By James Wimberley |

At Copenhagen in 2009, rich countries committed rather vaguely to putting up $100 billion a year from 2020 in long-term financing for climate mitigation and adaptation. The centerpiece of this effort was supposed to be the Green Climate Fund. So far they have pledged $10.2 bn to it. In other words, they have reneged. The future agreement in Paris will be based on “national contributions”, plans which may be contingent on finance. In advance of Paris, countries agreed in Lima to submit trial balloons, “intended national contributions”, INDCs in the insider jargon. Will the rich – us – finally cough up?

Instead of gloomy speculation, let’s try and make the question more concrete by looking at a sample country, Ethiopia. I pick it because it’s already submitted its INDC: not too long, and quite readable. French expert Bernard Chabot has analyzed it for us (h/t Craig Morris). We can also rely on a recent World Bank country report.

Key points:

  • Ethiopia is populous (99 m) and poor. In 2012, PPP income per head was $1,086 (2005 $). But it is fast growing (10.7% a year over the last decade), and quite well-run, with single-digit inflation, affordable levels of external debt, and no fossil fuel subsidies. Politically it is a stable, de facto one-party state with rigged elections. So it’s better than most. If we don’t help Ethiopia, we won’t help anybody other than Costa Rica.
  • Carbon emissions are low: 1.8 tonne CO2e per head against 17.5 tonnes for the USA. Of this, 87% is generated in the countryside, from wood-burning, deforestation, crops and livestock.
  • Most of the population (76%) has no access to electricity. What there is is almost entirely renewable hydro already.

The government’s climate plan is nevertheless ambitious, and consistent with the global 2 degree C cap, which is more than can be said for the main polluters. It intends to reduce GHG emissions per head by 40% from 2010 levels to 1.1 tonne CO2e by 2030, and 64% below a BAU scenario. (I do wonder about the realism of these BAU scenarios, seeing that the green ones are now normally cheaper if you throw in health GDP costs, as you jolly well should.)

The INDC puts a price tag of $150 billion on the needed investments, though it doesn’t offer a breakdown , which may exist in other planning documents. And of course it’s conditional:

The Government of Ethiopia already spends a substantial portion of its annual budget on infrastructure and the provision of social services, which contribute to addressing the negative impacts of climate change by reducing emissions and vulnerabilities. However, the full implementation of Ethiopia’s INDC requires predictable, sustainable and reliable support in the form of finance, capacity building and technology transfer.

I reckon Ethiopia is missing a trick by not spelling out how much they could do without governmental help – relying on domestic savings and commercial investment – and what the tab is for the full package. It’s worth making a few guesstimates.

Is the $150 bn realistic? It has to cover a lot more than electrification, but that’s the big ticket. If we earmark $100 bn for electricity, from my armchair this could buy a package looking like this:

  • 10 GW of microgrid and offgrid solar @ $3/watt = $30 bn
  • 20 GW of wind @ $1.5/watt = $30 bn
  • 3.75 GW of geothermal @ $4/watt = $15 bn
  • Transmission and distribution for hydro, wind and geothermal = $25 bn.

If the peasants on rural microgrids use 1 kwh a day, and the grid-connected urban dwellers 5 kwh a day, including their commercial and municipal uses, you would meet the needs of 102 million Ethiopians, around the current population. So the plan looks in the right ballpark. I have used a daily consumption for the peasants much higher than that typical in African solar rural projects today, which generally only cover phone chargers and LED lighting. To replace wood stoves, you need much more.

How can it be paid for? The Ethiopian savings rate is 6%, so around $6bn a year in all. The INDC plan at $150 bn over 15 years needs $10bn a year. So Ethiopia cannot possibly finance its transition from domestic sources. Let’s say that a quarter of the savings can be steered towards energy, that’s $1.5bn a year. The shortfall is $8.5 bn a year. That’s for 100 million Ethiopians. Scale up to the poorest billion in the world, and you would need $85 billion a year. This confirms that the Copenhagen commitment of $100 billion a year is in the right ballpark.

If we frame this as “foreign aid”, it is doomed. Third World spokesmen may like to present the claim as reparations for colonialism/imperialism and/or for trashing the climate, but this argument has no traction in the electorates of rich countries. It’s much easier to blame the poor for allowing Big Men to rip them off and having too many babies. The argument must be framed as enlightened self-interest.

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