House of Commons - International Development Committee

Sustainable Development in a Changing Climate - International Development Committee Contents

Written evidence submitted by the World Wildlife Fund (WWF)

SUMMARY

1. WWF welcomes the opportunity to submit evidence to the IDC select committee enquiry on Sustainable Development in a Changing Climate. WWF has extensive experience on climate change, management of natural resources and making the environment work for the poor. WWF works worldwide, and has offices in more than 50 countries. We work in partnership with local communities, civil society organisations, governments, multinational agencies and the private sector on the issues of fresh water, biodiversity, climate change, forests, marine, trade and energy. WWF was the first environmental organisation to hold a Partnership Programme Agreement (PPA) with DFID and has wide-ranging engagement on sustainable development, especially on climate change adaptation, low carbon development, fresh water, poverty and the natural environment. We actively engage with DFID policy through direct contact and consultations as well as with other NGOs through the Development and Environment Group (DEG), a working group of British Overseas NGOs for Development (BOND).

2. Climate change and ecosystem degradation, largely caused by unsustainable development patterns in the developed world, threaten to make the UN Millennium Development Goals (MDGs) for poverty reduction unachievable. These twin crises combined with continued economic and financial turmoil, are forcing a radical rethink of the "business as usual" development model that demands high growth and results in high environmental degradation. We need a complete overhaul of the current development model to move to a path of real sustainable development in the 21st century.

3. WWF believes the time is right for a fundamental change in assessing growth and development, putting sustainability at the heart of both policy and practice. While we recognise that growth is critical to achieve poverty reduction, achieving such growth within ecological limits will be critical. There are rapidly emerging opportunities in the global political system to enable development within this context and the UK government and DFID in particular, can take the lead in responding positively to this change.

4. WWF welcomes the fact that DFID has sought to take a leadership role on climate change and development. However, there are a range of crucial outstanding issues where DFID can and should do more, and, as a leader on the issue, has the responsibility to get it right. The implications of our assessment for DFID are threefold:

5. First, DFID needs urgently to rethink the current economic growth model, and turn it into a One Planet Economy model for sustainable development. Environmental sustainability should not only address carbon emissions, but also ecosystem services more widely, and be placed at the centre of all policy work on economic growth. New policy initiatives, such as the new International Growth Centre, should promote social and environmental sustainability, and include environmental accounting in its policy research and planning for economic growth and wellbeing.

6. Second, DFID needs to place the systemic links between climate change, the environment and development at the forefront of coherent UK policy making. Furthermore, our experience in the field shows us that when programmes are centred on poverty reduction within this context, this results in a positive outcome for both the local and global environment. One example can be found in the financing for reduced forest carbon emissions. Here, DFID should actively advocate a range of financing options that allows local communities, poor people and the environment to benefit. DFID should actively promote and use appropriate evaluation tools to measure their impact. New tools, such as water footprinting, can enable an assessment of complex interlinkages between the places where products are produced and where they are consumed. DFID has the scope to do more on water resource management to mitigate the negative impacts of western consumption.

7. Finally, DFID needs to improve the ways in which it addresses climate change and climate change policy in its development approach. The long-awaited climate change strategy should be opened for consultation, and should include a clearly stated goal for maximum global temperature increase of 2°C above pre-industrial levels. There needs to be better integration of DFID's mitigation and adaptation policy work, actively seeking greater input from those people who will be most affected. DFID should also do much more to reinvigorate trust in the UNFCCC negotiations. In particular, this means taking the position that financing for climate change adaptation should be considered as "compensation", and cannot be counted towards commitments to give 0.7% of GNP as aid. To radically improve the climate sensitivity of development finance, DFID should promote the use of a shadow price for carbon in all its investments through multilateral partners, to shift the balance in favour of renewable technologies. DFID should also champion the environment in new methodologies developed under the Paris Agenda aid effectiveness umbrella.

1. BACKGROUND: UNSUSTAINABLE ECONOMIC MODELS HAVE REDUCED ECOLOGICAL SPACE FOR POOR COUNTRIES

1.1 Climate change and ecosystem degradation, largely caused by unsustainable development patterns in the developed world, threaten to make the UN Millennium Development Goals (MDGs) for poverty reduction unachievable. These twin crises, combined with continued economic and financial turmoil, are forcing a radical rethink of the "business as usual" high growth and high environmental degradation development model. We need a complete overhaul of the current development model, to move to a path of real sustainable development in the 21st century.

1.2 Discussion of climate change and development cannot start without repeating what is well known, but still too rarely recognised: that the poorest, while least responsible for the causes of climate change, are suffering, and will increasingly suffer the worst impacts of global warming[118]. Climate change will manifest itself largely through radical changes in the environment (see box[119]), on which the poor and vulnerable more than anyone else directly depend. More than 1.3 billion people depend on fisheries, forests and agriculture for employment—close to half of all jobs worldwide—and this is nowhere more the case than among the rural poor[120]. But these natural resources are already changing because of climate change. Poor people are thus the first to feel the impacts of unsustainable lifestyles of developed countries, while they have done least to cause the problem, and are least equipped to deal with them.

In Africa, increased water stress is predicted to affect between 75 and 250 million people, and availability of agricultural land is expected to decrease, with some countries having agricultural yields reduced by as much as 50% by 2020.

In Asia, availability of fresh water, particularly in large river basins, is projected to decrease, with adverse impacts on more than a billion people by 2050.

