Global Climate Change: The Role of U.S. Foreign Assistance

Global Climate Change: The Role of U.S. Foreign Assistance

97-1015 F
November 21, 1997
CRS Report for Congress
Received through the CRS Web
Global Climate Change:
The Role of U.S. Foreign Assistance
Curt Tarnoff
Specialist in Foreign Affairs
Foreign Affairs and National Defense Division
Summary
With their expanding populations and growing economies, developing countries are
expected by the year 2010 to account for roughly half of emissions of the greenhouse
gases that most experts believe cause global warming. The Clinton Administration has
announced a $1 billion five year effort to help developing countries cut emissions and
meet the goals of the climate change treaty. The initiative follows on years of funding
by the U.S. Agency for International Development of projects to promote efficient
energy use, combat deforestation, and encourage adoption of appropriate environmental
policies in developing countries.
Developing Countries and Global Warming
The part played by developing countries in the global warming phenomenon that
many believe may eventually threaten climatic stability, world food supplies, and even the
existence of some island nations is the subject of some controversy. The current
Framework Convention on Climate Change embraces the principle that developed and
developing countries bear different responsibilities and possess different capabilities to deal
with the problem. Developed nations are expected to assist developing nations to meet
convention objectives with financial and technical aid.
An amendment to the convention to reduce emissions of "greenhouse gases" aimed
at establishing legally binding commitments for developed countries is currently under
negotiation and is expected to be concluded in Kyoto, Japan in December 1997. Under
the Byrd resolution (S.Res. 98), approved in a 95-0 vote, the Senate has gone on record
to say that it would not support a treaty that excludes the developing nations from binding
commitments and emission reduction targets. Developing countries say they will not make
commitments until the developed countries do so first. (See CRS Issue Brief 89005,
Global Climate Change, for discussion of related issues).
Congressional Research Service ˜ The Library of Congress

CRS-2
Although the 36 industrialized developed and "transition" countries are historically
responsible for the majority of greenhouse gases that may cause global warming, the
roughly 130 developing countries, by virtue of their growing populations and nascent, but
rapidly expanding, economies, are expected to contribute half of all such emissions by the
year 2010. Exacerbating the role of developing countries in climate change are their less
advanced methods of pollution control. They currently require 40% more energy than
developed nations to produce the same value of goods and services. State-owned utilities,
using poor equipment, and subsidized energy prices have led to inefficient energy uses.
Further, widespread deforestation — primarily caused by forest burning and a product of
population pressures and poverty in developing countries — is estimated to be responsible
for up to 20% of net annual increases in carbon emissions.
The President’s $1 Billion Initiative
In June 1997, the Administration announced a $1 billion 5-year Developing Country
Climate Change Initiative that would seek to reduce greenhouse gas emissions and help
countries meet the goals of the climate change treaty. It consists of three elements. First,
it would provide a minimum of $750 million — $150 million per year — in bilateral grant
assistance for climate change related programs. Second, it would support up to $250
million in “climate-friendly” investment through the use of credits, subsidized by the U.S.
government. The credit program would require congressional authorization.
The third component of the Initiative is a $25 million Inter-Agency Climate Change
Program. The latter consists largely of two existing programs — a U.S. Initiative on Joint
Implementation (begun in October 1993) that encourages U.S. and other-country partners
to work on joint projects to reduce greenhouse gases, and a Country Studies Program that
provides support to more than fifty countries to assess their greenhouse gas emissions and
ways of mitigating climate change.
Much of the proposed spending consists of repackaged or redirected funding already
built in to USAID's budget projections, but, in all, the Administration proposes that, over
the next five years, as much as $250 million of the funds targeted on global warming will
be new funds — additional to current program expenditure levels. Besides the $1 billion
for the initiative, other funds would go toward helping a number of vulnerable countries
adapt to the effects of climate change -- increasing disaster preparedness, developing more
adaptive crops, introducing flood control technologies, etc. Funding for the Initiative is
expected to come out of amounts normally provided for environmental activities under the
annual foreign operations appropriations bill.
The Initiative is primarily aimed at nine countries and three regions thought to be or
expected to become key contributors to total global greenhouse gas emissions: Brazil,
Central Africa, Central America, Central Asia, India, Indonesia, Mexico, Philippines,
Poland, Russia, South Africa, and Ukraine. At least 40% of the grant funds are expected
to go to these target countries/regions. In addition, a significant percentage of funds
under the Initiative will go to Egypt — a major recipient of U.S. foreign assistance — and
the rest elsewhere. Two thirds of the credit program would be targeted on focus
countries/regions. China, the most significant developing country contributor of
greenhouse gases, is not a recipient of U.S. foreign aid.

