- Associated Press - Wednesday, September 21, 2011

AMSTERDAM (AP) - Global financial institutions are recommending raising money to fight climate change by trimming subsidies for fossil fuels, putting a price tag of $25 per ton on carbon emissions and collecting a surcharge on aviation and shipping fuels.

The recommendations are part of a draft paper by the International Monetary Fund, the World Bank and other international groups prepared for a meeting Friday in Washington of G20 finance and development ministers. It was leaked prematurely and distributed Wednesday by aid agencies.

The ministers of the world’s 20 largest economies are responding to a commitment to channel $100 billion a year by 2020 to help developing countries adapt to global warming and develop low-carbon economies.

A separate paper by Microsoft founder Bill Gates will be given to the ministers. It is focused on financing development aid, and promotes the idea of a tax on international financial transactions.

The draft plan on climate finance, which could be adopted at the G20 summit in the French city of Cannes in November, refines proposals last year by U.N. Secretary General Ban Ki-moon’s advisers on how to meet the $100 billion target. The pledge would form part of a new global accord on climate change.

The summit of the G20 countries, which account for 85 percent of the world’s economy and two-thirds of its population, will set the stage for a resumption of negotiations on a climate pact by more than 190 countries beginning Nov. 28 in Durban, South Africa.

“It’s a big deal. You have to get a breakthrough at the G20 to get anything through” in a final climate deal, said Tim Gore, of the nonprofit Oxfam.

The draft paper says the starting point should be a review of fossil fuel subsidies, amounting to $40 billion to $60 billion a year. But many of those subsidies are handed out in poor countries, where people living on the edge of subsistence need help, for example, to buy cooking gas. Still, subsidy reforms in industrialized countries and emerging economies could contribute $10 billion a year to a climate fund, it said.

Bigger sums could be raised by charging $25 per ton on so-called bunker fuels, the carbon-heavy oil used for aviation and shipping.

A bunker fuel charge could raise $40 billion a year by 2020. Part of that would be earmarked to compensate poor countries for higher import costs, but about $25 billion could go toward climate change, it said. It also would lead to a reduction of 5 to 10 percent of the greenhouse gases emitted by aircraft and the merchant marine, it said.

A charge on all carbon emissions, whether through a tax or a cap-and-trade program as exists in Europe, also would lead to a 10 percent emissions reduction and raise at least $230 billion, it said. Most of that revenue would be used to reduce other taxes or compensate poor families, but allocating just 10 percent to the climate fund would meet nearly one-fourth of the goal, it said.

Private investments, based on competition and profit, are essential to the plan, the paper said. Investors will seek out the most cost-effective ways of fighting climate change, and investments are especially necessary when governments are grappling with a financial crisis.

Last year investment in renewable energy, energy efficiency, electric cars and other forms of green energy totaled $500 billion, including more than $200 billion in developing countries, the paper said. Private capital can benefit from public finance through concessional loans or grants.

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