Aid Effectiveness for Environmental Sustainability

Yongfu Huang, Unai Pascual, Yongfu Huang, Unai Pascual

• Publisher: Palgrave Macmillan
• Year: 2017
• Print ISBN:
  9789811053788
• eBook ISBN:
  9789811053795
• Topic: Biological Sciences
• Subtopic: Environmental Economics
• Index: Biological Sciences

This collection examines the role that foreign aid can play in dealing with the severe global challenge of climate change, one of the most pressing international development issues of the 21st century. Addressing the key threats of rising temperatures, changes in precipitation, coastal erosion and natural disasters, the book considers the implications for policy and future research, particularly in developing countries. Focusing on the worth of foreign aid in ensuring environmental sustainability, this collection consider how it can be used to improve access to sustainable energy, to promote efficient use of energy resources, to improve emission reduction and support the preservation of biodiversity in forests. Advancing our knowledge about foreign aid and climate change, it provides policy recommendations for the donors and recipient country governments. A cutting edge text on one of the most pressing international development issues of this century, this is key reading for all scholars of international development and climate change.

© UNU-WIDER 2018

Yongfu Huang and Unai Pascual (eds.)Aid Effectiveness for Environmental Sustainabilityhttps://doi.org/10.1007/978-981-10-5379-5_1

Begin Abstract

1. Introduction

Yongfu Huang¹ and Unai Pascual²

(1)

ICC, National Development and Reform Commission of PRC, Beijing, China

(2)

Basque Centre for Climate Change (BC3), Leioa, Spain

Yongfu Huang (Corresponding author)

Unai Pascual (Corresponding author)

End Abstract

1.1 Setting the Landscape: Foreign Aid for Sustainability

Since the 1990s, climate change has become one of the most severe global policy challenges of our age. Rising temperatures and changes in precipitation disrupt food and water supplies, drive many plants and animal species to extinction and trigger massive sea-level rises, flooding the homes of hundreds of millions of people. Climate change affects agricultural production and the amount of arable land area available, and threatens the lives and livelihoods of the more than 6 billion people alive today (possibly 9 billion by 2050). Poor people are especially vulnerable to climate-induced rising sea levels, coastal erosion and natural disasters. In addition to the impact on environmental systems, climate change has become one of the most pressing international development issues and poses a permanent extremely serious threat to human development and prosperity.

At a time when the world is faced with environmental degradation and rising inequity, developing countries are much more vulnerable to adverse situations than developed nations. This is for various reasons, such as low adaptation capacity, weak regulatory systems and disproportionate dependency on natural resources. Developing countries need financial assistance from developed countries to support their efforts towards a sustainable future. In this respect, foreign aid has played an important role in the global arena in attempts by developed countries to boost prosperity in developing countries.

Foreign aid (or foreign assistance) is the international transfer of capital, goods or services from a country or international organization for the benefit of a recipient country or its population. It can be humanitarian or development aid, official or private or non-governmental aid, and bilateral or multilateral. Development aid was defined by the Development Assistance Committee of the Organisation for Economic Co-operation and Development (OECD) in 1969 as the ‘flows of official financing administered with the promotion of the economic development and welfare of developing countries as the main objective and which are concessional in character with a grant element of at least 25 per cent’. The history of foreign aid dates back to the days immediately after the Second World War when aid was used to address the impacts of war in Europe as well as other reconstruction efforts. As environmental degradation and inequality have reached alarming levels, the purpose of aid has expanded to include multiple goals such as the Sustainable Development Goals (SDGs) that focus on poverty, the environment, literacy, health, woman’s right and so on. In other words, foreign aid targets the socioeconomic factors underlying poverty with the objective of promoting human development in a recipient country and generally includes development, humanitarian and food aid.

Given the constrained supply of foreign aid, aid effectiveness is a recurring theme in development discourses. The international community has taken serious steps to improve aid effectiveness, particularly after the adoption of the Millennium Development Goals (MDGs) in 2000 and of the successor Sustainable Development Goals (SDGs) in 2015. Major efforts include the 2005 Paris Declaration , the 2008 Accra Agenda for Action and the 2011 Busan Partnership for Effective Development Cooperation , important platforms for discussing mutual cooperation for achieving the development goals and increasing the effectiveness of aid.¹ The literature on aid effectiveness is voluminous and it focuses principally on the impact of foreign aid on advancing economic growth. However, systematic research on aid effectiveness for environmental sustainability is hugely lacking.

Foreign aid is key to achieve the SDGs as well as to facilitate intertwined development strategies that help with the adaptation to, and mitigation of, the current and future impacts of climate change. A number of foreign aid projects and programmes have been designed and established to integrate environmental sustainability and social inclusion into all aspects of development cooperation.² In fact, there is a widening recognition that the allocation of foreign aid in the form of official development assistance (ODA) needs to take into account and anticipate the effects of global environmental change, including climate change, on its effectiveness when measuring its impact on promoting human development. In this vein, foreign aid ought to be seen with a green economy lens, integrating a traditional development focus with global environmental protection.

Besides ODA, there are other financial mechanism including other official flows, as well as foreign direct investment, direct budgetary support, basket funding, and conditional and unconditional funding, which make up the bulk of foreign aid. Further, as pointed out throughout this book, the multilateral development banks or international financial institutions, such as the World Bank Group and regional development banks, as well as private-public partnerships through private sector funding and/or funding from foundations and non-governmental organizations (NGOs), offer other transaction channels for transferring foreign aid. There are also other channels specializing in environmental protection, and supporting programmes and projects to facilitate options to mitigate and adapt to the impact of climate change, such as the Global Environment Facility and various Climate Investment Funds .

