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The Debt Deal and Budget Process Threaten Critical Climate Aid Funding

Shortsighted Budget Conversations Mean Cuts to Climate Assistance, Humanitarian Aid, and Disaster Response

SOURCE: AP/J. Scott Applewhite

Sen. John Kerry (D-MA), right, and Sen. Rob Portman (R-OH), left, arrive for the start of the opening meeting of the Joint Select Committee on Deficit Reduction, often called the "super committee," on Capitol Hill in Washington, Thursday, September 8, 2011.

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This summer all eyes in Washington were focused on whether Congress would reach a deal on the debt ceiling and the doom that would immediately fall if the United States was unable to meet all of its obligations. Though an agreement was reached just 48 hours before the deadline in early August, the process and final package reflect an ideologically driven political discourse that fails to address major long-term problems that ultimately will be more destructive to our nation’s well-being, such as poverty and inequality. The deal does nothing to address unemployment and it may be more damaging for long-term economic growth. And the debate overshadowed one of the greatest challenges of our time: climate change.

Evidence of climate change is mounting as impacts are already being felt here at home and in developing countries that have contributed the least to the cause. The acceptance by all major economies that global temperatures should rise no more than 2 degrees Celsius was a major milestone in the international climate change negotiations process in recent years, but scientists are advising that reductions will need to be higher. Here in the United States, Congress has still not passed comprehensive climate and energy legislation, and climate deniers are unwilling to tackle problems that they don’t believe even exist.

But whatever progress is made on cuts in developed countries, they will not be enough to achieve climate safety. In conjunction with more ambitious actions in developed countries, the only way to stabilize emissions is to ensure developing countries grow in a more sustainable manner as these are the countries that will see the largest population increases this century. Consequently, our international climate financial commitments are even more critical for achieving emissions reductions by leveraging climate action in fast-rising greenhouse-gas-emitting developing countries.

Further, in the absence of a binding international climate treaty, the flow of climate finance is necessary for keeping parties at the table. But the United States’ ability to meet our climate aid goals is endangered by shortsighted vision as evidenced by the debt deal and ongoing budget process.

What follows is an outline of how the deal and budget negotiations could affect climate assistance and CAP’s proposals for appropriate U.S. funding going forward.

What’s in the deal?

Along with a $400 billion debt ceiling increase, $1 trillion in cuts over 10 years was tagged onto the agreement. The deal relied on huge cuts to discretionary spending, leaving revenues and entitlements largely untouched, including no new taxes on the wealthy and protecting oil subsidies.

The debt ceiling legislation also created a super committee tasked with finding another $1.5 trillion of deficit reduction by Thanksgiving. The super committee’s recommendations must be voted on in the House by December 9, 2011, and no later than December 23 in the Senate. There are no limits on the committee’s recommendations. If the super committee’s legislation is not approved by congressional leaders and the administration and enacted by January 15, 2012, $1.2 trillion in automatic spending cuts will be triggered.

Discretionary spending is capped at $1.043 trillion for fiscal year 2012 ($7 billion below FY 2011). Discretionary accounts, which represent one-third of the budget, took far and away the biggest hit. For the first two years, the deal assigned caps to two categories of discretionary spending: “security” and “nonsecurity.” International affairs, which includes climate assistance, humanitarian aid, and disaster response, is grouped in the security category.

It’s appropriate that foreign aid is considered under security. Approaches to national security should integrate diplomacy, defense, and development in order to address new complex threats such as climate change. An integrated approach addresses the impacts of climate change—which are more expensive and risky for troops that are sent in to respond to crises and disasters—and aims to prevent the cause—in this case greenhouse gas emissions—in an economically productive and equitable way that will improve livelihoods.

But given what we’ve seen in previous attempts to eliminate international climate aid in the federal budget, it is worrisome that now appropriators will be weighing climate assistance directly against other security items such as homeland security and defense.

Super committee members, however, can use this task to shape a conversation about creating solutions for long-term problems that will become more difficult to address the longer we ignore (or some conservatives deny) them. This is an opportunity for members who support climate change mitigation to create revenue generators for international climate assistance without a filibuster-proof 60-vote threshold, which is needed to pass legislation in the Senate.