IPCC, WG2, 4th Report, 2007

1.3 Climate scientists agree that the increase in global average temperature above pre-industrial levels needs to stay well below two degrees to avoid the worst impacts of climate change. Atmospheric greenhouse gas concentrations must therefore be limited to at most 450 parts per million CO2 equivalent and subsequently return to 350 parts per million to head off the most dangerous risks posed by climate change. This means that global greenhouse gas emissions (which are currently rising at around 3% per year) need to peak well before 2020 and be reduced by 80% by 2050 compared to 1990 levels to have any chance of achieving this goal. The challenge before us is enormous, but if we fail, any development and poverty reduction gains will be reversed by the scale of the climatic impacts. The world has an extremely limited global greenhouse gas budget to spend, and the developed countries have already taken up a disproportionate share both through historic emissions in the last century and through continuing high per capita emissions in the current century. This means that the potential "carbon space"—the share of a restricted global carbon budget—for developing countries to grow into has shrunk substantially, and continues to shrink with every year of failed emission reductions in developed countries (see Annex 1).

1.4 Current economic growth models still require substantial increased carbon emissions to achieve satisfactory human development[121], but the limited carbon space that industrialised countries have left for developing nations is too small. Decoupling carbon emissions from economic growth is essential, and a rapid global deployment of clean energy technologies (including on the demand side) can and must play a very large role. However, there are important questions over whether a purely technological approach can succeed, and particularly whether the poor stand to gain from this. If developing countries become "locked in" to a carbon intensive development model now, the future costs of change may be much higher.

1.5 The limit on carbon emissions is only one of the environmental constraints which we face globally. Pressure is increasing on other ecosystem services essential for human survival. Changes in global population and income levels have led to an increase in demand for water-intensive products such as meat, sugar and cotton. Today, 41% of the world's population lives in river basins that are experiencing water stress[122], with climate change exacerbating this situation. The 2005 Millennium Ecosystem Assessment[123] found that 14 out of 24 global natural systems are being degraded or used unsustainably; these include fisheries, air purification and control of pest species. As a result, MDG7—the Millennium Development Goal for environmental sustainability—was the only MDG well off track in 2007, at the midway point to the agreed target date of 2015[124]. All ecosystems, particularly forests, freshwater sources and fish stocks, are vulnerable to climate change. As the poor depend most on natural resources, and are most vulnerable to extreme weather events, the lack of progress on MDG7 puts all other development goals at risk, particularly beyond 2015.

"Global warming may dominate headlines today. Ecosystem degradation will do so tomorrow."

Corporate Ecosystems Services Review, WRI et al.

1.6 As with carbon, developed countries continue to appropriate more than their fair share of the planet's ecological budget. WWF's Living Planet Report 2008 demonstrated that, globally, we are increasingly living in ecological debt, with demand exceeding supply by one third in 2005. However, almost three quarters of humanity's total footprint is accounted for by the most developed countries; if everyone lived as we do in the UK, we would need nearly three planets to sustain us.

1.7 Current distribution of ecological footprint is profoundly unfair. While the ecological footprint of high-income countries increased by 76% between 1961 and 2005, the African continent has seen a reduction of its ecological footprint by 19% over the same period. This reduction is due primarily to a larger number of people sharing the same resource base, as well as a decrease in capacity of the ecological systems themselves. A rapid transition to a sustainable and fair global footprint would reduce the risk of ecosystem degradation and provide a basis for maintaining and improving human well-being (see figures[125]).

1.8 To achieve the right of all people to reach an acceptable level of sustainable development, an entire rethink of the development paradigm is needed, based on a more equitably shared carbon space, placing equity and environmental sustainability at its heart. This requires a massive reduction of not only carbon emissions, but also the ecological footprint of developed countries, and at the same time a rapid transition to sustainable development models in developing countries to lift poor people out of poverty at much faster rates than is currently the case.

1.9 The implications of our assessment for DFID are threefold:

— first, DFID needs to urgently rethink the current economic growth model, and turn it into a One Planet Economy model for sustainable development;

— second, DFID needs to place the systemic links between climate change, the environment and development at the forefront of coherent UK policy making; and

— third, DFID needs to improve the ways in which it addresses climate change and climate change policy in its development approach. These implications are discussed in each of the following sections.

There is one final factor which will obviously be a major influence on Africa's future economic growth. It is the environment.

Commission for Africa

2. A ONE PLANET ECONOMY MODEL FOR DFID: RETHINKING GROWTH

2.1 Development is taking place in a new and rapidly changing context which now requires a holistic and "joined up" approach, with the links between development, climate change and the wider environment better integrated. The global context for development in the coming decades is likely to be characterised by one or several of the following features:

— An increase in "carbon reduction" investments or programmes with strong adaptation links.

— Increased transportation costs as a result of higher energy prices, particularly affecting tourism and air-freighted produce.

— Potential slower consumption growth in developed countries, to meet carbon emission reduction targets and in response to higher energy prices, reducing demand for developed country exports.

— Accelerated climate change, potentially becoming irreversible, caused by natural feedback mechanisms, giving rise to increasingly frequent and severe extreme weather events.

— Pressure on aid budgets, as donor countries face increased domestic costs for adaptation and emergency response to local climate change and disruption.

