Analyst: UN’s $100B Climate-Change Plan Costly Boondoggle

Wednesday, 31 Aug 2011 09:09 PM

A fund to help channel $100 billion in climate-change aid annually to developing nations should encourage private financing instead of counting mostly on money from cash-strapped industrialized countries, Bloomberg New Energy Finance said.

An international panel is working to create an endowment depending primarily on donations from governments, which is “a recipe for failure,” Michael Liebreich chief executive officer of New Energy Finance, said in a report today. The committee is scheduled to finish before a meeting of UN climate negotiators set for November in Durban, South Africa.

The Green Climate Fund was central to agreements reached last year by United Nations treaty negotiators in Cancun, Mexico. The world’s richest countries pledged to channel $100 billion annually by 2020, part of it through the fund, to help poorer nations reduce greenhouse-gas emissions from energy production and adapt to effects of global warming such as rising sea levels.

Investment flows that large “can only be achieved if the bulk is provided by the private sector, not the public sector,” according to the report. Developed governments “are almost without exception under extreme fiscal -- perhaps solvency -- pressure,” Liebreich said.

He suggested a network of treaties and financial incentives designed to lower risks and attract private investors for clean- energy and adaptation projects.

‘Zero Chance’

Last year, a UN panel with members such as billionaire George Soros, chairman and founder of Soros Fund Management LLC in New York, and and Larry Summers, former director of U.S. President Barack Obama’s National Economic Council, said it would be “challenging but feasible” to raise at least $65 billion by taxing foreign-exchange transactions and auctioning pollution permits.

Nations won’t participate in such proposals, Liebreich said in the report. “There is simply no point in advocating global taxes on shipping, aviation and financial transactions, and/or a global carbon price, where there is zero chance of these being adopted in the current political cycle -- possibly ever,” he said.

Climate aid can be delivered to the developing world though a Green Climate Finance Framework using private funds when possible and public money “only to deal with specific risks,” Liebreich wrote. A model for the framework could be existing export-finance banks, the World Bank, and other development banks and institutions.

Nations receiving the aid should sign an investment treaty covering policy changes that could harm revenue, such as regulations that increase costs and the ability to bring profit back to home countries, according to the report. Richer national governments should provide guarantees that private investors won’t be hurt by natural disasters, coups and defaults where new projects are financed, the study said.

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