (solar and wind), which increased from 3% to 9.4% between 2015 and 2020, was achieved primarily through private investment, notably from European and Canadian companies. This trend is now being reversed, as the expansion of solar and wind capacity has slowed down since 2020, when a new regulatory framework for the power sector was introduced, and no new capacity is planned until 2027. Meanwhile, only 32% of CFE’s electricity production comes from renewables and, in aggregate, 75% of Mexico’s electricity still comes from fossil fuels. If approved, the Constitutional change would reverse the progress achieved so far.

At least, the proposed reform is putting the discussion on climate change and de-carbonization on the public agenda, where it has been conspicuously absent. In fact, President Lopez Obrador’s environmental agenda is rather limited. It focuses on the project Sembrando Vida, which consists of paying rural populations to plant trees – so far with underwhelming results. Instead, the government has prioritized energy self-sufficiency based on fossil fuels, through massive funding for the state-owned Mexican Petroleum (PEMEX).

For the EU, Mexico’s changing energy policy is of great concern for two main reasons. On the one hand, because of the implications of the European companies that have already invested in the renewables sector and now face legal uncertainty. On the other, at a more general level, the EU is worried about the difficulties this policy change poses for Mexico’s international commitment to fight climate change.

Mexico’s shifting international position on climate action

The 22% CO2 emissions reduction proposed in Mexico’s 2015 Nationally Defined Contribution (NDC) was based on the energy sector reform, especially the introduction of renewables in the electricity sector, as well as the introduction of cleaner fuels. However, given the current government’s energy policy, Mexico has not proposed a more ambitious 2020 NDC, up for review in Glasgow in 2021, as stipulated in the Paris Agreement. In fact, the new NDC revised the business-as-usual (BAU) scenario upwards, which means that achieving the 2030 target would result in higher emissions. Thus, Climate Action Tracker, moved Mexico’s pledge from “insufficient” to “highly insufficient”, lowering climate ambition and transparency.

As a result of these energy policy changes, Mexico’s international position is shifting, from the leading developing country it was in the effort against climate change, towards emphasis on adaptation, closer to the G77 views. At the COP26 it will be demanding financial support for Latin America and the Caribbean from international and regional institutions as a condition for intensifying its policies, as Foreign Minister Marcelo Ebrard stated at the CELAC (Comunidad de Estados Latinoamericanos y Caribeños) summit hosted by Mexico last September. More worryingly, no high-level officials are to attend the summit in Glasgow in November.

Still, in contrast to these trends, Mexico continues to pay lip service to environmentalism in other international fora and from other angles. For example, it recently co-sponsored and voted in favor of a resolution at the United Nations’ Human Rights Council recognizing the right to a clean, healthy and sustainable environment. Moreover, it is promoting the expansion of Sembrando Vida as a key cooperation tool with Central America. Mexico is also committed to strengthening the global framework for biodiversity and subscribes to a green recovery from the COVID-19 pandemic.

What role for the EU?

Despite the Global Agreement between the EU and Mexico, in force since 2000, and the Strategic Partnership since 2007, which includes a high-level dialogue on climate change, relations are not going through their best moment, as both sides’ priorities shift apart. The last high-level meeting of the dialogue on climate change, which used to take place yearly, was held in 2019, and the one that was supposed happen in October 2020 has been postponed indefinitely. Instead, discussion of the matter has been grouped with other issues, such as the Agenda 2030, the drugs problem, gender equality, and migration during the first high-level meeting on multilateral issues, a year ago.

Sectoral interaction with the Federal government has become increasingly difficult for the EU in matters related to climate and energy policy. The main interlocutor used to be the Ministry of the Environment (SEMARNAT), but it has suffered severe budget cuts in the last three years, drained of bureaucratic capacity, expertise, and political standing. Dialogue with the Ministry for Energy (SENER) is non-existent, and European ambassadors have complained to the Senate for not consulting stakeholders before changing the legislation in the electricity sector in April 2020.

The EU, its member states and the United Kingdom continue to be regarded as a source of funding, expertise and technical support, but dialogue on climate change has narrowed down to the Foreign Ministry, and within the frame of multilateral issues. Thus, EU bilateral environmental cooperation with Mexico continues, but it is now focused on state and local initiatives, as well as with other actors from civil society with whom cooperation is still possible. Examples of current cooperation include a project called “Chihuahua Green City”, in collaboration with the major and business associations, and a training course for young Mexican leaders in favor of climate action and biodiversity.

In the future, Mexico which is an open economy that depends on exports, will probably face difficulties when the EU starts demanding environmental certifications to allow entry into its market and imposes the carbon tax proposed in the EU Green Deal. Therefore, the EU should work with Mexican exporters’ associations and other local actors to increase their awareness of the coming changes that will affect their business and help them to adapt accordingly. Ratifying the recently signed EU-Mexico Agreement (2020), which includes a new chapter on Sustainable Development, would also provide additional tools for the EU to encourage Mexican compliance in this increasingly controversial issue.

Der Beitrag Mexico’s back-tracking on energy policy, the European Union and the COP26 erschien zuerst auf International Development Blog.

Learning from the Afghanistan debacle – But what exactly?

16. September 2021 - 14:00

With the takeover of Afghanistan by the Taliban only a few weeks after the withdrawal of international troops, the mission failed to leave behind stable functioning state structures which would be resilient enough to withstand military pressure from the Taliban, care for the population and be respected by it.

The failure in Afghanistan casts doubts over the usefulness of military interventions and state-building driven from the outside. However, assuming that not all interventions are doomed to fail, what lessons can be drawn for ongoing counter-terrorism coalitions in the Sahel or Lake Chad region as well as for peacekeeping operations encountering terrorist and militant groups? I propose five reflection points:

Debating interventions

We need an open, honest and nuanced debate around the effectiveness of military interventions which includes peacekeeping operations and counter-terrorism coalitions. Simplistic messages like ‘peacekeeping works’ or ‘military interventions are generally harmful’ are not helpful at all! It is neither acceptable to let terror groups spread without militarily containing them nor can we simply turn away from the deadlock situation in which many international mission find themselves in.
Peacekeeping operations are increasingly deviating from basic principles such as host-country consent, minimum use of force and political neutrality. This results from the splintering of militant groups, increased terrorism and often weak domestic governance structures. The majority of recent missions (Central African Republic, DRC, Mali, South Sudan, Somalia) face an environment displaying persistently high degrees of violence (even after years of deployment) and no clear exit strategy. Such a situation is not sustainable! The risk of donor fatigue in the civilian sector, a gradual withdrawal of troops and losing support from the local population increases over time.
Comprehensive mandates comprising of a mix of peace-building, peacekeeping and nation-building instruments are often desirable but not implementable in the medium term. Realistic achievable mandates need to be designed which should not be seen as a form of downsizing or anti-liberal defeat. It is rather a question of what goals should be prioritized and can be achieved realistically. As the UN Secretary-General aptly formulated it by “attempting too much we dilute our efforts and weaken our impact.”¹ Mandating 209 tasks for the UN Mission in South Sudan is over burdening the operation. “Mandate inflation” needs to end.

