On the heels of this week’s celebrated U.S.-China climate pact, the U.S. has pledged $3 billion to support the global effort to curb emissions and adapt to climate change.
The U.S. pledge to the Green Climate Fund (GCF), a new multilateral fund that will help developing countries shift to pathways of low-carbon and climate-resilient growth, is the largest national pledge to date. President Obama made the announcement Saturday, at the start of the G20 summit in Brisbane, saying that contributions to the GCF will allow developing countries to “leapfrog some of the dirty industries that powered our development [and] go straight to a clean energy economy that allows them to grow, create jobs, and at the same time reduce their carbon pollution.”
CREDIT: Center for American Progress
Japan also made a pledge — of up to $1.5 billion — during the summit this weekend. Meanwhile, countries such as Germany, France, and Sweden led with significant commitments earlier this year. The GCF now has over $7.5 billion in commitments as it heads into its formal pledging conference in Berlin this Thursday, when both the U.S. and Japan will elaborate on the conditions of their contributions, such as sufficient contributions from other countries. The fund is prepared for an initial capitalization of at least $10 billion.
The midterm elections in the U.S. have left a difficult environment for the Obama Administration’s climate agenda, which both the incoming Senate Majority Leader and the House speaker have opposed. There are several reasons, however, why the pledge to the GCF should have bipartisan support.
U.S. Policy Precedent
The U.S. pledge follows and develops more than two decades of multilateral climate finance throughout both Democratic and Republican administrations. During the George W. Bush Administration, for example, the U.S. pledged $2 billion over a 3-year period to the Climate Investment Funds—the precursors of the GCF that were designed to sunset when the GCF comes online.
National Security and the U.S. Economy
The U.S. pledge comes amid growing recognition that investments in a cleaner and more resilient world economy would serve U.S. interests. The Department of Defense, for example, recently reported that climate impacts can destabilize regional governments and create openings for extremism. In addition, the staggering and increasing economic costs of failing to invest in climate solutions are becoming apparent. Between 2011 and 2013, for example, the 34 most severe U.S. weather events caused damages that totaled $208 billion.
A Meaningful International Climate Agreement
Pledges to the GCF are essential to the ongoing international climate negotiations. Countries are currently working toward striking a climate agreement in 2015 that would be applicable to all countries and would therefore have a meaningful effect on world emissions.
In the Copenhagen Accord, developed countries agreed to mobilize $100 billion yearly by 2020 in public and private finance for developing countries to reduce their emissions and adapt to climate change. Although country contributions to the GCF will account for only a portion of this amount, they indicate that developed countries are committed to climate finance and intend to ultimately mobilize the funds that will fulfill the Copenhagen pledge. Contributions to the GCF from the U.S. and other developed countries are considered vital to their credibility in the negotiations.
The Potential of the GCF
The GCF has been carefully designed over the past several years and is now well-positioned to make legitimate progress on adapting to climate change and limiting further warming.
The fund is governed by both developed and developing countries and is already attracting the financial support of emerging economies in addition to traditional donors. Mexico, for example, has already pledged $10 million to the GCF. Korea has recently pledged up to $100 million to the fund and also hosts the fund in Songdo. Peru and others have indicated that they may soon pledge as well.
In addition, the investment framework of the GCF includes the goal of increasing adaptation funding over time to match the level of support offered to emissions mitigation. To date, investment in resilience has lagged far behind investment in clean energy: only 16 percent of global public climate finance was invested in adaptation measures in 2012.
It is also important that a core function of the fund is to mobilize private finance. The private sector has the potential to contribute a transformative amount of investment and has already demonstrated its power by supplying 62 percent of global climate finance in 2012. Public investments can help unlock this potential. They can, for example, be used to make private investments in the least developed countries more attractive through risk mitigation measures.
The GCF is ready to begin investing in projects next year. These might include much-needed projects such as the establishment of early warning systems, the introduction of agricultural practices that protect crops from drought and flooding, the installation of wind farms, and the implementation of residential energy efficiency programs. The coming months will indicate whether the GCF has sufficient support to begin making investments that can help spur a transition to a sustainable world economy.
This post, including the graph, has been updated to take into account Sunday’s news that Japan would be contributing up to $1.5 billion to the fund.
Gwynne Taraska is a Senior Policy Advisor at the Center for American Progress. Thanks to Ben Bovarnick for comments on this post.