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Climate Smart Aid Is Anything But

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By William Yeatman

International organizations like the World Bank and the United Nations are supposed to help the world’s poor escape poverty, but fully convinced they are doing good, these development agencies are pushing an anti-development agenda.

Now here’s an inconvenient truth: curbing the planet’s carbon footprint necessarily slows economic growth, the primary engine of human well-fare. International aid organizations need to carefully consider the impact of the climate “solutions” they advocate, lest they do more harm than good.

The International Energy Agency estimates that it would cost $45 trillion through 2050 to mitigate global warming through efforts aimed at “greening” the global economy. Most of that would be spent in developing countries, to prevent them from fueling their growing economies with hydrocarbon energy sources like coal and oil. These fossil fuels are cheap and still plentiful, but burning them to create energy frees the CO² they store, contributing to climate change.

Raising hundreds of billions of dollars a year to finance a global green energy revolution is a key component of current negotiations for a successor climate treaty to the Kyoto Protocol. In fact, European Union Environment Commissioner Stavros Dimas recently declared, “No money, no deal.” And clean energy aid was a topic of discussion at last month’s Major Economies Meeting, hosted by the administration of U.S. President Barack Obama.

Naturally, international aid agencies are jockeying for position to broker this wealth transfer.

United Nations Secretary General Ban Ki-moon said that his organization is the “natural arena” for coordinated international action on climate change. To that end the U.N. operates two programs to facilitate the flow of climate mitigation aid to developing countries—the Global Environment Facility and the Clean Development Mechanism.

Not to be outdone, the World Bank recently unveiled a “Strategic Framework” for global warming and development that calls for “unprecedented global cooperation” for the “transfer of finance and technology from developed to developing countries.” The Bank established a Carbon Finance Unit and several Carbon Investment Funds to distribute climate change mitigation aid.

Besides the inefficiencies inherent to duplicative bureaucracies, there are major problems with this “climate smart” approach to development. For starters, it is unlikely that Western bureaucrats can create a green energy infrastructure in developing countries. The history of development assistance is littered with abandoned projects backed by the best of intentions. Already there is evidence that climate aid is more of the same.

Under the Kyoto Protocol, for example, companies subject to climate regulations can meet their carbon “cap” by paying for emissions reduction projects in developing countries. According to the journal Nature, the U.N. certified $6 billions’ worth of emissions “savings” for reductions in HFC-23, a potent greenhouse gas. Yet removing the HFC-23 cost $130 million. That’s a lot of waste.

There are also ethical considerations. A coal-fired power plant may offend environmentalist sensibilities, but it would be a blessing for the almost 2 billion people in the world today who use charcoal, dung, and wood to heat and cook.

In his book, Global Crises, Global Solutions, Danish statistician Bjørn Lomborg persuasively argues that humanity faces many problems that are more pressing than warming decades down the road. After all, what good is a slightly cooler planet a century from now to a child dying of malaria today? In terms of saving lives, Lomborg shows why climate change mitigation is an inferior, albeit far less ‘sexy’, investment to water sanitation and halting disease.

Aid agencies should also consider forgone economic development. The U.N. and the World Bank want to redistribute trillions of dollars to create new green energy infrastructure whereas in the free market these scarce resources would be allocated to create wealth. In a globalized world, inefficiencies of this magnitude lower the tide and all boats with it.

Slowing economic growth has very real human consequences, such as fewer schools, worse health care, and lower environmental quality. That’s why a richer-but-warmer future is better for human well being than a poorer-but-cooler future, according to Indur Goklany, author of The Improving State of the World.

Instead of economically harmful global warming policies, development agencies should concentrate their considerable institutional knowledge on advancing pro-growth policies, like trade liberalization. Today, free trade needs an influential booster like the World Bank. Energy intensive export industries in developing countries are threatened by carbon taxes imposed by rich countries, under the pretext of fighting climate change. Retaliatory tariffs would be likely, which could easily escalate into a global trade war.

That would be a tragedy. By allowing developing countries to use their comparative advantage—inexpensive labor—international free trade has proven the fastest route out of poverty for hundreds of millions of people.

To avoid giving atmospheric chemistry priority over human welfare, the aid industry should ensure that the risks of global warming policies are considered as rigorously as the risks of global warming itself.


William Yeatman is an energy policy analyst at the Competitive Enterprise Institute.




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