Resources don’t fix everything

The amount of resources spent for conflict resolution matters far less than the ability to have broad-based local buy-in for international operations. Simply said, no amount of resources (military or civilian) is likely to override local ‘deficits’. Broad-based host-country consent which extends beyond domestic elites, cannot be bought through international aid. If the impression of predominance of external interests prevails, programmes are merely executed on the population but not developed with them. Where it is lacking, sustainability of progress is in jeopardy. Past debates around peacekeeping effectiveness have concentrated too much on resource supply and too little on ownership.

Raising Awareness

Most peacekeeping missions and counter-terrorism coalitions are in deep crisis but this has not triggered much concern among troop contributing countries or multilateral organizations. As of now there is too little awareness of the fragile situation in which we are in. In the Sahel the security situations has not improved markedly since the setting up of the G5 Sahel Joint Force. In the Lake Chad Basin, the fight against Boko Haram is not progressing further despite initial gains. In Somalia, Al-Shabaab cannot be defeated militarily. As long as military operations continue, much needed governance reforms are often marginalized. Excessive investment in armed forces is upsetting the military/civilian balance to the advantage of the former. In extreme cases political systems get militarized resulting in unnecessary use of force against civilians or increasing the likelihood of coup d’états (Mali 2021). In both cases national forces turn out to be threats to the population which they are sponsored and trained to protect while at the same time the terrorist threat is not dissolving.

The Double Governance Crisis

There is a real crisis of governance. This crisis does not only manifest itself at the local level (the inability of host-countries to erect stable and fair governance institutions) but is also a crisis of the international community which fails in state-building. Even less military heavy UN peacekeeping operations are hardly able to kick start country-wide governance improvements.² In other words these missions are not able to deliver. In the long-run the absence of profound governance improvements bears the risk of relapsing into armed conflict. The goal should be to support building communities which are able manage conflicts on their own.

Accepting Complexity

The character of many conflicts is shaped by complexity which means a high degree of uncertainty over outcomes and non-linearity. These kind of conflicts often do not produce clear winners. Influencing them from the outside is possible, but steering capacities remain limited. However, the response to conflicts is often guided by the implicit belief that, only with the right instrument and enough resources available, a solution can be enforced or administrated. Such a thinking is not likely to succeed. Instead of delivering solutions, these need to be generated within the specific conditions in which conflicts are taking place. In the end, conflict resolution is shaped by self-organization. Accepting these realities by international donors of not being the key drivers of change but merely the facilitators of slow gradual change often clashes with the too high expectations international organizations have created in order to receive donor support.

In Conclusion

The overall situation is uncomfortable, but not hopeless. There are no quick or easy solutions and no deployment can guarantee success. Critical for progressive change is the awareness that the underlying problems cannot be fixed through throwing more resources at conflicts. The very nature of the problem only allows external interveners limited impact. Instead of working with too comprehensive mandates missions need to focus on achievable goals and manage international and host-country expectations accordingly. Achieving military goals such as pushing back militants are not sustainable if governance structures are not embedded in society. The problem is that train-and-equip programmes for national armed forces often seem to deliver quick results while governance and societal support and domestic transformation are lagging behind considerably. Bridging this time gap should be prioritized.

¹ Antonio Guterres, Remarks to Security Council High-Level Debate on Collective Action to Improve UN Peacekeeping Operations, New York 28. 03.2018. https://www.un.org/sg/en/content/sg/speeches/2018-03-28/collective-action-improve-un-peacekeeping-operations-remarks

² Brosig, M. &  Sempijja, N. (2017) “What Peacekeeping Leaves behind: Evaluating Multi-dimensional Peace Operations in Africa” Conflict, Security & Development 17 (1) 21-52.

Der Beitrag Learning from the Afghanistan debacle – But what exactly? erschien zuerst auf International Development Blog.

Germany’s Role in EU Development Policy: From Broker to Agenda-Setter

10. September 2021 - 9:20

Germany is the world’s second largest development donor after the US, and the European Union’s (EU) largest aid provider. And yet its financial heft is not commensurate with its positioning on development in the EU. For the second time, Germany reached the aid target of 0.7 percent of gross national income (GNI) in 2020 (the first being in 2016, albeit in part due to its response to the high influx of refugees into the country), making significant contributions to the global pandemic response, including through the EU, COVAX, and the WHO. With a new government taking over the helm of the country and building on its financial firepower, Germany now has the opportunity to fully embrace a leadership role in the EU as an agenda-setter in development, driving forward innovative ideas, rather than as a mere broker.

Germany is considered to be a heavyweight member state in the EU and usually acts in tandem with France. Angela Merkel herself has been accredited with holding the EU together in past crisis situations. There have been instances (such as the Eurozone crisis, or during the presidency amidst the COVID_19 crisis) where German leadership has been forceful and single-minded. However, there are other cases in which Germany has “led from behind,” attempting to organise and negotiate diplomatic solutions (as in the migration crisis), which have not always proved fruitful.

A broker for EU development policy

In EU development policy, Germany has played a strong intermediary role, successfully getting deals over the line. This role was particularly clear during Germany’s EU presidency, most notably with the new Global Europe Financial Instrument (or more commonly known as the Neighbourhood, Development and International Cooperation Instrument) and the new agreement between the EU and the African, Caribbean, and Pacific countries. Germany has a reputation of being a respected and reliable partner amongst its peers. And having achieved the 0.7 percent target, Germany has now shed its stigma of being a slow starter when it comes to development finance.
However, the evolution of Germany’s own international development policy has developed largely independent from the EU’s development policy. Its main strategies—BMZ 2030, the Marshall Plan with Africa, the Compact with Africa—were devised without integrating European partners or securing early buy-in at the EU level. Particularly for its Marshall Plan for Africa, this approach of keeping German development policy separate from the EU’s has has subsequently prevented it from significantly influencing the positions of member states.