Global (official) aid for development increased steadily from the 1960s, reaching a peak of US$68.7 billion (in 2010 US dollars) in 1992. After a decade of cuts in foreign aid, it started to increase again after the Group of eight most industrialized countries (G8) pledged to double aid to Africa by 2010 and triple it by 2015. In 2011 the global reimbursed aid had reached around US$149 billion (Chapter 2). About 25% of total ODA is now generally devoted to ‘economic infrastructure’ and ‘production’, which include transport systems, energy and agriculture. The reimbursed aid to the energy and agricultural sectors is now modestly rising, both having declined since the 1980s. In the agricultural sector there is a shift from enhancing food production towards broader human development needs. The forestry sector is also seeing a revitalizing foreign aid interest through a mechanism aimed at reducing emissions from deforestation and forest degradation (REDD+), and through the conservation, enhancement and sustainable management of forest carbon stocks. In this context, a burgeoning literature exists on the effectiveness of foreign aid for economic development, including the investments in physical capital (often known as hard infrastructure for transport, etc.), human capital (mostly under health and education) and institutional capital (governance), but less so when related to investments in conserving natural capital. This volume introduces some of the key literature on this issue.

It is noteworthy that the share of climate-related foreign aid as part of total ODA is growing quickly, especially through bilateral agreements. The total amount of bilateral climate change-related aid for both mitigation and adaptation is about 15% or roughly US$22 billion (as per 2010) of total ODA in OECD countries, with two-thirds being directed at mitigation efforts and a third at adaptation (Chapter 2). ODA support for climate-change mitigation picked up momentum after CoP-13 , held in 2007 in Bali , and at COP-15 , held in Copenhagen , further agreements were achieved to scale up new and additional funding and improved access. In Copenhagen , developed countries pledged US$100 billion per year by 2020 to address the needs of developing countries (UNFCCC 2009). In this context, an important debate between multilateral agencies, donors, development and environmental NGOs, and country diplomats in general relates to whether the new environment (including climate change) aid will be new and additional or will simply be related to country programmable aid (which accounts for about half of total ODA ), versus or together with the need to invest in institutional capacity for having performance-based monitoring and evaluation mechanisms.

In addition there is a growing consensus that the effectiveness of foreign aid projects related to environmental sustainability hinges on some common factors, including donor commitment, harmonization and donor-recipient cooperation, given the multiplicity of foreign aid initiatives and programmes in the various sectors, including energy, agriculture, biodiversity and urban areas to name some key ones and the focus of this volume. This book provides evidence and arguments regarding the effectiveness of foreign aid and climate finance regarding these sectors.

1.2 Foreign Aid for Capacity Building, Energy Sustainability, Greening Urban Areas, Biodiversity Conservation and Climate Smart Agriculture

1.2.1 Foreign Aid for Capacity Building

In this context, one area that needs urgent attention is the role of foreign aid in building capacity to address climate change by the least developed countries. Foreign aid for capacity building is related to building up social and administrative infrastructure, a developmental concept mostly coined during the 1990s, which amounts to about a third of global ODA (Chapter 2). While these countries tend to have relatively low levels of greenhouse gas (GHG) emissions, thereby having a lower level of responsibility for climate change, they are most vulnerable to climate change and are expected to bear the bulk of the associated cost, in addition to climate change intensifying their development problems such as poverty and rampant inequality (World Bank 2010). Given current climate projections, it is key that the least developed countries invest in their capacity to analyse and respond to the threats posed by climate change. This necessitates well-functioning international climate change aid programmes. It is well known that such programmes tend to work best in countries with robust institutional and governance systems, including well-functioning systems of public administration. According to the United Nations Framework Convention on Climate Change (UNFCCC) , capacity building spans issues related to the root causes of climate change, to help create the incentive and governance structures for climate change mitigation and adaptation as well as to mainstream and prioritize them in development policies (UNFCCC 2012).

Given all forms (private, official, multilateral and bilateral) of climate finance, around US$97 billion per year is being provided to support ‘low carbon, climate-resilient development activities’ as per the latest data for 2009–10 (Buchner et al. 2011). This implies that reaching the goal of US$100 billion per year by 2020 in new and additional climate finance pledged in Copenhagen (UNFCCC 2009) will be challenging at best because this would require huge scaling in addition to leveraging of funds from the private sector (see Chapter 2 for what could be understood as additional in terms of climate finance).³ In additional, still the massive share of foreign aid for mitigation (95%) is likely to start changing because it is likely that the demand for help from the least developed countries to build their strategies towards adaptation and resilience beyond what they are already achieving will be based on their national funding lines.

1.2.2 Foreign Aid for Sustainable Energy Systems

The energy sector is intrinsically linked to the goals of energy security, economic development and tackling global environmental challenges, among which climate chang...

Table of contents

• Cover
• Front Matter
• 1. Introduction
• 2. Foreign Aid for Capacity Building to Address Climate Change
• 3. Lessons Learnt about Foreign Aid for Climate Change Related Capacity-Building
• 4. The Effectiveness of Foreign Aid for Sustainable Energy and Climate Change Mitigation
• 5. A Review of the Nature of Foreign Aid to the Energy Sector over the Last Two Decades
• 6. An Analysis of the Links between Foreign Aid and Co2 Emissions in Cities
• 7. Foreign Aid, Urbanization and Green Cities
• 8. Opportunities and Conditions for Successful Foreign Aid to the Forestry Sector
• 9. The Evolution, Paradigm Shift and Guidelines for Foreign Aid in Forestry
• 10. Financing Sustainable Agriculture under Climate Change with a Specific Focus on Foreign Aid
• 11. Foreign Aid and Sustainable Agriculture in Africa
• 12. The Global Partnership on Foreign Aid for Sustainable Development
• 13. Conclusion
• Back Matter