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McCormick says US investment in Clean Technology Fund is 'critical'

Jun 5, 2008 - Thomson Financial News

(Updates with additional details, Q&A)

WASHINGTON - It is 'critical' that the US support the Clean Technology Fund (CTF), a multilateral initiative that aims to help developing countries fund the additional costs of deploying clean energy technologies over dirtier and often cheaper alternatives, a Treasury official told a House Subcommittee today.

'If we take no action to provide developing countries with the right incentives, their investments today could lock in a legacy of highly-polluting, less efficient technologies for which we would all eventually pay through the accelerated effects of climate change,' said David McCormick, US Treasury Under Secretary for International Affairs.

The accelerated and unprecedented economic growth of developing countries in recent years has dramatically increased demand for energy and has come at a cost to the environment, McCormick said.

In testimony before a Subcommitee of the House Committee on Financial Services, McCormick outlined the details of the CTF, a multi-billion dollar global initiative announced by President George W. Bush in September 2007. The Bush administration has already asked Congress to commit $2 billion to the fund and the President's FY 2009 budget includes a $400 million appropriations request for the initial contribution.

The US would serve as lead donor, and with the help of countries in the G8 and beyond, would seek to raise up to $10 billion over the next three years. The UK and Japan have already pledged their support to the effort.

The fund has three objectives: to reduce emissions through the accelerated deployment of clean technologies, to stimulate and leverage private sector investment in clean technology, and to promote international cooperation on global climate change agendas, McCormick said.

US support of the CTF 'will contribute to building the kind of trust between developed and developing countries that will be necessary if a new UN climate arrangement is to be reached,' McCormick said.

The fund will be administered by the World Bank and implemented through all of the multilateral development banks (MDBs). Resources can be leveraged from the MDBs, but the bulk of the funding will come from national governments and private sponsors.

Subcommittee members expressed concern about the World Bank's involvement in the fund, noting the Bank's environmentally questionable investments. In April, the Bank approved &450 million in funding for coal-fired power plant in India. In today's hearing, full committee Chairman Barney Frank suggested that if the CTF were to be implemented, it 'could be helpful' if the Bank make a commitment not to fund projects that run counter to clean technology initiatives.

According to McCormick, the fund will not cover the entire cost of any energy project, rather the gap between cheaper dirtier technologies and more expensive cleaner technologies. 'In short, the CTF will help developing countries make the choice between deploying clean technologies and conventional technologies economically neutral,' McCormick said.

Funding -- which will come in the form of concessional loans, grants, equity investment, and credit guarantees -- will be allocated to developing countries, with an emphasis on those that expect high emissions growth.

To be eligible, developing countries would be required to work with the World Bank to develop investment strategies based on plans aimed to reduce carbon emissions.

McCormick noted that according to the International Energy Agency, by 2030, global demand for energy will increase by over 50 pct, with nearly three-quarters of the growth coming from a group of developing countries (Brazil, China, India, Indonesia, Mexico and South Africa). tlm/wash/rw


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Updated: 2016/06/30

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