What makes for good leadership in EU development policy

A good agenda-setter in EU development policy develops innovative and coherent strategies and quickly adapts to changing situations. It also needs to build coalitions from the outset with other member states and the EU Institutions to successfully rally partners behind a common approach. Member states have tended to shape EU development policy by “uploading” their policies and objectives to the European level, thus creating a composite of a variety of policies that result in an overloaded, broad, and unstrategic agenda. All member states, but in particular the more influential ones, tend to have a strong interest in defining what the EU should or should not do, while shielding their national policies from EU influence. Yet, even for a big member state, such as Germany, transformational impact is difficult to achieve through national policies alone. Initiatives, on the other hand, that involve the EU Institutions and selected member states from the outset—be it at the multilateral level or for strategies with specific purposes—not only lend more weight but also strengthen leadership and credibility at the EU level.
Rather than seeking to synchronize its national efforts with those at the European level, German leadership should seek to influence and guide activities by providing solutions to common problems or offering ideas about how to accomplish collective purposes and mobilising the energies of others to follow these courses of action.

Obstacles to transitioning from broker to EU leader

An innovative approach to development policy—be it at European or at national level—will have to build on a thorough understanding of the role of international cooperation in achieving sustainable development both in Europe and globally. While COVID-19 revealed the fragility of the gains made in human development by developing countries over the last decade, the need to promote and provide global public goods (GPGs) is increasing, due to the scope, interconnectedness, and complexity of the Sustainable Development Goals (SDGs), transnational development challenges, as well as the crucial socio-ecological reconstruction window that is opening up.
However, there are two fundamental challenges that Germany needs to overcome to address this agenda and transition towards a leadership role in EU development policy. The first is around its own internal mechanics. Germany is the only remaining European donor with a standalone development ministry. For some, this is a key advantage, as it allows the Federal Ministry for Economic Cooperation and Development (BMZ) to focus attention and promote issues of global sustainability and development in the Cabinet. However, the “Ressortprinzip”—the principle of ministerial autonomy in decision-making—means that internal processes of coordinating with the foreign ministry and other line ministries are both time and energy consuming, and often result in a lack of a joint approach across government. This organization makes a convincing stance in the EU even more difficult to achieve. Secondly, while Germany has a number of strategy and policy papers, such as the German Sustainable Development Strategy, it does not have a clear overarching strategic vision for how global sustainable development issues are organised across the federal government and implementing organisations. The absence of a whole-of-government approach means that Germany is unable to address the incoherence between domestic and European policies on global sustainable development across government. Furthermore, Germany lags behind other EU member states in articulating its development policy strategy for social and ecological reconstruction in a post-COVID world, despite having most instruments at hand with BMZ 2030 and the new German Sustainable Development Strategy.
This lack of an innovative vision for the role of international cooperation and development in pursuing global sustainability transformations mirrors the absence of debate on development policy in the run-up to German elections. Germany’s role in development, let alone its role in EU development policy, are niche topics in all the political party manifestos. What exists mainly reflects the domestic agendas of the political parties with the Social Democrats (SPD) emphasising fair globalisation and trade policies, the Greens climate finance, the Liberals (FDP) market mechanisms in support of development and the Conservatives (CDU) security and the role of the private sector. Not a single party presents a strategic vision for global sustainable development nor convincing ideas of how to address existing incoherencies between domestic and external objectives.

Actively shaping the future EU development agenda

As a new German government takes up office, it needs to define its agenda not only for development policy but also for how to promote global sustainability transformations across the government. In doing so, the European perspective needs to be integrated from the outset, taking into account the challenges the EU is better equipped to tackle than single member states, the shared principles and priorities of the EU and mutual advantage, and how it can lead that agenda as part of the collective, recognising that transformational impact can only be generated by working together. But a convincing strategic vision is paramount for others to follow. Leadership also requires a concerted effort to address domestic issues that hinder global sustainable development. The supply chain law is a key example of a BMZ led cross-government initiative that successfully contributed to a step change in domestic politics and as a result makes it possible for the incoming new government to further push similar legislation at the EU level and claim leadership.
When the new German government comes in, decisions around EU distribution and programming of funds will have already been made. However, the question of how the EU positions itself around the immediate and long-term challenges spewed by the pandemic and how member states align their national policies with a joined-up EU approach for “building back better” will be live. The external dimension of the EU’s Green Deal is at the very heart of these questions. There has been little progress in defining an integrated approach that links both domestic and external policies and that addresses negative spill-overs of European policies and of the domestic policies of member states. Furthermore, although the “Team Europe” approach has undoubtedly achieved greater visibility of EU development, there has also been little progress towards defining a common strategy that bridges social and ecological development objectives. There is a very real risk that social objectives become a blind spot of the EU Green Deal thereby overlooking buy-in from partner countries. No matter how important a green recovery is, most of the EU’s partners are now first and foremost prioritising the immediate damage done to human development and jobs.
Beyond defining its own approach towards post-COVID reconstruction that is sustainable and transformational in partner countries, a new German government should seize the opportunity to actively shape this agenda at the EU level, combining its brokering skills with a progressive agenda-setting role.

This contribution was also published on the website of the Center for Global Development

Der Beitrag Germany’s Role in EU Development Policy: From Broker to Agenda-Setter erschien zuerst auf International Development Blog.

Change or Crumble! Germany Needs to Reposition its International Cooperation

7. September 2021 - 16:00

©Brigitte makes custom works from your photos, thanks a lot on Pixabay

As Angela Merkel’s 16 years at the helm of the German government come to a close, Germany’s international cooperation for sustainable development seems, at first sight, to be in good shape. During her tenure, German official development assistance (ODA) more than tripled, reaching $28 billion in 2020 and putting Germany second only to the United States ($34 billion) and well ahead of the United Kingdom ($19 billion) and the EU Institutions ($17 billion).

Germany boasts an independent cabinet-level Ministry for Economic Cooperation and Development (BMZ) that steers 75 percent of the federal government’s ODA. The remainder sits primarily with the Foreign Office (15 percent) followed way behind by the Ministry for the Environment (2.5 percent) and some others. It might seem, then, that the outlook is sanguine for Germany’s development cooperation. But is it?

Sadly, the numbers don’t tell the full story. Germany may be among the most generous providers of ODA, but its international cooperation and broader foreign policy architecture are undercutting its efforts. The next government will need a clear vision and political capital to retool Germany’s international cooperation to truly promote sustainable development on a global scale.

