Examination of Witnesses (Questions 100-104)
MS JENNIFER
MORGAN, PROFESSOR
TOM BURKE
AND DR
BENITO MU
LLER
4 MARCH 2008
Q100 Mr Caton: Can we move on to
actually talk about adaptation funding for developing countries.
Given the historical record of failure of meeting international
aid commitments, how might we fund for adaptation at the sorts
of levels we are going to need in the future?
Dr Muller: I have been working
on this for a little while. We are talking about very rough estimates
because no-one really knows exactly how much this is going to
cost, but we do know orders of magnitude. It is going to be tens
of billions of dollars or euros. We know, exactly as you said,
the ODA would never be able to provide additional tens of billions
from the OECD countries to be exported—it is just not politically
feasible. That is why I was so intrigued by the adaptation fund
and by the 2% adaptation levy on the CERs; because in essence
it is the first international tax. It goes directly from the private
firm to an international body, initially the CDM executive board
in a holding account, and then for the adaptation fund. What is
happening is the realisation both domestically in treasuries and
ODA agencies that, since they were not politically and domestically
politically able to send monies abroad, domestic taxpayers' money,
we need to raise these monies directly from the individual or
the firm. There are other ways. There are a couple of ways mentioned
here in terms of extending the levy to the other mechanisms, but
there are many other interesting ways of innovative financing
in this way—aviation levies, which I proposed; and these
are the only ways in my mind which would raise the sorts of monies
which are needed without getting into deep political difficulties
domestically. I am Swiss originally and they were selling their
gold reserves off and there was the issue of about a billion dollars
being sent to Eastern Europe as a gesture to rebuild the economies.
In terms of the GDP it is nothing, but it triggered a huge furore
because for the average taxpayer a billion is a lot of money;
it is a figure we cannot imagine; whereas from the country perspective
it was 0.1%. It is politically not possible, but the taxpayers,
and we see this from the French solidarity levy which is used
for HIV Aids, they are quite happy to pay five euros on top of
their flight ticket to New York, because no-one knows what the
actual price is to book a flight to New York, five more or less;
and with a levy on aviation of, say, five euros you can raise
ten billion annually easily. There are these mechanisms; just
forget the bilateral flows from taxpayers' money—that is
not going to work.
Ms Morgan: The other one I would
add to the list, as I mentioned before, is looking at the auction
revenue, both on a national level and potentially on an international
level, which is probably less likely politically. If you had an
agreement where a certain percentage of your target was auctioned
and then that went into a fund, I think that is much more likely.
That is why I think the current debate in the European Union around
the ETS and auctioning and how that revenue money is spent is
so important, and is one of the main links into the current negotiations.
I hope more Member States will put that money in. The German model
right now is, 10% cent of their auction revenue is all going into
climate change, with two-thirds domestic and one-third into adaptation
and mitigation internationally.
Professor Burke: This is potentially
a reason which Copenhagen can find. If we do not have the credible
policy this issue is one which could line up all of the people,
for good or bad reasons, who really do not want to make a deal.
It is really important there is a credible policy. The point you
well made is: why should anybody believe anything we make that
is a promise for, as it were, Treasury transference, and not something
along the lines that Benito was talking about, some sort of mechanism
with more independence? That raises huge issues of principles.
These are not light issues.
Q101 Mr Caton: You say that the Germans
are advocating using the auction take from EU ETS in this way.
Is that gathering momentum across the EU, or are they isolated?
Ms Morgan: The Germans are actually
doing it with their current auction revenue. I do not know if
they will do 100% if they get 100% auctioning in the next round.
I think there is some momentum in the Nordic countries on this,
but there is not really a strong political debate on these finance
issues, that is my sense.
Dr Muller: I think the Commission
is also thinking about using the auction revenue. The problem
with doing that is, again, where does the money go from the auctions?
If it goes to the domestic treasury it automatically becomes domestic
money. It then competes with education and health, so it would
be better if the Commission would collect the auction revenues
because then it would be easier to send something abroad than
if it goes through the domestic treasuries. The other thing is,
it always struck me a bit funny that we have a levy on the CDM
which a) is something we try to encourage; and b) it is the one
with probably the most transaction costs in the first place, and
only developing countries are suffering from this levy. They also
get the money. Taking a part of the auctioning revenue, or even
if their grandfather just asked for a fee, that is actually to
some extent a pollution permit and you harden with these emissions,
so you pay something for that. That is much more satisfactory
to me than actually levying an activity which we try to encourage.
