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Budget Gridlock Risks International Climate and Clean Energy Investments

Hackensack River

SOURCE: AP/Julio Cortez

A group of cormorants stands on pilings on the Hackensack River in New Jersey with the New York City skyline in the background, Tuesday, June 18, 2013. Superstorm Sandy caused tens of billions of dollars in damages when it pummeled the region after roaring ashore in New York and New Jersey last fall.

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As Congress continues to operate without a budget and faces the prospect of a government shutdown on October 1, appropriations for crucial investments in international climate change mitigation and adaptation hang in the balance. While the Senate Appropriations Committee passed the fiscal year 2014 Department of State, Foreign Operations, and Related Programs appropriations bill, which maintains spending consistent with last year’s climate investments, the House Appropriations Committee voted to eliminate or significantly cut $10 billion for foreign-affairs programs. This vast difference means that international climate and clean energy investments—and their high rewards—are in danger.

Investments are crucial for climate, development, and international security

The effects of international climate change—which include more droughts, floods, and tropical storms—threaten to undo tremendous progress toward increased prosperity in the developing world. In areas of the world that already have complex and delicate geopolitical situations, climate change could displace populations and further destabilize governments. The formation of alliances and partnerships on environmental and climate initiatives with major emerging economies such as India, Indonesia, China, and Brazil that will help us meet other foreign policy objectives is at risk—and so too is international security.

Because the warming impacts of greenhouse gas emissions know no national borders, increased emissions abroad continue to threaten U.S. communities. Rising sea levels are on course to submerge more than 1,000 municipalities along our shores by the end of the century, and extreme weather linked to global warming continues to cost lives and dollars in towns from Arizona to New Jersey.

So for the sake of domestic and international security and economic growth, we need sustained action to combat climate change. Such action is already underway. Countries around the world have committed to reducing greenhouse gas emissions, and in June, President Barack Obama announced a Climate Action Plan that uses his executive authority to limit emissions from coal-fired power plants here at home. But reducing carbon emissions in developed countries is not enough to limit global climate change. That’s why President Obama’s plan includes 10 international objectives along with its domestic regulatory reforms.

With continued economic growth and without significant changes in energy policy worldwide, carbon-dioxide emissions from the developing world—categorized as countries that are not members of the Organisation for Economic Co-operation and Development, or OECD, a group of 34 developed-economy states—are expected to exceed OECD levels by 127 percent by the year 2040. In 2010, non-OECD emissions exceeded those from OECD countries by 38 percent. This means that progress in curbing greenhouse gas emissions from developed countries such as the United States, the United Kingdom, and Germany is likely to be dwarfed by a massive rise in emissions from the developing world.

But developing countries face significant challenges on the road toward stronger clean energy economies. Currently, 1.3 billion people lack access to electricity, living in what is called “energy poverty,” a term that recognizes the close relationship between prosperity and access to affordable electricity. Ninety-five percent of the “energy-poor” live in developing Asian countries or Sub-Saharan Africa. No matter how much developing countries would like to increase clean energy production, they face a basic problem: rapidly increasing demand for energy in the absence of effective policies to mobilize public and private investment in clean energy, which makes their growing populations reliant on dirty fossil fuels.

Additionally, the lack of reliable energy access is a significant barrier to middle-class attainment. Even families with some energy access—those not classified as energy-poor—face diminished prospects for education and social mobility because of unreliable and outdated energy infrastructures. Women continue to bear a disproportionate burden, as gender discrimination continues to be a key driver of poverty. As such, empowering women is essential to sustainable development, and linkages between gender equality, poverty eradication, and sustainable development must be strengthened in policy.

In order to limit global climate warming to the internationally agreed-upon threshold of 2 degrees Celsius, developing and developed countries alike must increase their clean energy deployment. Furthermore, since clean energy investment in developing countries must be made on a large scale in order to decrease emissions while increasing energy access, international collaboration is necessary.

It is not just necessary, however; international climate investment is also cost effective. Foreign investment helps develop new overseas markets for U.S. clean energy companies, which creates jobs here in the United States. There are also significant co-benefits, such as public health gains. By implementing clean energy technology and limiting pollution overseas, the United States can help decrease childhood mortality and premature death caused by pollutants.

That’s why the United States traditionally appropriates a small fraction of its nondefense-discretionary-spending budget to several large multilateral investment funds managed by the World Bank Group, in addition to the U.N. Environment Programme, or UNEP; the U.N. Framework Convention on Climate Change, or UNFCCC; and the Intergovernmental Panel on Climate Change, or IPCC, an organization that scientifically assesses climate change. These programs are all part of the Global Climate Change Initiative, or GCCI, a group managed by the U.S. Agency for International Development, or USAID, and the State and Treasury Departments that funds clean energy investment, sustainable landscape protection, and climate change resilience and adaptation projects. Relative to the entire federal budget, the cost is small, and the impact is large.