2.2 As the global economy currently operates, the implications for development would be severe. Declining demand for exports would reduce both price and volume, thereby reducing revenues, while import costs for fuels and basic foods—which account for a large proportion of total imports in many developing countries—would rise sharply. If coupled with declining aid receipts, this would be a severe economic setback in developing countries. The additional impact of increased extreme weather events would be potentially disastrous.

2.3 These effects could be limited and minimised by appropriate global and national responses to climate change, particularly by developed countries. The 2008 food crisis is a clear demonstration of the consequences of failing to do so. However, if emission reduction targets are to be achieved globally, it is unlikely that the current approach to development remains viable. When coupled with increasing doubts about how effectively current economic growth achieves poverty reduction (in terms of the proportion of the proceeds of global economic growth accruing to the poor), and environmental sustainability (poverty reduction per tonne of carbon emitted)[126], this presents an overwhelming case for consideration of alternative economic models.

2.4 We need to move towards a One Planet Economy where ecological and carbon space is shared more equitably, and where success is measured not only in economic, but also in environmental and social terms. One important way to start shifting the existing model is to improve the indicators with which development is measured and on which basis policy is decided.

2.5 Current development models almost exclusively use economic indicators, particularly GDP growth, as a measure of development. Globally, this particular focus has allowed economic growth to continue without consideration of ecological limits. At the same time, economic growth has not effectively supported poverty reduction targets, and there has been a decrease in sustainability, and an increase in the gap between the poorest and richest nations[127]. While economic growth is a necessary component for developing countries, alone it is not sufficient to underpin poverty reduction, sustainability and more harmonious societies.

2.6 There is increasing realisation that GDP has limited value in explaining the real income and well-being of families in any one country. In response to this, President Sarkozy has set up a Commission on the Measurement of Economic Performance and Social Progress[128], and the European Commission announced in late 2007 that it will develop an indicator to measure environmental progress and will use integrated accounting and other sub-indicators to improve policy-making. A preliminary version is due to be operational by 2009[129].

"| if climate change resulted in a drought that halved the income of the poorest 28 million Ethiopians, this would barely register on the global balance sheet: world GDP would fall by less than 0.003%."

The Economics of Ecosystems and Biodiversity

2.7 Without broader social and environmental sustainability criteria, measuring economic growth alone gives a distorted view of the overall wealth and assets of a country, for example by only including the gains from intensive agriculture, but not the costs of damage to the water catchment[130]. By excluding natural or social assets, positive economic growth figures can conceal growing inequality and the depletion of the natural resources on which growth was based in the first place. An example is Pakistan, which reported GDP growth of 6.9% in 2006. However, the World Bank Pakistan Strategic Environmental Assessment (SEA)[131] found that the degradation of the resource base (on which growth is based) and burden of disease due to environmental problems is costing Pakistan at least 6% of GDP (US$6 billion) annually, reducing the growth gains almost to zero.

"We are trying to navigate uncharted and turbulent waters today with an old and defective economic compass. And this is not just a national accounting problem—it is a problem of metrics [|], and affects our ability to forge a sustainable economy in harmony with nature."

Pavan Sukhdev

The Economics of Ecosystems and Biodiversity, Interim Report 2008.

2.8 Former UK Secretary of State for International Development, Hilary Benn, said: "it's a myth that developing countries can go for growth and worry about environmental sustainability later on."[132] Both the DFID White Paper and the Stern Report on the economic cost of climate change have encouraged new thinking within DFID about the nature and quality of growth. At the same time, there was a growing realisation that there have been fundamental problems with the one-size-fits-all "Washington Consensus" of the 1980s and 1990s. DFID responded in 2007 with a new policy report on growth: Building jobs and prosperity in developing countries[133]. However, there has yet to be a new consensus on the relationships between economic growth and the environment either within DFID or the UK government more broadly.

2.9 First, there is no clear indication, in terms of policy proposals, documents or practice within DFID, that there is a shift towards linking economic growth and environment sustainability. The 2007 DFID policy report on growth, while recognising the failures of the single focus economics, refers to environmental sustainability just twice, and only in the narrow sense of the need to promote low-carbon energy. There has been no substantial discussion about how broader environmental sustainability will be achieved, and DFID has failed to link the two issues. DFID's departmental report of 2008 celebrates sub-Saharan Africa's growth rate of 6.8% in 2007, but fails to recognise that part of this growth is not sustainable, as it is based on poorly-managed natural resources, such as forests and fisheries. In the meantime, the cross-team policy group on low-carbon and economic growth, which was set up a year ago, has yet to produce any externally available advice or positions.

2.10 Second, the new International Growth Centre, which was announced in DFID's growth policy paper[134], will undertake developing country growth diagnostics and support developing countries' economic development. It provides a major opportunity for alternative thinking about development. The Growth Centre will support developing country growth diagnostics and prioritise actions that stimulate growth. However, this opportunity looks likely to be missed, as the Terms of Reference for the Centre state that 70% of the research will be on country-focused analysis, with the remaining 30% focusing on "emerging global or regional challenges related to fundamental components of growth such as agriculture, inclusion, infrastructure and low-carbon future". It is surprising that an International Growth Centre, fit for the 21st century, does not have a more comprehensive remit, with sustainability central to all its work.