Dark clouds gathering at the horizon

Germany’s impressive ODA figures are not matched by an equivalent political clout, either across government or at the European and international levels. The recent OECD/DAC Peer Review on Germany’s international cooperation criticised its lack of overall vision and a practice of non-interference among autonomous ministries instead of a whole-of-government approach. This translates into weak or even absent leadership in multilateral and multistakeholder partnerships. It seems as if the rise in financial resources is accompanied by a decline in political capital invested, while shiny initiatives primarily play to domestic galleries instead of rallying international alliances. This is all the more concerning as implementing the universal 2030 Agenda with its 17 Sustainable Development Goals (SDGs) requires an overhaul of an international cooperation architecture that still perceives cooperation as aid or charity limited to poorer countries.

Looking beyond election day, dark clouds are gathering at the horizon. The medium-term financial perspectives foresee a 25 percent cut of the BMZ’s budget after the additional funds for the COVID-19 crisis and some refugee aid run out. Warding off these cuts will require political heavy lifting as well as strong conceptual and institutional underpinning. However, Germany’s National Sustainable Development Strategy still lacks a coherent interdepartmental implementation program for the key lever of international responsibility and cooperation.

Furthermore, with the Chancellor leaving office and the political composition of the next government probably changing significantly—and the incumbent development minister not standing for reappointment after eight years in office—changes to the departmental set-up of the government, including BMZ’s remit, might be more likely than usual. The election campaign is awash with vows to modernise the entrenched German governance system, whose weaknesses have been laid bare by the pandemic, the climate crisis, and the devastating summer floods. There are proposals to set up new ministries for climate protection, digitalization, or immigration and integration, topics that all include a significant international dimension. Other proposals aim at bringing trade and aid closer together, or pooling development cooperation, international climate finance, and parts of humanitarian aid, with a view to finance a global transformation along the SDGs and the Paris Climate Goals.

In this context, two questions stand out: First, how prominently will the incoming government feature international responsibility and cooperation for sustainable development in a whole-of-government approach to external policies? Second, what will be the rationale behind the future departmental set-up of international cooperation?

Adapting the cooperation architecture to the 2030 Agenda

Let’s start with the second, seemingly easier question. With the adoption of the 2030 Agenda and its 17 SDGs, the development agenda turned universal, aiming at transformative change in poorer and richer countries alike, as well as balancing the economic, social, and environmental dimensions of sustainable development in an integrated and indivisible manner. However, to what extent does this change get translated into the conceptual and departmental set-up of Germany’s international cooperation?

Not so much, if you listen to the development policy spokespersons of the democratic political parties in the German Bundestag. Across the aisle(s), they prioritize poverty, hunger, and inequality as the main concerns for BMZ’s development cooperation with obviously little understanding of the broader SDG agenda (“People, Planet, Prosperity”) or the related idea of the global common good, without which all other efforts will be futile.

A more nuanced approach is taken by the BMZ’s 2030 reform strategy. While it highlights overcoming hunger and poverty as its primary aim when implementing the 2030 Agenda, the strategy also emphasizes new partnerships to protect global goods and defines five core areas, from peacebuilding to the environment, that relate to concerns across all SDGs. Yet, the selection of partner countries and allocation of budgetary funds do not reflect the necessity to act in these core areas from a global perspective, but rather the neediness of countries and their quality of governance.

Exceptions confirm the rule. Eight emerging economies are framed as global partners, but cooperation with them, for example on global public goods, will be carried out mainly through loans and leveraging market funds, an all-too narrow approach. Another 10 conflict-affected countries, mainly in Africa and the Middle East, are grouped as nexus and peace partners. The focus, however, lies with 42 bilateral partner countries, most of them (35) in Africa and the EU’s Southern and Eastern neighbourhood. It is more than debatable how you can follow through on a global agenda aimed at the SDGs by applying a poverty lens in the first place, and with only five partner countries in Asia and two in Latin America, let alone build the transformative partnerships with other high-income countries necessary to achieve the SDGs.

A strategic choice to be taken

Germany’s next government will face a strategic decision: either limit the BMZ mainly to poverty-focused aid for the poorest countries and expand other ministries’ international cooperation in the areas and regions beyond this remit, or reposition the BMZ towards a broader transformative cooperation agenda geared at the universal achievement of the SDGs. The first choice could imply even ceding competencies to other ministries. The latter would require new formulas for allocating budgetary and political means, revisiting decade-old business models of aid delivery, and introducing a new openness towards other policy concerns.

Cooperation and coherence across government cannot be organised as one-way streets. Over the years, BMZ’s traditional hesitation in these regards has certainly contributed to the creeping rise of other ministries’ budget lines for international cooperation. Although these newcomers in the cooperation business have experienced beginners’ mistakes, they have also developed innovative approaches when entering uncharted territory. This can be observed with the Foreign Office’s crisis interventions (like at the civil-military interface), or with the Ministry for the Environment’s climate partnerships. Although completely different settings, both cases feature stronger links between operational activities and political initiatives, which is not common practice in the aid business. Another innovative feature can be found with first elements of reciprocity discussed around the climate partnerships. Addressing structural changes at both ends of the partnership would help with escaping the traditional donor-recipient trap and tearing down the walls separating cooperation with low- and middle-income countries from the cooperation between high-income countries.

Overall, the stronger arguments are with repositioning and thoroughly innovating the BMZ as Germany’s global cooperation ministry for sustainable development. First, the integrated character of the 2030 Agenda, with its mantra of “leave no one behind,” is best served if fighting poverty and inequality (“people”), protecting the climate and biodiversity (“planet”), and promoting economic development (“prosperity”) are supported by a respectively integrated cooperation architecture. Second, the effectiveness and efficiency of Germany’s international cooperation would suffer further by adding more actors to its already-complex cooperation bureaucracy. Third, coordination of and between diplomacy, cooperation, and the military as the core instruments of external policies is made much easier if led by one ministry each. Compare, by analogy, the military, where few would like to go back to the times of separate ministries for ground forces, the navy, and the air force.

Whole-of-government vision for geopolitical self-assertion or survival in the Anthropocene?

Let’s now address the first and larger question, which requires an answer no matter how the next government sets up its departments: How will and how should the next German government shape a stronger whole-of-government approach to external policies?

Across the political spectrum, there are calls for a better-coordinated, integrated approach to Germany’s and the EU’s external relations. As a recent Munich Security Report put it, Germany’s international commitment and leadership still “falls short not only of the expectations of its most important partners but also of the requirements arising from the strategic environment.” If Germany is to evolve from a status-quo power into an “enabling power,” it should “define its strategic interests … and modernize its foreign policy apparatus, including its decision-making processes.” The recent failures around Afghanistan could well accelerate these calls.