Professor Burke: The issue of
what happens to the revenues, whether they are generated by a
carbon tax or through an auctioning of permits, however you generate
them, that is at the heart of the real politics of climate change.
As Jennifer said, there is not really a debate going on yet about
how that should be handled. The likelihood is that at the moment
most of those revenues will end up in the general pot. Certainly
the Treasury's view is that these revenues will be there to ensure
fiscal stability; that is their view. You understand their point
of view, but they just do not tell you how it squares with solving
the climate change problem.
Ms Morgan: The German model is
that the environment ministry has that money to spend.
Q102 Mr Chaytor: We briefly touched
on aviation but could I just ask a couple of things before we
finish. We have not mentioned shipping. Of course there is some
debate about the practicalities of getting shipping into the EU
Trading Scheme. Do either of the three of you have any observations
about shipping? I think I am right in saying that the commitment
is that shipping will enter the EU some time after 2013. Any observations
on that?
Dr Muller: There are two
issues: there are proposals around dealing with the new proposals
and I am happy to send some links to anyone who wants to see them.
I think we have to distinguish between maritime bunker fuel emissions
from shipping and the issue about funding for adaptation. My problem
with putting a levy on shipping is pretty much the same as why
I did not do a levy on air cargo, because the cargo issue is much
more sensitive in terms of WTO and all these things than passenger
travel. We have no qualms about restricting the movements of passengers
in general; but restricting the movement of goods is politically
much more sensitive. It is also an issue in terms, as in Kenya,
of exporting fresh vegetables and fresh flowers which, given their
very low emissions as it stands and also the low emissions in
which they are grown, they see they should have a right to do
that and it is not simple to do that. It is something which needs
to be looked into, which maybe needs different instruments.
Professor Burke: These are not
the top priorities in addressing the emissions reductions. They
are very important issues and they have got to be dealt with.
It is quite sensible not to make them worse by facilitating a
growth in those emissions; and it is slightly bizarre that the
shipping industry will be asking for a lot of money for adaptation
in ports to cope with rising sea levels but seems unwilling to
contribute anything by way of a cost to that. I think there are
issues like that. We have got to really focus our efforts right
now on how we essentially manage electricity and road transport.
A carbon-neutral world is one which will be much more electricity-dependent.
I do not see any way, without much more significant increases
in electricity than even IEA is forecasting, you actually get
to carbon neutrality. If you are going to do that for both transport
and for power and communications and all the other things then
that is what we have got to do. That is where the bulk of emissions
come from, and we should focus on that, which is not to ignore
those things but not to get distracted by them, particularly in
aviation because it happens to be very high profile.
Q103 Mr Chaytor: Jennifer, earlier
you referred to the importance of not becoming obsessed with the
present US administration but looking forward to the next one.
Of course today in the United States there is a significant moment
perhaps in deciding who will lead the next US administration.
I am interested in your observations about what the three people
still in the field have said about climate change and its relationship
to national security in a way that might be encouraging. Any comments
from Senators Obama, Clinton or McCain on this?
Ms Morgan: Yes, absolutely. From
a climate change perspective we have got three of the national
leaders running. Certainly Senator McCain, as you know, has been
a leader on this issue and was willing to hold hearings on this
and to lead on legislation for binding carbon trace and fuel economy
standards for some time when it was quite unpopular to do this,
and he has stated that he will continue with that position if
he is elected. Obama and Clinton both have very ambitious national
plans as well with 80% targets below 1990 by 2050. On the international
side Senator Obama actually said at a recent caucus that he had
spoken with Al Gore and that if he does get the nomination he
will bring together a group of international and national advisers
immediately to inform the position of the United States before
the November election because he understands its urgency; which
to me links in our strange role of the negotiations to the Poznan
meeting in getting a shadow delegation there and an engagement.
I think the opportunity is that as the US emerges, as the security
issue comes forward and as the need to rebuild American credibility
on multilateralism is there, that climate change can indeed be
the issue where the US redefines its role in the world. I think
there is a tremendous opportunity that behoves diplomatic investment
right now.
Professor Burke: It was the Democratic
Congress after the mid-term elections that asked for a national
intelligence estimate to be prepared, and not the administration.
The national intelligence estimate, which will be out sometime
next month, is due out and there is a very significant document
in regard to climate change and security which was commissioned
by the Congress.
Q104 Mr Chaytor: That is due for
publication in mid April?
Professor Burke: I think April,
the last I heard, yes.
Mr Chaytor: May I thank you for your
evidence; that was a fascinating session. Thank you very much
indeed.
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