2.11 Third, DFID's view of low-carbon growth remains focused on carbon alone, not on other equally pressing environmental limits faced by many countries. In the most recent Country Plan for Pakistan 2008-13, for example, DFID pledges that it "will make sure that growth benefits poor people and takes account of international commitments to address climate change". But the Country Plan does not include a strategy for dealing with the relationship between growth and the urgent water crisis identified by the World Bank/Pakistan SEA of 2006[135]. DFID now acknowledges that carbon has a value, but fails to recognise that capital assets such as fish stocks, forests and water basins also have a critical value which is currently not being captured. Furthermore, DFID fails to understand how the resilience of ecosystems is a determinant in efforts to adapt to climate change. Natural capital assets need to be included in economic assessments to avoid making policy decisions based on short-term gains.

3. SYSTEMIC LINKS BETWEEN CLIMATE CHANGE, ENVIRONMENT AND DEVELOPMENT POLICY

3.1 In a changing climate, a more complex view of sustainability is required that considers the implications of environmental changes on development as well as vice versa, at national, international and global levels. Actions to tackle climate change have enormous potential to underpin development and poverty reduction goals, but inappropriate or poorly coordinated actions could set them many years back. Recent events, such as the food crisis, partly caused by a relatively small shift to the production of biofuels[136], have illustrated how climate change policies (in the North and the South) may be unsustainable because of their wider effects.

3.2 On the other hand, development actions that are not integrated with climate change actions cannot be considered sustainable. Coherent efforts to support the goal of poverty reduction in environmentally sustainable ways should be the cornerstone of any policy, whether it is in global climate negotiations (eg reducing forest emissions), in our consumption patterns (eg water footprint), or in our trading patterns.

Financing reduced forest carbon emissions

3.3 A clear example of links between climate change and development policy is the issue of reducing carbon emissions from forests. Climate policy in this domain is moving forward, with proposals to compensate developing countries for reducing emissions from deforestation and forest degradation (REDD) in the post-2012 UN climate treaty and inclusion of REDD in the Bali Action Plan. WWF strongly supports the inclusion of a mechanism for REDD in the post-2012 climate agreement and, therefore, the focus of the recent Office of Climate Change review (the Eliasch Review) on the issue of financing reduced forest carbon emissions is very welcome and brings together important evidence.

3.4 However, WWF believes that the report's recommendation to use carbon markets to finance forest emission credits should be balanced and strengthened with references to other financing mechanisms—such as the use of revenues from the auctioning of pollution permits under the EU emissions trading scheme. This would allow more flexibility and feasibility in finding appropriate mechanisms which deliver sufficient and sustainable funding, support the local community and ensure long term protection of the forest[137].

3.5 Raising funds to support REDD is only part of the picture. More than one billion of the world's poorest people rely on forests for their livelihoods, so any measures to reduce emissions from deforestation must ensure that local communities and indigenous peoples retain access to, and benefit from, forests resources. At the same time, governments of forested countries need to be involved in how the finance is allocated and conditions associated, with all decisions open and transparent and involving local communities and civil society. DFID should advocate financing options that benefit local communities and poor people and should support the development of REDD programmes in developing countries which ensure the participation of all stakeholders.

Water footprints

3.6 Increasingly, water footprints are being used as a further illustration of the complex interconnections between development, the environment and our patterns of production and consumption. A water footprint is the total amount of water required to produce goods and services that a particular individual, organisation or nation uses. WWF published the first example of a national water footprint in August 2008[138]. This report shows that while an average household in the UK directly uses around 150 litres of water per day, the daily consumption of water to support the products consumed, such as food and clothes, means that, in effect, each of us soaks up a staggering 4,645 litres (or 58 bathtubs full) of the world's water every day. More important than the amount consumed is where this water comes from. Only 38% of this water is from rivers, lakes and aquifers here in the UK. The remainder, 62%, is water used abroad in agriculture and the production of exports, which means our UK consumption has a global impact on water resources. This affects the communities that rely on these resources, and increases their vulnerability to climate change as water availability becomes less predictable.

3.7 In many situations the economic, poverty reduction and carbon reduction imperatives may well support the export of "thirsty" products such as tea, especially where those products have minimal impacts on water resources. However, when products consume significant volumes of water in poorly managed, water-scarce parts of developing countries (cotton from Pakistan is one example), we need to be aware of, and active in addressing, the impacts of our consumption. The logical starting place is to encourage better water management in the exporting country. The problem of increasing water stress can be reversed not only by reducing the overall water footprint of a product, but also by supporting and promoting good management of water in river basins, including more efficient farming practices, stronger water governance and improved allocation of water among different users. There is a clear role for DFID here.

3.8 DFID has realised the importance of water resource management, making it one of three priority themes in its new water policy. It is undertaking potentially influential work to assess the state of the international frameworks and institutions for this area of development. However, there is scope to do more:

— DFID should ask the Foreign and Commonwealth Office to lead a process for the UK to accede to the UN Watercourses Convention, which seeks to improve transboundary water management and so reduce the risk of conflict caused by tension over shared water resources.

— The implications of DFID policy and funding decisions on agriculture, energy and trade need to take account of risks from, and impacts on, increasingly unpredictable water resources.

— On the issue of water infrastructure, DFID should take note of the process being managed by the International Hydropower Association, with input from a wide range of stakeholders, to develop improved guidelines for sustainability in the dams industry.

— Building on the debate about water-related risk with organisations such as the World Economic Forum, and the World Business Council for Sustainable Development, DFID working with NGOs and UK-based companies should find constructive, transparent and mutually beneficial ways to support better water management in developing countries.