Sen. John Kerry (D-MA) is a long-time champion of fighting climate change, and he introduced a bill to formally integrate climate change into foreign development policy in late July. Sen. Rob Portman (R-OH), the original co-sponsor of the Tropical Forest Conservation Act, or TFCA—a program established under the Bush administration in 1998 that offers developing countries debt relief in exchange for tropical forest conservation that has generated $266 million for tropical forest conservation and is vital for maintaining climate stability that is also at risk of losing funding—is another committee member who recognizes the value of smart investments in international climate assistance.

One action the super committee could take would be to propose a price on aviation emissions as a source of revenue. Airlines that fly in or out of Europe will begin reducing global warming emissions in January 2012 (3 percent reduction from 2004-2006 levels in 2013 and 5 percent by 2020) under the European Union’s Emissions Trading System, or ETS. Aviation accounts for 13 percent of global transportation greenhouse gases, and emissions from the sector are on track to quadruple by 2050 if left unchecked. The European Union’s ETS is the only legal framework attempting to address such a massive growth in emissions. It includes a clause that waives the compliance of flights from countries with an “equivalent measure.”

The super committee can include a price on airline emissions that will satisfy the European Union’s directive. A price on carbon will limit greenhouse gas pollution and lead to innovation in the aviation sector and related industries, providing opportunities for economic growth and job creation.

Another point to make is that the international affairs budget makes up less than 1 percent of the federal budget even though it is essential for maintaining global stability. And there’s a huge misconception about how much of the federal budget is devoted to foreign aid. Most Americans believe 25 percent of the budget is blocked off for international development and humanitarian assistance. When asked how big they think it should be, on average Americans believe the foreign affairs budget should be 10 times larger than it actually is. In other words, cutting foreign aid won’t do much for deficit reduction, and Americans support the aid.

The takeaway is that climate aid that fosters sustainable development and supports disaster risk management is critical for achieving our national security goals in a cost-effective way that will keep fewer troops on the ground. It should get the funding it needs.

As Deputy Secretary of State for Management and Resources Thomas Nides said at a recent Center for American Progress event, “Deep and disproportionate cuts in the State [Department] and USAID won’t do anything or make any sense if our goal is to enhance our national security.”

Recent international climate assistance in the U.S. budget

For the last several years, the Obama administration has approved development assistance consistent with international climate aid goals. Now this assistance is under threat from the budget process.

During the international climate change conference in Copenhagen in 2009, representatives from the United Nations Framework Convention on Climate Change, or UNFCCC, approved a commitment to $30 billion in bilateral and multilateral climate-related “fast start” financing for adaptation, mitigation, technology transfer, and capacity building in developing countries from 2010 to 2012 and to the mobilization of $100 billion annually by 2020 for adaptation and mitigation in developing countries.

The process of creating a Green Climate Fund to mobilize large sums of money to strengthen the capacity of developing countries to face climate change and develop in a sustainable way began last year during the international climate change conference in Cancun, Mexico. The Green Fund will be established in 2020 and it can leverage more than $100 million annually.

The Obama administration favored the climate aid funding agreements as part of the Copenhagen Accord and Cancun Agreements, and it has since sought to allocate roughly $4 billion toward the fast-start goal in bilateral and multilateral funding through the Global Climate Change Initiative that integrates climate change into foreign aid and other programs to prevent global warming and reduce vulnerability to climate impacts in developing countries. Direct U.S. climate change assistance increased from $316 million in 2009 to nearly $1 billion in 2010 in line with the administration’s development and climate priorities and our international climate finance commitments.

International climate assistance fared relatively well in the 2011 budget up to $950 million. Yet it was still up to 30 percent less than the administration’s core climate change request.

Now that Congress is back in session, appropriators will continue crafting the FY 2012 budget and moving spending bills through respective committees. For international climate assistance, it will be key to keep an eye on the House State-Foreign Operations Appropriations bill that was introduced but did not make it through full committee before summer recess. The bill in its current form is devastating to international climate assistance:

  • The World Bank multilateral Climate Investment Funds that the Bush administration established, and consist of the Strategic Climate Fund, the Clean Technology Fund, and the Forest Investment Program, were zeroed out.
  • The Global Environment Facility, the main funder of international global warming projects, was severely cut to $70 million, which is more than half the FY 2012 presidential request.
  • Funding for the UNFCCC and the Intergovernmental Panel on Climate Change—a body of scientists that studies the risk of human-induced climate change—is abolished.
  • USAID’s operating expenses are cut 30 percent below FY 2010 levels to less than $1 million, meaning consequent layoffs.
  • The Bush administration’s Millennium Challenge Corporation, which invests in country-led policies to generate economic growth with a major focus on climate change, would see its funding drop 20 percent.
  • The TFCA is excluded, indicating no continued funding for this program.

