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Nov 16, 2014

‘It’s No Longer Funny': The Funding Wars That’ll Dictate Our Future

Pooja   /   Pooja Parvati

In the recently-concluded G20 Meet (15-16 November) in Brisbane, Australia, US President Barrack Obama and Japanese PM Shinzo Abe committed to $4.5 billion towards a Green Climate Fund (GCF), a U.N. fund to help developing nations cope with global warming that aims to collect $10 billion by early-2015. Four days later in a meeting of the GCF countries in Berlin, the amount grows to $9.3 billion promised by 22 countries that also includes developing countries like Mexico, Indonesia, and Mongolia.

The GCF was set up as an outcome of the 16th meeting of the UN Conference of State Parties in 2010 to part-finance an annual $100 billion commitment till 2020 to rein in fossil fuel pollution. If it took four years for 22 countries (that also included some developing countries) to commit to just the start-up funds, wonder how feasible it is to think that countries would collectively provide $10 billion every year for the next six years.

This reminds me of the Scandinavian pop artist Meja’s hit solo album titled ‘Seven Sisters’ of 1998 where she sang:

 

 “…We find strange ways of showing them how much we really care

 When in fact we don’t seem to care at all

 This pretty world is getting out of hand

 So tell me how we failed to understand

It’s all about the money…I don’t think it’s funny…”

I am talking about climate financing also because it is a key part of our ongoing conversation around the post-2015 development agenda. The new Sustainable Development Goals (SDGs) that will come into effect post-2015 are going to be defined by their emphasis on sustainable development; the Green Climate Fund (GCF) is one of the ways to achieve sustainable development.

Globally, the amounts needed for climate change mitigation (this means preventive measures such as – checking global temperature rise, protecting forests and oceans that are also known as carbon ‘sinks’) ranges from $ 400 to 1,200 billion a year by 2030. For climate change adaptation (this means efforts to adjust to future climate change such as – a farmer planting more drought-resistant crops or a city ensuring that new coastal infrastructure can accommodate future sea level rise), the bill works out to anywhere between $ 50 to 170 billion per year by 2030. The proposed GCF with a pool of $100 billion aims to address this deficit to some extent.

On what it would cost to finance some of the other critical areas such as healthcare and education, a UN Committee (called the Intergovernmental Committee on Sustainable Development Financing) with 30 experts from across all regions globally worked out estimates and submitted its report in August 2014 to the UN General Assembly. The calculations highlight how wide the gap still remains.

Sample this: a global safety net to eradicate extreme poverty in all countries would cost $66 billion while eliminating hunger by 2025 would be possible with $50.2 billion. Universal health coverage and universal primary education comes with a price tag of $37 billion and $42 billion respectively. Throw in an additional $27 billion and you can ensure water and sanitation for all. To fund infrastructure projects in areas like water, agriculture, telecom, power, transport, buildings, industry and forestry, we would need a whopping $5000 billion. All of this adds up to $5222 billion on a yearly basis.

Do you know how a global safety net to end poverty is defined? It is measured in terms of increasing incomes of the poorest to a $1.25 a day benchmark. Activists have been voicing their concern about this paltry amount ($1.25) which translates to a meager Rs.75 a day.

What can Rs.75 buy for an Indian family of four living in the capital city of Delhi? A litre of skimmed milk = Rs.34; a kilogram of onions = Rs. 25-30; a kilogram of wheat flour = Rs. 16. And we are not even looking at electricity or transport, leave alone shelter, water and sanitation that are basic entitlements for a life with dignity. Now do you agree why the mythical poverty line has also been called the starvation line? Any lower than this and you would cease to exist.

One last fact: Official Development Assistance (ODA) stood at $134.8 billion in 2013, the highest level ever recorded. If we compare this to the massive bill of $5222 billion that we have accumulated to ensure some basic services, it is clear that ODA covers just 2.5% of the bill. This means we cannot rely on ODA alone and will need to look at other options as well.

The same UN Committee Report flagged some of the other sources available to us to tap into. These include: increased taxes collected by governments, private sector contributions, international trade and financial markets. Checking the outflow of income through tax evasion and flow of black money (money that is earned without paying taxes) are also ways to enhance available funds for development. There is a lot of talk now of contributions from the corporate and business houses – my only concern is there is not enough conversation around holding them to account.

And to ensure that the funds from these sources do not get misused, we would need policy reforms such as increased transparency, access to information and improved governance mechanisms. The Indian PM Narendra Modi mentioned this at the G20 Meet when he voiced the need for increased tax transparency and automatic exchange of tax information as vital to bring back the black money that has flown out of India. The G20 outcome Communiqué promises to put in place automatic tax information exchange processes by 2017-18. Not next year, or the year after, but three years from now!

Something tells me we need to keep a close watch as milestones continue to get pushed without any concrete actions in sight. Echoing Meja’s sentiment, the success of the new development agenda would rest entirely on how much, how well and in what way the money will flow in and direct the priorities for the next 15 years. And yes, it’ no longer funny!

 

By Pooja Parvati, Research Manager, Oxfam India

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