But what should be the vanishing points of such a strategic vision, geopolitical self-assertion or survival in the Anthropocene? Depending on the perspective taken, different approaches are pursued. Some want to create a National Security Council, others a National Council for Peace, Sustainability and Human Rights, both placed under the guidance of the Chancellor. Interestingly, the actual three contenders for the job are keen on strengthening the role of the Chancellery in international politics, not least to catch up with the presidencies in Washington and Paris or Moscow and Beijing. The idea of a National Security Council (or an upgrade of the dormant Federal Security Council) has been put forward from within the traditional foreign and security policy establishment for decades but is regularly met with resistance by the Foreign Office, which fears ceding influence to the Chancellery, and by development folks who fear a securitization of aid.

However, with the adoption of the SDGs and the Paris Climate Goals a new discourse is emerging. Achieving these goals requires a realignment in all external policy areas, as these need to be used as effective levers for a global transformation towards sustainable development, from foreign affairs to trade, science and technology, and cooperation. Only recently, the Citizens‘ Council „Germany’s Role in the World“ emphasized the need for a German and European foreign policy aligned with the 2030 Agenda. A National Council for Peace, Sustainability and Human Rights could become an apt place to drive this forward. Still, does it make sense from a practical, operational perspective to deal with all issues at the same time in one body? In the narrower security arena, there is much that could be improved at the interface of diplomacy, military, and cooperation by a revived Federal Security Council. But aligning all foreign policies and international cooperation with the goals of securing a global future requires an additional Transformation Cabinet for International Sustainable Development. As both a Federal Security Council and a Transformation Cabinet would be committees of the Federal Cabinet with significant overlaps in membership, common visions and strategic approaches could emerge more easily and be discussed and adopted by the Federal Cabinet itself.

It’s time to leave the trenches and embrace the next generation

Will Germany’s next government muster the vision and political capital to reposition Germany’s international cooperation architecture? Can it revamp and realign its broader foreign policy apparatus to turn Germany into an “enabling power” for global sustainable development? The answer to these open questions will, to a large extent, depend on the vagaries of the next coalition negotiations and the commitment of incoming ministers in relevant departments. But civil society and academia should help with this by leaving the comfort zones of their trenches and get foreign policy and security wonks, development, trade, and climate folks to talk to each other—and with the next generation.

Der Beitrag Change or Crumble! Germany Needs to Reposition its International Cooperation erschien zuerst auf International Development Blog.

Four Ways the German Government Can Improve Development Effectiveness

2. September 2021 - 11:57

©Vadim Derksen, Pixabay

Over the last decade, Germany emerged as a leading provider of development finance. Since 2016, Germany has consistently been the second largest bilateral provider of official development assistance (ODA), and in 2020, it was the only G7 member to meet the 0.7 percent ODA/GNI spending target due to its generous increases in ODA in response to COVID-19. While Germany continues to provide a large quantity of ODA, it often ranks in the middle on comparative measures of development quality (for example: 2021 Quality of ODA index, Global Partnership for Effective Development Co-operation monitoring, Aid Transparency Index, and AidDATA’s Listening to Leaders survey)

Given that this year marks the 60th anniversary of Germany’s Federal Ministry for Economic Cooperation and Development (BMZ) and a doubling of its budget over the last eight years, it is a pertinent moment to assess the prospects for improving the effectiveness of German ODA ahead of the election on 26 September 2021. In this blog, we offer four recommendations for how Germany’s new government can address key bureaucratic constraints to development quality and enhance its reputation as a generous and effective partner.

1. Rationalize Germany’s complex development bureaucracy

The complexity of Germany’s development cooperation system has often been viewed as a potential source of ineffectiveness due to the challenges of ensuring coherent action across multiple key agencies. Germany’s development system features a dedicated development ministry (BMZ) and two major official implementing organizations, KfW Development Bank and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), the German corporation for international co-operation. Together, these two agencies channel the bulk of Germany’s bilateral ODA. While this structure offers a diversity of modalities for various sectors and country contexts, coordination across agencies has been an ongoing challenge.

Every few years (often corresponding to the election cycle), calls to rationalize Germany’s development system are seemingly renewed and two substantive reforms are typically proposed. The first involves transforming BMZ into a ministry of global cooperation to adapt Germany’s bureaucratic structures to the changing demands of development cooperation as a policy field, which increasingly recognizes development as deeply intertwined with global challenges including climate change, and peace and security. The second involves combining KfW and GIZ into a single implementing agency that brings together Germany’s technical and financial cooperation. While prior reforms have already sought to consolidate Germany’s implementing agencies—a 2011 merger, for instance, combined three implementing agencies to form GIZ—the roles of KfW and GIZ are deeply enshrined in the German federal budget and governmental guidelines, which could raise resistance to further reform.

Despite historic path dependencies and vested interests, which have prevented these ambitious reforms in the past, the incoming government should consider deeper structural change to Germany’s development architecture to ensure that the system is fit for addressing the challenges ahead. In particular, the government should evaluate different options of merging technical and financial cooperation. Irrespective of structural reform, the new government should think carefully about ways to promote deeper alignment and cooperation across its development actors—particularly KfW and GIZ—to ensure that the agencies act as complements working to strengthen development outcomes.

2. Develop a “whole-of-government” strategy for development to guide ODA spending across departments

Beyond KfW and GIZ, the complexity of Germany’s development system creates the potential for incoherent, inefficient, and ineffective action in the absence of cross-government coordination. Although BMZ allocates the majority of German ODA, other line ministries (such as the Ministry for the Environment, Nature Conservation and Nuclear Safety, which funds international climate finance) are increasingly active in international cooperation. In 2019, Germany’s ODA was allocated by 14 federal ministries beyond BMZ (data from the OECD’s Creditor Reporting System and Members’ Use of the Multilateral System datasets).

While the use of specialized ministries for development can bring sectoral expertise to ODA programming, and may be justifiable in the context of achieving the multifaceted SDG agenda, there is a risk that actions taken across federal ministries may neither pull towards the same overarching goals nor comply with similar standards of development quality. The issue is particularly acute in the German case where cross-government actors enjoy relative autonomy over ODA resources, mandates and engagement, and where a “coherent overarching vision” for development is broadly absent. Different policy initiatives promoting closer collaboration with Africa are a case in point. In 2017-2018, BMZ’s “Marshall Plan with Africa” and the “Compact with Africa,” initiated by the German Ministry of Finance as a G-20 initiative, were launched in parallel with little coordination.

To strengthen the coherence of Germany’s vast ODA resources, the new government should develop a high-level whole-of-government strategy for development that outlines the main vision of Germany’s ODA spending and sets basic standards for effectiveness including on reporting and transparency, that are applicable across ministries and support accountability for all ODA resources. Doing so is a first step towards ensuring that the actions taken across government agencies are aimed towards the same broad outcomes, and ultimately support programming that is more impactful than the sum of its parts. Setting up a whole-of-government ODA strategy could also form the basis of a longer-term perspective on how all German policies with external effects—and including non-ODA development resources—can be coordinated better towards achieving the SDGs.

