Comment: Climate aid is tantamount to bribery

by Jim Giles, New Scientist, 13 January 2009

After eight years of pain, the environmental community is about to gain a US president they have some faith in. Barack Obama has said that climate change will be one of his priorities. The bad old days are over. No longer will the president send negotiators to Kyoto protocol talks with the aim of frustrating progress.

Those negotiators will, however, have to break with the past in another way. To beat climate change, rich countries need to invest billions overseas.

China wants to move onto a greener development path, for example. That involves swapping coal-fuelled energy for more expensive renewable sources, and progress will be slow unless Europe and the US help out.

Other, poorer nations need help with the droughts and sea level rises that climate change will bring. The United Nations says that rich nations will have to double their aid budgets to pay for this.

Aid for votes

But there is a bigger problem even than the daunting sums involved and the squeeze on budgets caused by the current economic crisis.

To make overseas aid have some real effect, the money needs to go to projects that the developing nations themselves deem necessary. It sounds obvious, yet other factors often determine where the money goes.

Ilyana Kuziemko and Eric Werker, economists at Princeton and Harvard universities respectively, have shown that countries receive almost 60% more aid from the US when they hold one of the 10 two-year seats on the UN Security Council (Journal of Political Economy, DOI: 10.1086/507155).

This is bribery, and it works. Alex Dreher of Göttingen University and colleagues looked at the voting record of 143 countries at the UN General Assembly: those that received US aid were more likely to follow the voting patterns of their donor (Public Choice DOI: 10.1007/s11127-008-9286-x).

It suits the US and others to buy influence in this way, but the approach does not necessarily lead to effective aid programmes.

Business boost

Economists often complain that many of the billions spent on overseas aid are wasted. Part of the reason is surely that politics, not need, drives the flow of money. If rich nations are to make climate-change funding work, they will have to pay for programmes that put climate-change measures first, not their own economies and strategic interests.

This message does not seem to have got through to some countries. Australia's overseas aid agency, AusAID, declares that "business is good for development and … development is good for business".

This means, at least in some cases, using aid money to help Australian producers of green technology sell their products to the developing world. Good for the Australian economy, no doubt, but not necessarily the best way to tackle climate change.

Garnering support

In Japan, ministers are distributing funds with an eye on diplomatic aims. The government's Cool Earth Partnership, announced last year, includes US$10 billion for climate projects in developing countries.

After interviewing government officials, Friends of the Earth Japan concluded that the scheme was designed in part to buy support for Japan's position at Kyoto protocol negotiations, where the country is pushing for India and China to do more to limit emissions. Ministers are currently considering partnership projects in some of the world's poorest nations, such as Burkina Faso and Bangladesh.

Other nations, most notably the UK, say they have cut the links that tied aid funding to commercial gain. But Britain and others still seek to benefit from climate-change programmes.

For example, the World Bank launched a series of Climate Investment Funds(CIFs) last summer. These sound great on paper. Developing countries can apply for help with emissions reductions and adaptation projects. Rich nations have pledged over $6 billion and the first awards are due early this year.

Profiting from crisis

The problem is that much of the money is in the form of loans, and all of it will be distributed by the bank - an institution where most of the power lies with donor nations. Think about how that looks to the developing world. The rich world has created climate change; now it wants to control the way the problem is tackled and make money (in form of interest on the loans) while doing so.

The decision to use the bank to distribute climate-change funding is even more open to criticism given that other channels exist. The Kyoto protocol set in place the Adaptation Fund - a pot of money designed to do some of the same things as the CIFs.

The difference is that the money is in the form of grants, not loans. Equally importantly, developing countries feel that they have a proper say in how it is distributed. Poorer nations like the structure of this fund so much that they want to establish similar mechanisms for other purposes, such as providing funds for green technology and emissions-reduction schemes.

Climate change presents a bigger challenge than any previous aid project has ever had to tackle. And if this spending does not produce results, it is not just developing nations that will lose out. This time, the aid is aimed at arresting a problem that is truly global. What better reason to put aside the parochial policies of the past?

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