I’ve been hanging out at sessions dealing with international financing and with the clean development mechanism (CDM) and my feeling that finance is hard--let’s understate, yeah?--persists.
For one thing, the type, amount, and location of financing is going to vary by goals: strict mitigation of greenhouse gas emissions to the atmosphere does not demand the same financing as adaptation to the effects of climate change.
But because I’ve been tuned into the CDM, which focuses on implementing projects in developing countries to prevent emissions, with developed countries basically paying to make those projects viable and then counting the CO2e (carbon dioxide equivalents, on a 100-year global warming potential basis) toward their reduction commitments, let’s look at mitigation financing.
The CDM is project-based, which means that investment is made in specific projects with measurable, verifiable emissions avoidance. This is different from, say, general development aid, where a government gets money to distribute as it sees fit. The project-based nature of the CDM means that funding must be quite narrowly defined.
The idea of NAMAs, or nationally appropriate mitigation actions, captures countries’ choice to implement policy that reduces greenhouse gas emissions from what they usually would have been. Funding for NAMAs would theoretically be more flexible—and would theoretically allow countries to invest in more synergistic efforts, such as developing an environmental ministry that can make long-term structural changes instead of using money to build a specific biogas facility with explicit reduction requirements.
The problem, of course, is that it’s hard to tell how much greenhouse gas reduction you get per dollar with a NAMA. That said, there are theoretically major sustainable development advantages and greenhouse gas emissions reductions. Investing in “theoretically” can be uncomfortable, though, especially given historical examples of development aid misuse.
But back to the CDM for a minute. There’s a lot of heated discussion about including carbon capture and storage (CCS) projects in the CDM. From a pure “reducing carbon emissions” standpoint, CCS probably makes sense. From a sustainable development standpoint, probably not so much. And all goals aside, because funding does go directly from a given developed country to a specific project, who bears responsibility 40 years from now if it turns out that something went wrong?
Sequestering pure stream CO2 is one story. In refineries, chemical plants, and natural gas stripping facilities, the CO2 is often already separate and can be stored without the additional energy penalty associated with capture—that was being expended anyway. Assume for a minute that the storage process works and is safe. That doesn’t sound so bad.
With something like coal plant capture and sequestration, though, I have a lot of concerns about liability from environmental impacts. Right now, carbon capture involves a lot of additional energy, which means a lot of additional coal is burned and mined. This means more emissions of nongreenhouse pollution that need to be dealt with, and it means more mining. These types of things have health impacts. Is it safe for a developed country to agree to invest in this type of project just because a developing country claims that right now, it wants the investment?
This issue is not unique to CCS, by the way. Any time one country directly contributes to a trackable project, it needs to consider long-term responsibility.
With the CDM and other financing mechanisms, a lot of developing countries have voiced concerns that conditional aid compromises their sovereignty. Ok, that’s true. But I’m not convinced that when a country is asking for investment or direct grants, sovereignty should take precedence over aid goals and an aid provider’s need to ensure it won’t be responsible for long-term damage.
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