3. Foster the implementation of the reform strategy “BMZ 2030”

In April 2020, the German government launched its new development strategy, “BMZ 2030.” The strategy, which was the result of a staff-driven year-long process, includes the most wide-ranging reforms to Germany’s bilateral development cooperation of the last decade. The BMZ 2030 reforms not only reduced the number of Germany’s partner countries and narrowed focus on key thematic priority areas, but also look to improve bureaucratic processes, including planning, allocation, and reporting.

BMZ 2030 demonstrates an internal capacity of the ministry to set strategic priorities and address shortcomings. A lack of strategic focus and a need for professionalizing key administrative processes have been publicly criticized for a long time and were finally addressed. Moreover, the reforms follow a larger trend of BMZ reasserting leadership and building up expertise vis-à-vis the implementing organizations (KfW and GIZ). Over recent years, BMZ has increased the number of staff in partner countries, carried out a procedural reform (Verfahrensreform) and improved its monitoring and evaluation system.

Yet, the BMZ 2030 process is still being implemented and will require continued effort to deepen impact. Germany’s new government should continue the BMZ 2030 process, review progress towards its objectives regularly and enact new reforms as needed. One key area is Germany’s monitoring and evaluation system, where the BMZ 2030 process established standardized indicators for results reporting across countries, topics and implementing organizations. The newly established system will require recruiting more staff with specialist skills in results-based management to continue professionalizing BMZ. Further, it is necessary to better integrate monitoring and evaluation knowledge as well as scientific evidence across the German development cooperation organizations within an overall knowledge system that is geared towards learning and continuous improvement.

4. Support ownership and responsiveness to partner country views

The views of Germany’s partner countries should be the ultimate yardstick for assessing the quality of its development cooperation, and the next government should use existing feedback from partners to improve the effectiveness of Germany’s development cooperation. The latest OECD Peer Review of Germany’s development cooperation found that despite Germany’s strong commitment to development effectiveness, more was needed to facilitate partner country ownership over its development programming. Data from the Global Partnership for Effective Development Cooperation’s 2018 Monitoring Round (cited in Germany’s latest OECD Peer Review), shows that while Germany performs above the DAC average on the predictability of ODA and use of country-led result frameworks, it performs poorly on allocating spending through partner country financial systems. Specifically, Germany performs below the DAC average on the use of country systems at 35 percent (DAC average is 55 percent) and records only 53 percent of its ODA in partner countries’ national budgets, falling well below the 2015 GPEDC target of 85 percent.

Germany should ensure that administrative decisions on development spending – for instance on use of partner country systems, untying and ODA predictability – are more deeply aligned with partner country priorities to promote ownership. While Germany is scaling-up the use of budget support as part of BMZ 2030, which should increase spending on and through partner country budgets, deepening ownership can also foster better relations and more positive assessments of providers by partner countries. Research from the Germany Institute for Development Evaluation (DEval), for instance, showed that greater alignment with partner systems is associated with more positive assessments of the influence and helpfulness of providers by partner countries. With the latest AidDATA’s Listening to Leaders survey showing a relative decline in partner countries’ perceptions of Germany’s “helpfulness”, which fell from 17th in 2017 to 21st in 2020, focusing future engagement on deepening country ownership can not only support more effective cooperation, but can also strengthen Germany’s reputation as an influential and helpful partner.

Championing development effectiveness on the global stage

The next German government will face a global development cooperation environment that is increasingly shaped by competing geo-strategic interests among and within regions. To counter this trend, Germany should ensure that its development system is set-up to primarily support effective cooperation and partnership. This stance will be crucial for aligning Germany’s vast development budget with a matching impact and for establishing global thought leadership.

Germany is already a leader in development in many ways. It is one of the few countries that has meaningfully worked to align its domestic and international agenda and pivoted its cooperation towards global challenges (and “global partners”) far earlier than many of its peers. In the years ahead, Germany can continue to show leadership through its own actions for advancing development effectiveness domestically and through working with its wide network of partners towards revitalizing effectiveness as a global norm.

The authors would like to thank Mikaela Gavas, Stephan Klingebiel, and Adolf Kloke-Lesch for their helpful comments and suggestions. Any mistakes are the authors’ alone.

Der Beitrag Four Ways the German Government Can Improve Development Effectiveness erschien zuerst auf International Development Blog.

Germany votes – so what for global governance?

18. August 2021 - 14:00

© Pixabay

On 26 September, Germany’s population votes for a new Parliament and, in extension, for a new government. The stakes are high as Angela Merkel, after 16 years in office, will not run again paving the way for a new Chancellor and potentially new approaches to external affairs.

Elections are a national event and are predominantly shaped by domestic agendas. However, in a number of cases, national events have global repercussions – and in all cases, global events should be considered locally, too. This interconnectedness is even more so relevant when we speak about a middle-power such as Germany that has engaged – and very much depends – on multilateralism and global cooperation, not least so from a position of one of the “big five” Member States of the European Union and one of the world’s largest economies and biggest trading nations. As a result, Germany has a seat at the table of the G20 and the G7, which it will chair in 2022. The next German government will have to made up its mind which strategic partners it will engage and cooperate with. Beyond this important question, the choice of external policies will very much be determined by the issues that the next government of Germany – in any governing coalition setting – will have to address.

The next government

With change in highest government offices in Germany imminent, it is unclear, however, who’s going to be in the next government. One can argue that that’s always the case in democracies and the very reason why we hold elections. This time, however, polls show a rather three-way race between conservatives, greens and social democrats. German politics used to be less adversarial than elsewhere, with broad foreign policy consensus; this seems to be eroding, though, both from the left and the right, but holds with the large political centre. The biggest three parties – conservatives, social democrats and the greens – as well as the liberals, have similar commitments to multilateralism and European integration. Approaches differ, however, in important nuances with regard to, for instance, relations with Russia or China.

Constellations for the political parties that govern next are currently mere speculation. The issues all parties have to face in global relations, though, are often also externally driven, as typical for middle-powers, and will require an answer by any government, whatever their political colours. Let’s focus on the key issues – not an exhaustive list, though – the next German government will have to face.