3.9 In this era of globalised economies and trade, there are also problems with the way in which countries continue to think in national terms about their impact on the environment without making global connections. This is easily illustrated by the rapidly increasing footprint of trade itself:

3.10 In 1961, the ecological footprint of all goods and services traded between nations was 8% of humanity's total footprint, but by 2005 this was already more than 40% of the total footprint. In high-income nations this figure is 61%, indicating that rather than having solved environmental problems, the environmental impacts have merely been relocated[139].

3.11 Similarly, a recent WWF report[140] showed that in 2001, carbon emissions due to consumption within Europe were around 12% higher than emissions physically produced in Europe. If the ecological impact and carbon emissions associated with the production of goods imported are not included in a country's performance assessment and environmental policy, then a large part of the environmental impact remains out of view and absent from policy initiatives.

3.12 A globalised trade system brings challenges as well as opportunities, so a crucial focus should be to increase the market share of ecologically and socially sustainable goods and services within the trade system, while decreasing the negative environmental impacts of globalised trade. DFID, and the UK government, can play a crucial role in promoting this.

4. CLIMATE POLICY IN A DEVELOPMENT CONTEXT

4.1 As climate change will have severe consequences for sustainable development, poverty reduction, adaptability and the achievement of the MDGs, development institutions need to make climate change a central concern in their work. DFID is one of the leading agencies to have started this, making climate change a priority area of work in the 2006 White Paper, and having launched a range of policy, research and funding initiatives to directly tackle this issue.

4.2 DFID has taken a strong position globally in efforts to integrate climate change into mainstream development. The Secretary of State, Douglas Alexander, has outlined five development tests that DFID will use to measure the effectiveness of the international response on climate change[141].

4.3 The following are some of the recent initiatives DFID has undertaken in this respect[142]:

— Joint funding of research into the cost of climate change adaptation, up to £3 million (with the Dutch government).

— £100 million to research climate change over next five years, plus a further £5 million for improving climate knowledge in Africa. £20 million to the UN special funds to help developing countries to adapt to climate change.

— £800 million to the Climate Investment Funds (World Bank).

— Policy work on what a fair global deal on mitigation and adaptation would include.

4.4 Despite the rapid ascent of climate change on the development agenda, there are a number of crucial outstanding issues where DFID can support positive change to the poorest countries and communities. DFID is a leader on climate change and development in the international community, so many countries are likely to follow its lead. As such, the UK government has a responsibility to get it right and not hide behind political expediency or convenience. Fortunately, the doors for change are wide open at the moment. The current global situation, including a new administration in the US, offer new possibilities for imaginative and bold reform.

4.5 WWF proposes that DFID addresses the following issues:

1) DFID's climate change strategy, more than a year in the making, has still to be made public. The strategy will outline DFID's overall approach to climate change and development, beyond the top line statements made in ministerial speeches, and will identify concrete actions. However, despite repeated calls from civil society for consultation and input, the strategy is still elusive. Without clearer positions and strategies from DFID, civil society engagement remains on an unsure footing, and potential for collaboration and further discussion is difficult to pin down. It is also not clear to what extent partner governments and southern civil society have been involved in the development of the strategy. WWF asks for a more participatory and transparent process leading to the early publication of the strategy.

4.6 2) DFID should set a goal for global reduction and stabilisation of green house gases, along with emissions reduction pathways and the likely associated climatic impacts. There is ample evidence that any increase in average global temperature beyond 2°C above pre-industrial levels will have a dramatic effect on very large numbers of the poorest people. Studies predict that beyond a 2-3°C rise, 1-4 billion people will experience increasing water shortages; at a 3-4°C rise, yields of predominant crops across Africa and western Asia may fall by 15-30%, and 250-550 million people may be at risk of hunger. At an increase of 4°C, 70-80 million more people will be exposed to malaria in Africa alone, and 1.5-2 billion people globally to dengue fever. Between 56 and 245 million people will be affected due to rising sea levels if temperature increases beyond 2°C[143].

4.7 A new WWF report, Climate change: Faster, stronger, sooner[144], gives evidence from new scientific studies that update earlier IPCC studies. It shows how current warming may already have triggered the first tipping point of the Earth's climate system—the complete disappearance of summer Arctic sea ice. The study confirms the clear message from the IPCC and more recent peer-reviewed science—strong and urgent global mitigation efforts are needed to stay below 2°C warming, and even warming of this magnitude may be too much to avoid catastrophic and irreversible impacts such as melting of Greenland ice-sheets and consequent extreme sea level rise.

4.8 With no clear target for stabilisation, DFID is not able, or not willing, to set out the implications of certain levels of climate change from a poverty reduction perspective. It therefore lacks a framework for effective action to balance mitigation and adaptation costs and investments. Without knowing how much developing countries should be adapting and need to mitigate, they risk being locked in the wrong policy and investment decisions for years to come. Without a clear climate compass, there is a real likelihood of getting it very wrong.

4.9 3) DFID has not assisted in achieving a global consensus in the international climate change negotiations as it has actively promoted institutions outside the UNFCCC to take up responsibilities for climate change mitigation and adaptation in the developing world. For instance DFID has allocated £800 million to set up new Climate Investment Funds in the World Bank while in comparison, is currently contributing £18.5 million per annum to the climate change related funds of the UN[145]. With a reinvigorated international climate system and a new American administration that has pledged to enter into the UN climate negotiations, DFID should show increased support for the UNFCCC. One way of doing this could be to lead the way in ensuring that National Adaptation Plans (NAPAs) are fully funded.

