Bali must bring developing nations on board

by Sri Mulyani Indrawati and Robert Zoellick

Climate change is a development, economic and investment challenge, not just an environmental issue. An effective global accord on climate change will have to recognise the interests and needs of developing countries. That is why this week in Bali, finance ministers will, for the first time, attend a climate change session in conjunction with the new round of negotiations under the United Nations Framework Convention on Climate Change. Indonesia, host to the 13th Conference of Parties, is both vulnerable to climate change and a source of large emissions, particularly from deforestation and changes in land use.

After President Susilo Bambang Yudhoyono met with the World Bank in September, Indonesia announced it is launching the development of its first low-carbon growth strategy to reduce the carbon intensity of its development path, identify opportunities for climate change mitigation and adaptation, and manage the financing implications of shifting to cleaner carbon development activities. It is proposing an initiative on reduced emissions from deforestation and degradation, with support from the World Bank and the UK, Australia, Germany and the Netherlands.

Developing countries recognise the dangers climate change poses to their territories, economies and people. They are interested in the potential of carbon markets and new technologies to finance greenhouse gas reductions. But many are wary of climate change negotiations because of two fears: that international assistance will be diverted from social development and growth plans, and that climate change policies championed by developed countries will constrain the growth of countries moving up behind them. Unless the concerns of the developing countries are addressed, any new international accord on climate change will be neither global nor successful.

While the environment ministers in Bali will be working on a roadmap to a post-2012 framework, more than three dozen countries are sending finance and development ministers to support this process. The finance ministers will discuss policy options, economic incentives and disincentives, and financing arrangements that combine growth and energy sources with low-carbon strategies, technological development, efficiencies and measures to adapt to climate change. The engagement of finance ministers will help to integrate climate change mitigation and adaptation issues into national priorities and budgets as well as the international dialogue on financing instruments and flows. Climate change policies cannot just be the frosting on the cake of development; they need to be baked into the recipe of growth and social development.

The World Bank and international financial institutions, working with developed countries, can help. We are devising innovative and concessional financing mechanisms. In Bali, we will launch the Forest Carbon Partnership Facility to help counter deforestation. The Clean Energy Investment Framework will promote alternative energy, efficiency and lower emissions. For example, Indonesia and the World Bank are co-operating on a geothermal project with support from the Global Environment Facility.

International partners can also assist countries with the implementation and expansion of carbon trading systems to finance low-carbon growth in poorer countries. The World Bank’s private sector arm, the International Finance Corporation, can help draw private capital towards developing countries’ needs for an estimated $200bn per year of low-carbon energy production. We also need to encourage research and development in new technologies for low-carbon growth and advance their rapid adoption in the developing world.

For many developing countries, the stresses of climate change are today’s crisis, not tomorrow’s uncertainty. The poorest are the most vulnerable to calamities and adverse changes in health conditions, food production, water resources, coastal integrity and biodiversity. Yet research and spending on climate adaptation have fallen far behind work on mitigation. We should be developing integrated adaptation and mitigation strategies that will reinforce one another.

Indonesia is doing more than hosting the UN conference on climate change. It is also showing developed countries how to engage developing countries in a constructive discussion about the integration of climate change and development strategies. The Bali meetings need to launch two mutually supportive projects: one is a negotiation to guide a global approach to climate change; and the second is a commitment to support developing countries’ efforts to combine development and climate change strategies. Progress with developing countries will be a prerequisite for a new global climate change agreement that works, and is sustainable environmentally, economically and politically.

The authors are, respectively, the minister of finance for Indonesia and the president of the World Bank Group

CopyrightThe Financial Times Limited 2007