This year, a so-called super year of three connected U.N. conferences are set to help solve two great problems of our time: extreme global poverty and the threat of climate change.
This month saw U.N. member states gather at the third International Conference on Financing for Development to discuss the rules governing development financing and the role of the private sector.
The outcome was the Addis Ababa Action Agenda — a document whose definition of sustainable development financing includes not just aid but also domestic taxation, private finance, trade, debt and financial markets — all of which should be coherent with human rights and sustainable development.
But what signals has the Addis conference sent to the climate negotiations at COP21 in Paris, France, in December?
One of the key phrases in Addis Ababa was policy coherence for development and the outcome document recognizes the link between climate, the environment and development. It states: “All of our actions need to be underpinned by our strong commitment to protect and preserve our planet and natural resources, our biodiversity and our climate.”
The problem is that there are no concrete and time-bound commitments to ensure this. Indeed, the Addis conference asked all the right questions on sustainable development but failed to provide clear answers to climate financing and other key questions.
Similarly, the outcome document clearly recognizes the urgency of climate mitigation and adaptation and expresses a desire to “develop and implement holistic disaster risk management.” However it does not take the global community further than the already existing agreement and processes.
In short, the sense of urgency is missing from the Addis outcome.
In July, British multinational insurance company Aviva presented a study suggesting that inaction on climate change may wipe $4.2 trillion off the value of managed assets. The cost of extreme climate change would create much larger losses of $13.8 trillion in the private sector and $43 trillion in the public sector — equivalent to 30 percent of all managed assets in the world. For people living in poverty, catastrophic climate change is likely to carry a much greater cost in terms of their relative assets and future income.
Against this background, it is critically important that promises to the world’s poorest in terms of development aid are maintained, and that action on climate change increases their overall share of assistance.
The Addis outcome document does send a positive signal about delivering the agreed international target of in $100 billion per year in climate finance from developed to developing countries. Also welcome is that it emphasizes the need for “transparent methodologies for reporting climate finance.” However there is no clear signal on the additionality of climate finance to the vitally urgent overseas aid bill.
As for domestic tax policy, Addis missed the opportunity to improve the way that global tax rules are made by creating an intergovernmental tax body within the United Nations. Such a body would have enabled clear linkages to be made between tax and climate change, along with the tricky issue of effectively and fairly taxing multinational companies to raise revenues.
Critically, the summit also failed to call for the removal of fossil fuel subsidies, declaring only that “we reaffirm the commitment to rationalize inefficient fossil-fuel subsidies that encourage wasteful consumption by removing market distortions.” This only refers to consumption subsidies, which are usually targeted at the poorest people, and omits production subsidies.
This is significant because it puts more pressure on developing countries and removes it from wealthy fossil fuel-producing nations. Nor does it ensure that subsidies in developed nations get shifted to greener energy sources.
In relation to private finance, the Addis outcome document contains some welcome language on corporate accountability. However it does not move the debate forward and merely acknowledges and promotes existing practice, most of which is voluntary.
It gives no greater confidence that future investors will need to think about the climate change or social risk of their investments, or that regulations would be developed to ensure such linkages. Instead, the private sector expects to gain a greater share of subsidies, in order to move its assets to developing countries through new methods of blended and leveraged financing. Structural reforms to ensure private finance contributes to sustainable development and does no harm to human rights will need to be built afterward.
In conclusion, 2015 may be the year that we recognize that the problems of poverty and climate change are intimately connected — and acknowledge the need for profound, interlocked solutions. This would be a big step forward.
We must now use the follow-up mechanism created by the Addis summit — the annual Financing for Development conference — to make progress on this and other issues in 2016.
We can no longer stick our heads in the sand, pretending it will all sort itself out in time and that there are still years ahead to deliver the urgent change needed to create a safe and prosperous world. Most important now is to challenge world leaders at Paris to set us firmly on a path to avoiding catastrophic climate change and its devastating effects.