4.10 4) Policy around climate change action overseas is largely developed by DFID policy teams in the UK, and the main discussion partners are multilateral agencies (such as the World Bank) or developing country governments. Current mitigation and adaptation actions therefore have a tendency to be focused on macro-level issues, maintaining or increasing GDP growth by developing low-carbon energy, or safeguarding entire economic sectors through adaptive measures to extreme weather events. These policy developments are taking place largely without consultation with those people at the frontline and most dependent on climate sensitive resources such as local water and food supply—the poorest and most vulnerable.

4.11 However, research has found that vulnerability to climate change is largely increased by non-climate stresses, such as poverty, unequal access to resources, food insecurity, trends in economic globalisation, and diseases such as HIV/Aids. In fact, the number of people impacted under different development pathways differs not in relation to changes in the climate, but to differences in vulnerability[146]. From a poverty perspective, therefore, DFID should be directly focusing on reducing vulnerability.

4.12 5) Policies on mitigation and adaptation are being developed in isolation of each other. The over-reliance on top-down modelling for mitigation on the one hand, while working on adaptation at international levels on the other, means that the institutional and practical relation between adaptation and mitigation is being missed. However, mitigation and adaptation are intrinsically linked. Costs of adaptation are estimated between USD 50[147]-86[148] billion per year, but these costs will increase dramatically as mitigation is being delayed. There are barriers and limits to adaptation too, and these will increase with failed mitigation. An increasing number of studies document the inter-relationships between adaptation and mitigation, as well as the links with other environmental concerns such as water resources and biodiversity[149].

4.13 For example, mitigation actions to reduce carbon emissions from forests could have positive, neutral or negative impacts on biodiversity, which in turn have a direct impact on human well-being and coping (adaptive) options in particular. Avoiding forest degradation in most cases implies positive benefits for both biodiversity and emissions, but certain afforestation and reforestation interventions could harm biodiversity due for instance to the use of a fast-growing alien species, and REDD mechanisms must therefore ensure that conversion of natural forests to plantation is excluded. Such interlinkages have profound policy implications, both for global climate change negotiations, and for the overall development "portfolios" for climate actions for developing countries. DFID must better integrate both strands of work.

4.14 6) DFID needs to adopt a position on the nature of financing for climate change adaptation which is firmly rooted in the principle that the polluter pays. Initial trends indicate that some high-income countries are using already pledged Official Development Assistance finance for the purpose of climate change financing. The UK was one of the first countries to do this—even though it claims that the climate financing is additional. The financing was only additional to the ODA already budgeted in the Comprehensive Spending Review of 2008-11, but will still be counted towards the commitment to give 0.7% of GNP as ODA, in effect displacing mainstream development financing. Other countries see adaptation funding clearly as additional to their 0.7% ODA targets. The Dutch Development Minister Bert Koenders said at a joint event with DFID last year: "There is no time left. We have to be crystal clear. Adaptation costs should be additional on the basis of the principle the polluter pays."[150]

4.15 Civil society organisations, including WWF, are calling on high-income (Annex I) countries to pay their fair share towards the adaptation and mitigation needs of the developing world, in addition to development commitments. There is a moral as well as pragmatic reason for the NGOs' calls. Rich countries are responsible for causing climate change impacts in the first place, therefore developing countries should be compensated for the damage that they will face, and are already facing[151].

What does DFID propose to do with countries like the Maldives,

where president Mohamed `Anni' Nasheed is already looking for an alternative location for its 300.000 people once sea levels inundate the islands?

4.16 Furthermore, there is very little development space for developing countries as most of the global carbon budget is already being used by richer countries. This means the main responsibility for financing the transition of poor countries to low-carbon economies rests with the developed world.

4.17 There is also a pragmatic reason for not taking climate money out of the development financing pot. As stated earlier, among the most important constraints on adaptive capacity are shortfalls in human development, adequacy of financial and human resources to the public sector, and the effectiveness of local and national governance structures. Momentum is needed now to ensure that adaptive capacity is strengthened at all costs. Taking away from mainstream development financing, even if some climate-related programmes are beneficial for development purposes, is therefore not an effective solution. Finally, using already pledged aid money also seriously undermines trust and action within the UNFCCC process and the hope of getting a clear and firm deal in Copenhagen.

5. DEVELOPMENT POLICY IN A CLIMATE CONTEXT

5.1 Development aid and delivery mechanisms are changing, moving away from project approaches to development, to much wider sectoral and governmental programmes, with donors agreeing to cooperate much more in the future to goals and indicators agreed at a country level. DFID, which is one of the most vocal supporters of the Paris Agenda to deliver better-coordinated and effective aid, has much less direct project engagement, but increasingly contributes to development through direct budget support or multilateral development channels, such as the World Bank, or the European Commission. This section looks at DFID's development policies and ways in which they could be improved to address climate change issues, through two lenses: DFID's indirect development impacts, for example through the World Bank; and DFID's role in the Paris Agenda for aid effectiveness.