The Senate Appropriations Committee’s overall spending figures for State and Foreign Operations are $53.3 billion, including $8.7 billion for overseas contingency operations in Afghanistan, Pakistan, and Iran. That means the appropriations committee is working with a discretionary budget that is 7.5 percent less than the amount enacted last year and around $8 billion less than the State Department request. But it’s still $5 billion more than the House. It will be up to the Senate Foreign Operations Committee to pass a bill that not only protects international climate programs but holds a hard line on funding.

What happens to climate finance after 2012?

Attempts by conservatives in Congress to put international climate assistance on the chopping block have not been as successful as climate change deniers might have hoped for. This is in part because of the fast-start finance commitments that are already moving forward. But what happens to the international climate change budget when the commitment period ends in 2012?

The next commitment begins with the creation of the aforementioned Green Climate Fund that is the key to mobilizing $100 billion annually for adaptation and mitigation in developing countries by 2020. The world needs a second phase to pin financing on in order to maintain crucial investments that will be more costly if we wait to bridge the gap between the end of the fast start and 2020 goal.

In a Center for American Progress report, “The U.S. Role in International Climate Finance,” with the Alliance for Climate Protection with analysis by Climate Advisors and Project Catalyst, we recommend a blueprint for a “ramp-up” period of international climate investment. The report provided an analysis of how much money from developed countries would be needed in the ramp-up period to 2020 to achieve concrete objectives that will help developing countries develop sustainably. The report outlines new mitigation and adaptation goals sector by sector and specifies the increases in public and private investment necessary to achieve them.

During the ramp-up period, the United States should aspire to provide 20 percent of the total funded through a mix of public and private sources. For public funding, this would be $3 billion in 2013 and $5 billion in 2015. Development bank lending and private financing also will play significant roles in providing international climate-change-related funding, as well as carbon markets in countries with cap-and-trade systems.

Why we must preserve strong international financial commitments

A second international climate finance commitment period will position the United States and other developed countries to work with developing countries to achieve emissions reductions. It will also yield multifaceted benefits for the United States.

International climate investments, for example, are good for domestic economic growth and the U.S. labor force. Investments in adaptation and mitigation save money by reducing the impacts of climate change and providing opportunities for U.S. businesses to innovate and create jobs.

The United States can tap into what HSBC projects to be a $2.2 trillion yearly clean energy technology market and meet the global demand for clean technologies by building a domestic market for U.S. companies in these industries and through cooperation with developing countries.

For instance, a CAP and Asia Society report found that U.S.-China cooperation to accelerate deployment of carbon capture-and-sequestration technology could create as many as 940,000 direct and indirect jobs in the United States by 2022.

Also we’ve written previously about the economic toll of climate change-related disasters. The World Bank and U.S. Geological Survey estimate that investing $1 in disaster risk reduction saves $7.

Climate aid protects public health and personal security, and it leads to a more productive and equitable society. Investments that prevent global warming reduce health care costs by preventing malnutrition resulting from resource scarcity and the spread of diseases linked to climate change. Aid also mitigates the disproportionate impacts on girls and women who, for example, are more at risk of violence from traveling longer distances for water and disempowerment as they are taken out of school for such tasks. Women’s lack of education and inability to fully participate in the economy has long-term economic and societal impacts.

Political security benefits from climate aid stem from limiting the exacerbation of conflict from climate change impacts and stopping the flow of oil money that sustains hostile and undemocratic regimes. And partnerships on clean energy and climate change will improve relationships and maintain our credibility with key allies and emerging economies.

These are just some of the reasons why international climate assistance is a smart and crucial investment. We discuss the benefits at length in our report.

Conservatives are not seeing the forest through the trees. They are stuck in a conversation about blocking life-saving EPA regulations and opening up more pristine land to drill for oil in places like the Arctic. And they are pitching these same old and discredited ideas to the super committee. The reality is that clean energy protections drive innovation, and investments in clean energy create three times the number of jobs as the same spending on fossil fuel industries.

It’s time to ramp up and reap the benefits.

Rebecca Lefton is a Policy Analyst with the Energy Team at American Progress.

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