‘Fast start’ and beyond

U.S. investment in clean energy and climate projects abroad dates back to the 2009 U.N. Climate Change Conference in Copenhagen, a concerted effort to mobilize climate finance in developing countries. At the conference, world leaders committed to providing $30 billion in “fast start” financing to fund climate change mitigation and adaptation from 2010 to 2012. Starting in 2020, they also pledged to annually mobilize $100 billion for these efforts. These larger sums are to be managed in part by a Green Climate Fund, of which the World Bank was named trustee at the following year’s negotiations in Cancun, Mexico.

President Obama supported the UNFCCC’s financing goals. At the September 2009 U.N. Climate Change Conference, he said:

No nation, however large or small, wealthy or poor, can escape the impact of climate change. … We have a responsibility to provide the financial and technical assistance needed to help these nations adapt to the impacts of climate change and pursue low-carbon development.

The U.S. government acted to meet the fast start goal, allocating $7.5 billion to fund the GCCI from 2010 to 2012. Even after the fast start period ended in 2012, the president continued to demonstrate his commitment by requesting about $770 million in core GCCI funds for FY 2013.

The congressional divide

But as Congress battles over the budget, progress toward fully mobilized clean energy and climate finance to meet international goals is in danger. Although the House and the Senate passed budgets in March, House Republicans refused to hold a conference committee to reconcile the vastly different documents, citing a need to agree on a budget “framework” prior to hashing out the details of a compromise.

This impasse has left the Senate and the House without a shared document to guide spending in appropriations bills. House Republicans have directed their appropriators to use a budget proposed by House Budget Committee Chairman Paul Ryan (R-WI) that slashes discretionary spending across the board to guide appropriations, a situation that has led to sweeping cuts in the State Department and Foreign Operations appropriations bill that passed out of the House Appropriations Committee on July 24.

While the Senate maintained base funding—the total funding minus military-related overseas-contingency-operation funding—at $44.2 billion in the appropriations bill that passed out of its committee on July 25, the House bill allocates base funding of about $34.1 billion. That’s a $10 billion difference.

A large portion of the cuts comes from international climate and clean energy investment. The House bill would:

  • Eliminate funding for the World Bank Climate Investment Funds. These include the Clean Technology Fund, which invests in large renewable-energy, efficiency, and transportation projects in low- and middle-income countries, and the Strategic Climate Fund, which supports pilot forest investment, resilience, and renewable-energy projects.
  • Eliminate funding to the Global Environment Facility, an independent financial institution that works with international bodies, civil society, and private firms to fund sustainable development around the world
  • Eliminate funding for international organizations and programs, including funds for the UNEP, the UNFCCC, and the IPCC
  • Cut more than one-fifth of 2013 funding to the Millennium Challenge Corporation, a U.S. development and foreign-aid agency founded under former President George W. Bush that incorporates sustainability principles into its investment projects
  • Cut nearly 13 percent of funding to USAID, the agency that has traditionally provided a significant portion of funding for climate change adaption, clean energy, and mitigation-through-forest-protection programs under the GCCI umbrella

There is a clear discrepancy between the priorities of the House and Senate appropriations committees. The Senate bill includes $283.7 million for the World Bank Climate Investment Funds, $143.8 million for the Global Environment Facility, $355.7 million for the International Organizations and Programs account, and almost $900 million for the Millennium Challenge Corporation. It also increases USAID funding to almost $1.45 billion. The following table provides a breakdown.

Neither the House nor the Senate voted on its respective Foreign Operations appropriations bill before the August recess began, and neither Senate Majority Leader Harry Reid (D-NV) nor House Speaker John Boehner (R-OH) have scheduled floor votes on the legislation. In any case, the $10 billion divide will not be easily breached, which indicates that State and Foreign Operations appropriations may be considered in a continuing resolution rather than full-fledged legislation—the same fate that befell the State Department and Foreign Operations appropriations bill last year.

Legitimacy and lives hang in the balance

Regardless of how these appropriations are made, we cannot afford to let Congress cut climate investment. The health of our communities here and our security around the world are at risk. More so, our international credibility—the ability to collaborate with global partners on necessary climate change mitigation action now and throughout this century—is on the line.

In a January op-ed in The Washington Post, World Bank president Jim Yong Kim wrote that, “The world’s top priority must be to get finance flowing and get prices right on all aspects of energy costs to support low-carbon growth.” He continued, “Just as the Bretton Woods institutions were created to prevent a third world war, the world needs a bold global approach to help avoid the climate catastrophe it faces today.”

For the United States to maintain its status as a major power and moral force, it must maintain its legitimacy in global climate change negotiations and bilateral relations. This means that we must meet our financial commitments. When they arrive back in Washington after the August recess, members of Congress will battle over appropriations for Foreign Operations—decisions with global, long-term impacts—because when it comes to international climate finance, lives both here and around the world are at stake.

Rebecca Lefton is a Senior Policy Analyst focusing on international climate change and sustainable development at the Center for American Progress. Jesse Vogel is a former intern with the Center’s Energy and Environment team. He is in his fourth year at Oberlin College.

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