In our last update, we asked “How can good practice from the COVID-19 response inform climate action?” We suggested principles such as applying science and prioritizing marginalized groups for both countries and institutions (like the World Bank) as useful guides in responding both to COVID-19 and climate change. But the World Bank has a special leadership role, as a global development finance institution, in promoting global goods, whether eradicating infectious disease or protecting a livable planet. How can it best do these things? The Bank has already proposed using a Sustainability Checklist to assess COVID-19 recovery projects. That’s a great start. Here we offer a few more ideas for addressing the crises of COVID-19 and climate change together, or at least, at the same time.
1. Ramp up now. What’s the difference between the Bank’s ability to commit $160 billion for COVID-19 response over the next 15 months and its ability to undertake a similar effort for response to the climate crisis? It’s political will. In both cases, millions of people’s lives are at stake. It’s just that one crisis has greater visibility and urgency. But we know that just as every week of delayed action on COVID-19 has been costly, every year of delayed action on climate is costly. Historically low interest rates for AAA borrowers such as the World Bank mean that it has an opportunity to expand its balance sheet with little risk. It should do so — provided that it adheres to very strong standards with respect to transparency and accountability and social and environmental impacts, if there is a surge in funding.
2. Leverage through policy. Not everything requires money. Many of the measures to respond to COVID-19 have been basic instructions: don’t gather in crowds. Stay at home. Policy changes require political will, first and foremost, to put people’s lives ahead of corporate profits. In climate policy, many changes will save money — the end to fossil fuel and other perverse subsidies would save trillions [1]. Others, such as pricing greenhouse gas emissions (i.e. a carbon tax), can fill government coffers. The Bank can offer incentives to help create the will and technical assistance to get the details right. Incentives should confirm that poorer people who lose out in these shifts are provided transition assistance, a safety net, and/or dividends/rebates. It can be done.
3. Pursue innovative financing. Most climate financing to date has been through investment projects, the plain vanilla brand of development finance. But as the Bank knows well, more creative solutions exist, including from the health sector, debt buy-down. This has been used to finance the near-eradication of polio. Third party donors turned International Development Agency (IDA) financing into a grant if certain results (high polio immunization coverage) were achieved[3]. The trick: they pay the Bank less than the face amount of the IDA debt since the Bank is equally happy to get the smaller lump sum as to get the full amount over 30 (or more) years. Other models also can be applied: payment for ecosystem services, used with success in Costa Rica, and other forms of programs for results, could be used to get climate results.
4. Implement nature-based solutions. Nature is good for our health. It is also good for our climate. Relative to developing carbon capture & storage technology, keeping trees standing is much more cost-effective. That doesn’t mean it is simple, given the multiple pressures on land use around forests, especially in the tropics, but it can be done, with proper incentives. Given that one of forests’ greatest values to human well-being is in stabilizing climate (absorbing greenhouse gases, conserving soil, regulating rainfall), and the low level of climate finance for forests and people that protect and conserve forests, the World Bank and other development finance institutions should scale up financial incentives for climate change solutions that integrate forests.
5. Strengthen the role of local actors to tackle climate change. The COVID-19 epidemic has meant that many people and businesses have had to step into new roles. Climate finance calls for similar drawing in of new partners. The Dedicated Grant Mechanism for Indigenous Peoples and Local Communities has demonstrated that providing direct access for communities to climate finance is good both for climate and for people. Empowering people to take action that contributes to the greater good is or should be a primary goal of development finance. While the scale of such programs may necessarily be limited by the scale of the communities involved, they should become a common and not an exceptional feature in climate finance. By the same token, it is important to engage directly with Indigenous Peoples and other traditional communities, especially those who are closer to the climate problems that the Bank seeks to solve. The capacity building achieved through this engagement is a co-benefit, additional to the climate results.
6. Persist. We have already been warned that responding to COVID-19 is not going to be a “one and done” deal: after the first wave has passed, there is likely to be a second wave, and a third — until we have broad access to a vaccine, and/or a degree of herd immunity. So it is with climate change. As climate impacts grow, it will call for successive rounds of mitigation and adaptation. So our solutions must be replicable and sustainable.
But by starting now, we will reduce the future disruption to our lives and our economies. Let us take this and other lessons from the pandemic. We have the solutions. We need to apply them.
[1] “Globally, subsidies remained large at $4.7 trillion (6.3 percent of global GDP) in 2015 and are projected at $5.2 trillion (6.5 percent of GDP) in 2017. The largest subsidizers in 2015 were China ($1.4 trillion), United States ($649 billion), Russia ($551 billion), European Union ($289 billion), and India ($209 billion). About three quarters of global subsidies are due to domestic factors — energy pricing reform thus remains largely in countries’ own national interest — while coal and petroleum together account for 85 percent of global subsidies. Efficient fossil fuel pricing in 2015 would have lowered global carbon emissions by 28 percent and fossil fuel air pollution deaths by 46 percent, and increased government revenue by 3.8 percent of GDP.” IMF Fiscal Affairs Department Working Paper 19/89: “Global Fossil Fuel Subsidies Remain Large: An Update Based on Country-Level Estimates,” May 2019.