Climate change requires action

The global climate is arguably the most illustrative example for global interconnectedness, standing as an example for other global commons such as biodiversity or health. Germany needs to act on mitigation, so as to keep the world’s average warming close to 1.5°C. As the recent IPCC report has shown, climate change is man-made, is accelerating and the window to prevent an overheating of our atmosphere is closing quickly. Also, extreme weather events have become more likely – and a painful illustration to this was the latest flooding in Western Europe, the Black Sea, and Central China or the heat waves in large parts of Southern Europe and North America.

How to react to this challenge? Germany’s CO2 emissions only constitute about 2% of the global output. Yet, action needs to happen, as Germany has disproportionately high emissions per capita of its population AND a historically higher emission than other (due to industrialisation taking place at the end of the 19th century). Leading by example might be another big motivation for strong climate change mitigation actions by the next government. This insight is also driven by a strong self-interest as the prevention of extreme weather events, which will become more frequent with rising global temperature, in Germany very much depends on actions in other parts of the world where greenhouse gas emissions are rising fast. These countries might ask themselves why they should substantially contribute to climate change mitigation while a wealthy and technologically advanced country such as Germany does not do enough in its own right.

Multilateralism to be revived

Whichever coalition will govern, it is almost certain that they will be prone to promote international cooperation, as that’s both in the DNA of post-WW-II policy making in German – and is in the very interest of a globally connected middle-power like Germany.

A first reference point is the internal cohesion of the EU that will require attention and involvement. Effects of climate change and political populism in a number of European countries might discourage cooperation within the EU. However, transformation of the economic system can only be done jointly when countries and their economies are as closely knit together as they are in the European Union. And global voice for Europe will require speaking with one voice.

Specifically in “communitarised” policy areas such as trade, critically important engagement – be that on reforming the World Trade Organization (WTO) or flanking Carbon-neutrality in trade policy – will require global cooperation. Knowledge and skills are a global item, too – and without collaboration in science and technology, little can be achieved on a unilateral pathway for Germany.

The fork in the road to 2030

Overall, the Agenda 2030 remains an important task – domestically and in international cooperation. Taking decisions on large investments usually comes with longer-term considerations until when investments will have paid off, with time horizons usually beyond 10 years. The next German government, therefore, will be in office for key decision points on reaching internationally set sustainable development goals. If they don’t act during their parliamentary term until 2025, the timeframe will be too short as to have a meaningful impact until the end of the decade.

Making good use of opportunities

The substantial transformation of the economic model in Germany and Europe requires partners. The EU’s Green Deal is one such frameworks, and it will require political shaping and implementation at national level. It has become part of the “recover forward” after the Corona pandemic’s hard hit – and includes efforts on digitalisation, where Germany is not a global champion, as well as more work on moving towards a circular economy. Collaborations on renewable energy are also likely so as to foster sustainable electrification of transport.

The next German government needs to look for other opportunities to foster global cooperation. One of these opportunities more or less falls into the lap of the new government: Germany will host and chair the next years G7 process. While this historically important format of economically significant economies has been replaced by the G20 – which Germany chaired in 2017 – it still represents a good enough opportunity to set international agendas, and are an important starting point for promoting global transformation projects and reforming multilateral institutions. These opportunities, however, need to be realised jointly with the G20. Close collaboration with emerging countries such as Indonesia – the host of next year’s G20 – is essential.

International relations or international effects of German policy making unfortunately do not feature most prominently in political parties’ programmes. Voters are citizens, and domestic comes first, naturally. Yet, with regard to the political debate and feasibilities in Germany, more discussion on effects and international preconditions for policies would be desirable. And certainly, it will be relevant to the future of globalisation, at least in some areas, who will obtain the mandate by German voters on 26 September 2021.

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The Review of the Resident Coordinator System: Give UNDS reform a chance!

21. Juli 2021 - 14:00

Photo by hibino on Flickr (altered), https://www.flickr.com/photos/hibino/51544029/

These days, the United Nations (UN) General Assembly is tasked with fine-tuning a centrepiece of the reform: the strengthened Resident Coordinator system – key driver of a more cohesive UN Development System (UNDS) working towards a common agenda. Negotiations have yet to reach a break-through.

A Resident Coordinator (RC) leads a UN Country Team – on average 18 UN entities – in a given programme country. The reform delinked the RC system from the UN Development Programme (UNDP) and invigorated the authority and neutrality of RCs. During the Covid-19 pandemic, many RCs have enabled and enriched the UN’s response; they have been useful beyond the amount of resources they command, due to their convening powers and the ways they can orchestrate change, bridge the peace and development nexus, and liaise with external actors. Many have stood up for human rights, gender equality and the principle of ‘Leaving no one behind’, demonstrating the value of a strong multilateral development actor that can use the considerable trust of developing countries for promoting the 2030 Agenda in all its facets.

The RC system is set out as the centre of gravity in the ongoing exercise to reposition the UNDS. UN member states decided in 2018 on a set of far-reaching measures to make the UNDS greater than a sum of its parts and fit for the requirements of the 2030 Agenda. The objective is to offer more sophisticated services, policy and normative support that leverages the full breadth of the system’s capacities. This is not an easy task in a very heterogeneous system that comprises entities as diverse as the World Health Organization, UNDP, or the Office of the High Commissioner for Human Rights, with partially or completely independent governance arrangements, unreliable funding structures, big differences in size, and overlapping activities.

In the current negotiations, as most important task, parties must agree on how to reliably foot the bill for the 130 Resident Coordinators, their strengthened offices, as well as support structures at regional and headquarter level. The current hybrid funding model (consisting of contributions by UN entities, a 1 percent levy on earmarked resources, and a trust fund for voluntary contributions by member states) does not provide a sound basis. For 2021, a funding gap of US$ 58 million is projected.

The UN Secretary-General therefore –as already in 2018 – proposed to fund the costs of altogether US$ 281 million annually through assessed contributions, or at least a rather small portion (US$ 154 million) thereof. Assessed contributions are mandatory payments by all UN member states in line with their capacity to pay. They would provide greater predictability and distribute the costs of the vital RC function across the UN membership, thereby ensuring better ownership. Assessed contributions would also firmly place sustainable development at the heart of the organisation and on par with the UN’s peace and security and human rights functions.

So far, important member states are opposed to or not yet fully supportive of introducing assessed contributions, even for such as relatively small amount. Nor have they come up with viable alternatives. Should member states fail to agree on a significantly improved funding model, the chances of success for the UNDS reform will be significantly diminished. RCs and their support staff would be weakened in their ability to pull the system together, and resistance from within the UNDS against the reform would increase. Three considerations should inform the negotiations.