A. Multilateral investments

5.2 The World Bank—the most important development partner for DFID—has finally fully recognised the urgency of climate change, and the likely implications for developing countries and for the World Bank's investments, through its Strategic Framework on Climate Change and Development (SFCCD). This recognition is long overdue and it remains to be seen to what extent this will translate into a change in the choice of investments made. The SFCCD provides a real opportunity to put the entire World Bank portfolio on a sustainable footing, and DFID should play an important monitoring and accountability role in this.

5.3 If past energy sector investments are anything to go by, however, there are reasons to be sceptical. Despite the Bank's claims that it has dramatically increased financing for renewable energy, it has only now returned to the same level of investment as in some of the years of the previous decade. At the same time, its investment in oil and gas in 2007 (financial year) was proportionally higher than the average investment between FY90-FY07 (26% versus 22%). The combined investment in oil and gas in the last three years amounted to more than US$3 billion, nearly double the amount the British Government has pledged to the Climate Investment Funds for the next three years. However, DFID refuses to take a stronger line on the energy portfolio of the Bank, stating that it does not want to create new conditionalities, and that NGOs contradict their own calls for a stop on conditionality when they raise this point[152].

5.4 There is a clear difference, acknowledged by all major development agencies, between making strategic decisions about the prioritisation of public (or publicly backed) funds and imposing economic or other policy requirements as a condition of providing funds. With current knowledge about the probable impacts of climate change and the number of deaths that could result, this is equivalent to arguing in favour of World Bank investment in a country's arms industry just because a country makes this request. Moreover, massively increased investment in renewable technologies, and rapid reduction in support for fossil fuels, does not prohibit a country from searching for alternative financing, but reflects the changing priorities that the World Bank should promote.

5.5 A solution is to demand that the World Bank makes public the data about the carbon emissions of its portfolio of projects, and introduces a shadow price for carbon (SPC) in its project assessments before it makes an investment decision. An SPC captures the damage costs of climate change caused by each additional tonne of greenhouse gas emitted[153] and should be set at a sufficiently high level to reflect the emerging climate change science and also the significant costs attached to relatively low probability, but extremely high impact events. Introducing the shadow price of carbon would show the true cost of its investments, and would shift the balance in favour of renewable energy technologies. Going even further, an actual carbon debit could be charged to these investments, with governmental shareholders having to pay carbon debits (proportionally to their investment) in the same way that money is already being earned through the awarding of carbon credits[154].

5.6 The same logic should run across the other investment institutions—Regional Development Banks, the European Investment Bank and others—as well as any private investment channels in developing countries, such as the CDC Group Ltd[155] of which DFID is the sole shareholder. The CDC group reported "infrastructure" (18%) and "minerals, oil and gas" (16%) as the second and third largest sectors in its investment portfolio. To date, information on the carbon emissions of these investments is not available, and there is no evidence that climate change plays a role in investment decisions. The new CDC Best Practice Investment Policy (January 2008) does not require the CDC to be transparent about carbon-intensive investments, even though it states that CDC will only invest in businesses that take account of the environmental impact of their operations (through a formal Environmental Impact Assessment). Recently the government agreed, in an amendment to the Climate Change Bill, that another government institution—the Export Credits Guarantee Department—should report on the emissions of its high and medium impact projects, and there is no reason why the same should not be upheld for the CDC investments.

B. Paris Agenda on Aid Effectiveness

5.7 An important part of the Paris Agenda on Aid Effectiveness is to harmonise and coordinate donor actions in-country, while supporting country-led decision making and planning, which will allow for greater country-ownership and mutual accountability. WWF fully supports the principles of the Paris Agenda, and believes that they are essential to put the aid relationship on a more effective, just and environmentally sustainable footing. New donor coordination initiatives under the Paris Aid Effectiveness framework, or under the recent EU Code of Conduct on Complementarity and Division of Labour provide ample opportunity to bring approaches to environmental sustainability into the mainstream, and to build a more comprehensive platform to tackle urgent cross-cutting issues such as climate change and water scarcity.

5.8 At the same time, since developing country governments are increasingly in the driving seat, certain challenges emerge. Accountability between developing country governments and their own citizens is often weak or still in development. DFID has recognised some of these inherent difficulties with the shifting aid framework, and commissioned research into the implications of increased Direct Budget Support for the environment (ODI[156], 2008). A key recommendation is to strengthen the Thematic and Sector Working Groups (on environment or natural resources) to maximise the quality of policy dialogue, and consequently it is "essential to keep a balance between the representation of government, civil society and development partners [donors]"[157].

5.9 However, national civil society organisations working on environment, climate change and poverty links are often weak or non-existent, and government departments for the environment are often badly resourced and badly integrated into the rest of government (a product of years of project-focused development approaches). DFID should put much more effort towards encouraging democratic scrutiny through supporting and strengthening national parliaments and civil society, and convince other donors to do the same. WWF will be publishing research with more suggestions on this issue.

5.10 Furthermore, in the process of coordinating or "dividing up" labour between donor countries, political reality may mean that critical cross-cutting issues, such as gender or environmental sustainability, risk falling within the cracks. The EU Division of Labour initiative could be a particular case in point, as there still is no overarching strategy to monitor the process to ensure that there are no "orphan" sectors. It is not clear to what extent developing countries themselves would have a say in the coordination negotiation process. DFID should champion the cause of cross-cutting issues in the division of labour process, and ensure that a process is set in place to monitor the inclusion of all essential sectors in division of labour, not just those with greatest political appeal for donor countries.

