International Climate Change Fund

The International Climate Change Fund is a proposed alternative to the current international climate change agreement set by the Kyoto Protocol. It would require all countries to pay for their own carbon emissions, with the money going into an international trust fund that would be used to develop and purchase low-carbon technology for developing nations. Jagdish Bhagwati, an economics professor at Columbia University, is a major advocate of this plan.¹ It should not be confused with various other “climate change funds.” Unlike other funds, this plan would serve as the primary mechanism for an international climate change agreement.

The International Climate Change Fund would require all nations to pay for their current greenhouse gas (GHG) emissions, or "flow" emissions. In addition to these payments, developed nations would also be required to pay for their historical, or "stock," GHG emissions. The generated revenue would be placed into an international trust fund. Revenues would be used to finance clean technology research and investments and to purchase this technology for developing nations. Bhagwati argues that this use of the funds will encourage participation from the more reluctant developed nations because the bulk of research and production will occur in the developed world, thus a good deal of the funding will flow back into these countries.²

Following the Superfund Model

The Climate Change Fund would resemble an international version of the United States' Superfund program. The Superfund program requires companies in heavily polluting industries to pay into a trust. This fund is then used to finance clean-ups at abandoned hazardous waste sites.³ The Climate Change Fund, by contrast, would require developed countries to pay into an international trust fund, which would be used to promote and subsidize low-carbon technologies in order to mitigate, or “clean-up,” climate change.

Differences from the Kyoto Protocol

Unlike the Kyoto Protocol, the Climate Change Fund would not set emissions caps nor use a cap-and-trade scheme, but would rather set a harmonized global carbon tax. The tax could be structured either as a flat tax, where all nations pay the same rate per ton of carbon, or as a variable tax rate based on a country's GDP or another standard of measure. The Fund would also differ from Kyoto in that it would require developed nations to pay for their stock emissions; these being past emissions that continue to persist in the atmosphere and contribute to climate change.⁴ Furthermore, the Kyoto Protocol only requires action from developed signatory nations, leaving China, India, and other developing nations free to emit GHGs unhindered.⁵ The Fund involves all nations, thus fostering a truly global effort to mitigate climate change.

Criticisms

Because the Climate Change Fund would utilize a harmonized global carbon tax, much of the debate over the plan would connect to the larger argument over the merits of a global cap-and-trade program versus a global carbon tax. ^6,⁷ Some question the likelihood of involvement of the United States, India, China, and other large GHG emitters in the Climate Change Fund because of the cost burden. The United States would be particularly difficult because it would have to agree to pay for past and present emissions, which would likely be politically toxic.⁸ A separate argument is that because the developed world was able to prosper through centuries of unrestrained fossil fuel use, the rest of the world should now have the same opportunity and should not be subjected to a carbon tax.⁹ Again, these criticisms are not unique to the Climate Change Fund, but are part of the ongoing conversations over potential structures for an international climate agreement.