CRS-3
Background: USAID and Global Climate Change
Under the auspices of the Agency for International Development (USAID), the U.S.
foreign assistance program has attempted to affect the environmental policies and
practices of developing countries since the 1970s. In response to a 1990 congressional
mandate (P.L. 101-167, sec. 534), USAID established a Global Warming Initiative (GWI).
This initiative supported projects totaling $191.6 million in FY1995, $174.2 million in
FY1996, and an estimated $149.5 million in FY1997. To a large extent, the President’s
Global Climate Change Initiative is an extension and strengthening of these earlier and on-
going efforts.
Although USAID has climate-related projects in 44 countries, the GWI has been
targeted at the same countries now expected to be the focus of the President's Initiative.
In terms of overall funding, most assistance has gone to Asia and the Near East — 49%
in FY1996. In these regions, Egypt is the leading recipient. This is followed by Europe
and the former Soviet Union (21%), Latin America (10%), and Africa (9%), with
Armenia, Brazil, and Malawi among the chief recipients in their respective regions.
Most of the hundreds of USAID GWI activities seek to reduce sources or increase
sinks of greenhouse gases and focus mainly on two sectors — energy and forestry. The
energy sector accounts for one half of the potential global warming problem. The chief
objectives of USAID within that sector are to promote developing country use of energy
efficient technologies, renewable energy facilities, and low carbon-emitting energy systems
through encouragement of private sector and public/private partnerships, policy and
regulatory reform, and development of improved environmental standards and government
institutional capacities.
An Energy Efficiency Project begun in 1992, for example, has helped set up a special
$20-30 million fund for Brazilian medium sized commercial and industrial users to help
finance their energy efficiency programs, and conducted workshops in India and elsewhere
to introduce bankers and businessmen to energy efficiency financing mechanisms. The
Project’s Sustainable Cities Initiative hopes to stimulate private investment in energy
efficient urban infrastructure with a series of pilot demonstration projects. In Ahmedabad,
India, for instance, the Project has helped the municipal government, local utilities, and
major resident textile companies to identify problems and solutions and locate financing
for energy efficiency projects. Working with Mexico’s National Energy Conservation
Commission, the Project has supported the development of energy efficiency standards
for that country.
Another project, the Clean Energy Production and Use Program, has sought to
introduce new technologies to developing countries for cleaner use of fossil fuel-based
energy production. For example, it helped retrofit the Manzanillo Power Station in
Mexico with advanced combustion hardware that increased burner efficiency, reduced fuel
requirements, and reduced plant emissions. In demonstration projects in Bangkok,
Thailand, and in India, the Program sought to introduce electric vehicles, through
emissions testing and conversion of fossil-fuel transport to electric. In Brazil, the Program
is examining the potential recovery and commercial use of methane gas from solid waste
landfills, a project with both health and, through associated reduction of carbon dioxide
levels, environmental benefits.

CRS-4
USAID also supports projects fostering use of renewable energy. These include an
Environmental Enterprises Assistance Fund that provides loans, equity capital, training,
and technical assistance to renewable energy businesses in developing countries. The
Biomass Energy Systems and Technology project funds demonstration projects using
biomass wastes, such as sugar cane residue, for power and liquid fuel production.
Roughly one quarter of all carbon released from combustion comes from tropical
forests cleared for agriculture. USAID therefore seeks to foster sound forestry and
natural resource management practices, with the hope that this will lead to reducing
deforestation and other carbon-emitting land-use changes and increasing carbon sinks by
establishing new forests. Between 1991 and 1995, USAID spent more than $425 million
in the forestry sector. In Brazil, for instance, USAID supports the development of a
model for reduced impact logging with eight demonstration plots in the Amazon, is
monitoring forest burning using satellite imagery, and has facilitated a partnership between
Brazilian NGOs and the Brazilian government’s EPA to manage a national park.
In the Philippines, USAID established a Community-Based Forest Management
Program which seeks to give local communities the ability to make decisions regarding
land use, by making legal agreements between the government and local groups. In Haiti,
USAID funds reforestation efforts, including the planting of 85 million trees. In
Guatemala, USAID supports the development of the Maya Biosphere Reserve which is
protecting a forest area of 1.9 million hectares. And USAID is assisting the Central
African Regional Program for the Environment (CARPE) to reduce deforestation in the
Congo basin, by funding research to identify strategies for reducing the negative
environmental consequences of logging and to promote better agricultural practices.
Issues for Congress
Despite the Administration's characterization of its Developing Country Climate
Change Initiative as something new, it appears to add little substance to what USAID is
already doing as a result of the Global Warming Initiative begun at congressional impetus
in 1990. Moreover, the funding level proposed — at least $150 million in grant assistance
per year — is less than pre-FY1997 levels for this activity. In the past few years, foreign
aid environmental programs, traditionally strongly supported in Congress, have been
squeezed by other developmental priorities — child survival and basic education, among
them — and a decline in overall aid levels. Efforts to bring the developing countries to
accept binding commitments in an amended Climate Change Convention are likely to be
met by demands for developed country assistance to help them meet those commitments.
While the FY1998 foreign operations appropriations levels suggest that proposed U.S.
funding of climate change activities can be implemented in FY1998, future efforts to
increase such funding might be problematic.
The effectiveness of these programs is also problematic. Although USAID is hoping
to develop a methodology to measure impact, it funds hundreds of projects, where
thousands may be needed to significantly affect country emission levels. Many of these
are pilot demonstration projects that would have to be reproduced on a larger scale by
the tens of thousands of businesses and millions of agriculturalists directly responsible for
producing greenhouse emissions. To have a measurable impact on global warming,
USAID programs also require the commitment of developing country governments to
regulatory reform, strict enforcement, and other programs that might divert precious
financial resources away from their economic growth and development priorities.