6. CONCLUSION: WHAT DFID SHOULD BE DOING

6.1 WWF believes the time is right for a fundamental change in assessing growth and development, putting sustainability at the heart of both policy and practice. Environmental and social imperatives are leading to new policy initiatives, such as the International Growth Centre, the low-carbon policy group, and to new funding mechanisms, such as those to address climate change. There is rapid change in the global political sphere and the global economic system.

6.2 The UK government and DFID, in particular, can take the lead in responding positively to this change. The following is a summary of WWF's requests to the government and to DFID to build more resilient and sustainable economies in developing countries that have poverty reduction, fairness and environmental sustainability at their centre.

A One Planet Economy model for DFID: Rethinking growth

6.3 DFID should urgently adopt a One Planet Economy model, by:

— integrating global and national environmental values and constraints, by including environmental accounting in its development assessments; and

— supporting an approach to economic development which places sustainability, fairness and poverty reduction at the very centre.

6.4 DFID should ensure environmental sustainability addresses not only carbon emissions but also ecosystems services and natural resources management, and place these at the centre of all policy work, research and dialogue on economic growth. It should set key low-carbon and sustainability targets for the Growth and Investment Division of DFID, with a clear timetable for achieving this.

6.5 In particular, the new International Growth Centre should place social and environmental sustainability at the very heart of all research on economic growth. The centre could play a major role in including environmental accounting within policy options and scenario planning for economic growth, giving a more comprehensive and balanced picture.

Systemic links between climate change, environment and development policy

6.6 In the extraordinarily complex relationships between sectors, trends and events, DFID should always base its position on what is best for the poor, which more often than not turns out also to be positive for the local and global environment.

6.7 With regard to financing for reduced carbon emissions from forests, DFID should actively advocate a range of financing options beyond the carbon market and must promote the need for all funding mechanisms to benefit local communities, poor people and the environment.

6.8 DFID has the scope to do more on water resource management. In particular, DFID should support the process for the UK to accede to the UN Watercourses Convention and ask the Foreign and Commonwealth Office to act.

6.9 DFID policy and funding decisions on agriculture, energy and trade must explicitly take account of risks from, and impacts on, increasingly unpredictable water resources as climate change takes hold. Specifically on the issue of water infrastructure and energy, DFID should take note of the process being managed by the International Hydropower Association, with input from a wide range of stakeholders, to develop improved guidelines for sustainability in the dams industry.

6.10 In the current global trade system, DFID should work, with other parts of the UK government, to increase the market share of ecologically and socially sustainable goods and services within the trade system, and seek to decrease the negative environmental impacts of globalised trade, rather than focusing on increasing the volume of trade per se.

6.11 There is increasing scope for going beyond sustainable market mechanisms and involving the private sector constructively in the development and implementation of public policy for good natural resource management. DFID should take advantage of emerging conversations about water-related risk within the World Economic Forum, the World Business Council for Sustainable Development and other organisations by working with NGOs and UK-based companies to find transparent and mutually beneficial ways in which those companies can support better water management, and thus help poor communities in developing countries.

Climate change policy in a development context

6.12 DFID should open its climate strategy to consultation with wider civil society, and ensure that partner governments and southern civil society are fully involved in its development.

6.13 DFID's strategy should include a clear target for maximum acceptable temperature increase of 2°C above pre-industrial levels and greenhouse gas concentration, and also the associated timeframe for ensuring that global emissions peak and are then placed onto a downward path. Without such clear targets, it is impossible to set out a framework of action to balance mitigation and adaptation costs.

6.14 DFID should more openly support the UN system and the UNFCCC process. One way of doing this could be to ensure that National Adaptation Plans (NAPAs) are fully funded.

6.15 DFID should invest far more of its resources into policy and research on climate change impacts and low carbon development, with greater input from those people at the frontline of climate change and most dependent on climate-sensitive resources. An immediate way to increase adaptive capacity to climate change is to focus on reducing vulnerability.

6.16 DFID should do much more to integrate its policy work, research and activities on mitigation and adaptation, recognising the interlinkages, mutual benefits and potential trade-offs between them. These interlinkages have profound policy implications for both the climate negotiations and the overall climate action "portfolios" in developing countries.

6.17 DFID should urgently follow the example of the Dutch government, and take the clear position that financing for climate change adaptation should be based on the "polluter pays" principle. Financing paid under the UNFCCC should be considered as "compensation" under the UNFCCC principle of common but differentiated responsibility. Mainstream development financing should not be used for climate-related financing.

Development policy in a climate context

6.18 DFID should promote the use of a shadow price for carbon (SPC) in the project assessments of its multilateral partners, particularly the World Bank. This would reflect the true cost of its investments, and would shift the balance in favour of renewable energy technologies. Furthermore, an actual carbon debit should be charged to these investments, in the same way that money is already being earned through the awarding of carbon credits. The same logic should apply to DFID investments through the CDC.

6.19 As part of its environmental strategy, DFID should put more effort into encouraging democratic scrutiny through supporting and strengthening national parliaments and civil society, and through encouraging similar practice across the donor community.

6.20 DFID should champion the cause of cross-cutting issues in the division of labour process, and ensure that a process is set in place to monitor the inclusion of all essential sectors in division of labour, not just those with greatest political appeal for donor countries.

WWF UK

November 2008

Annex 1