1. UNDS reform deserves a chance

So far, the reform is showing progress. More than two years into the reform, the Secretary-General’s RC Review report is an impressive compendium of the multifaceted efforts in terms of legal, institutional, staff-related, programmatic, and operational changes. An analysis by the Multilateral Performance Assessment Network describes the RC system as one of the reform areas that has seen most progress. This chimes in with key positive findings from the first system-wide early lessons study on the UN’s socio-economic response to the COVID-19 pandemic. Yet, the actual impact on delivering on common objectives e.g. through integrated policy advice is less clear. The RC review lists some positive examples, as does our own research which however concludes that a broad repositioning of functions has yet to take place. A UNU CPR report echoes this, detailing the challenges for the UNDS to effectively address environmental crises. While success depends on many factors, all in all, reform measures do address the right levers and need to be reinforced.

2. UNDS Reform demands behavioural change also from member states

Secretary-General Guterres uses his political weight to make UN entities align. Yet, his power remains limited in a system of semi- or fully-autonomous entities and a system-wide share of roughly 80 per cent earmarked funding. Member states command both, the carrots, in form of funding, and the sticks, in form of governance. They can demand support and provide funding through RCs, or can continue to deal with individual agencies. They can demand and fund complex, integrated policy support – or short-term services. The UNDS remains fragmented, and longstanding relations between states and individual UN entities make it hard to follow through on reform commitments articulated in New York.

Funding is a central risk to the reforms. As important as a secure funding for the RC system is an overall shift towards a higher quality of funding. Contributions to the Peacebuilding Fund, the Joint SDG Fund or other pooled funds incentivise cooperation. While the UN system showed overall good progress in implementing its commitments of the Funding Compact, member states lag behind in their commitments to provide a higher quality of funding.

3. A half-hearted solution to funding the RC system will reinforce reform resistance

The reform changes power within the UNDS. Our research saw that some staff and entities fear losses – loss of access to government or funders, visibility, the ability to fully implement their mandate. This is particularly true for larger UN entities. They shoulder a greater burden of coordination costs, individually enjoy strong support from contributing countries, and might calculate that in the long run, they stand a chance of ‘going it alone’. All reform studies underline that the reform is still fragile. Despite nascent structural changes, competition about visibility, mandates, and funding persists. For the reform to succeed, entities need to subscribe to the new model, in which collective objectives (not necessarily joint work) clearly take precedence. Many UN entities have adjusted their policies to reform requirements – across areas ranging from business practices to job descriptions and staff appraisals. However, staff incentives for raising the profile of individual entities still compete with or even trump a more coherent, synergetic approach. In this concoction, whatever member states decide will send signals to laggard UN entities: they encourage resistance or reform.

What next?

Funding coordination is never appealing, least so during a pandemic with high domestic costs. However, investments in the RC System go beyond mere coordination and promise increasing returns. The urgent need to accelerate sustainability transformations calls for a politically empowered UNDS able to work much better across organisations and sectors.

Member states should do their part in supporting a more cohesive UNDS. They should improve the current funding model of the RC system and thereby support the repositioning efforts. Assessed contributions would be a clear sign that states step up to their collective responsibility. Subsequent UN budget negotiations may become affected by the ongoing geopolitical struggle over influence. Assessed contributions however provide clearer limits to unilateral influence than voluntary funding. Negotiators should use the only formula member states ever agreed on for sharing the burden of funding truly collective tasks. If the UN is to become more relevant in managing transnational threats, this is the way to go. Member states: focus on the big picture!

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The EU’s Carbon Border Adjustment – proceed with caution

14. Juli 2021 - 14:00

Today, the European Commission presented its “Fit-for-55” proposal which includes a Carbon Border Adjustment Mechanism (CBAM). The CBAM would impose a levy on imports into the EU based on their CO2 content from 2023. As part of the European Green Deal, Commission President von der Leyen had announced this instrument two years ago in order to be able to implement more ambitious climate policy targets without energy-intensive sectors shifting their emissions abroad (carbon leakage). Following the Commission’s proposal, the CBAM must now be spelled out in detail by the EU member states and the European Parliament. Going forward, it is key to ensure that the CBAM is effective in fighting climate change, that it is WTO compatible and, above all, that it has as few ramifications as possible for foreign policy and for developing countries in particular.

International perceptions of the EU CBAM?

With its initiative, the EU is sending clear signals to the outside world. The EU wants to position itself once again as a global leader in climate policy in the run-up to the COP26 in November. On the international stage, however, numerous negative reactions to the EU initiative emerged – to the European Green Deal and to carbon border adjustments specifically. Several sceptical readings of the CBAM exist. One is that the EU wants to introduce the tool to improve domestic competitiveness. Another reading is that the EU ignores potential negative consequences for imports from small and poor countries. And lastly, the perception is that the EU is mainly interested in filling its coffers with the CBAM.

In light of the EU proposal, these concerns from partner countries are at least partially justified. The coming weeks and months will tell to what extent the EU will address them.

How to improve the EU CBAM

How could the EU CBAM be improved? We see the following three entry points as particularly important.

First: In the legislative process, the main purpose of the CBAM, namely climate protection, has to remain in focus and also be communicated internationally. The draft extends the existing EU emissions trading system by requiring importers to pay the actual EU CO2 price for goods purchased abroad in five sectors (steel, cement, electricity, fertilizer and aluminium). The data base on embedded CO2 is collected both from emissions data abroad and from default values. This approach requires a willingness to cooperate and has to be embedded in climate policy cooperation with the countries of origin.

Second, the EU has to ensure that poor countries are not negatively affected by the CO2 border adjustment. This is required both by the principles of the Paris Agreement and the special World Trade Organization rules for Least Developed Countries (LDCs). LDCs who supply very small amounts of energy-intensive goods to the EU should thus be excluded from the CBAM. This can be implemented simply by “de minimis“ clauses that relate to the quantities traded or by negotiating exemptions for particular countries.

Third, the EU should earmark most of the revenue from the CBAM for climate policy purposes in third countries. The focus should be on investments to decarbonise the five sectors covered by the CBAM in emerging and developing countries. Possible ways forward for revenue recycling include establishing investment funds or setting up bilateral climate partnerships.

The essential role of international cooperation

As international cooperation is key to the success of a CBAM, the EU has to address the concerns of partner countries. It needs to reflect on points from partner countries, and understand the Green Deal as a truly global deal. To this end, the European Commission, the European Parliament and the Member States have to consider basic fairness principles, impacts on the poor countries and engage in intensive discussions with major trading partners. Complementing the CBAM proposal with global diplomatic efforts, explaining the approach and negotiating details of application are crucial for its success. Only then will it be possible to prevent trade sanctions and further strengthen the EU’s claim to leadership in climate policy.

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