and Society (CLICCS)
Not all that glitters is green
7 December 2021, by Stephanie Janssen
Photo: Orlandow/Pixabay
In the future, investments are to be made more sustainable. Franziska Müller, a Junior Professor of Globalization and Global Climate Policy, is currently investigating the energy transition and financial instruments designed to slow climate change.
Ms. Müller, you’ve said that, when it comes to green financial instruments, there’s still much work that needs to be done?
Green funds are going to gain in influence and play a major role in determining what future climate protection will look like. As a political scientist, in my work I’m exploring the underlying power structures of this trend, and how green fund governance could be designed in a beneficial way. Who decides what’s green enough? What gives these criteria legitimacy? And who enforces the rules? There are often discrepancies.
The UN Climate Change Conference created the Green Climate Fund. What’s your view on it?
It’s the largest climate fund in the world and is intended to support the goal of using US$100 billion per year in public and private funding for climate financing. Over 220 climate protection projects in the Global South have been planned, based on this financial backing. But by 2021, only US$7.4 billion had actually been paid into the fund. The money needs to be made available much more quickly.
Are the decision-making processes fair?
Countries in the Global South have a fundamentally harder time getting their projects funded. It starts with the formalities; in many cases, they lack strategic capacities that could help them submit an application that “satisfies” the Global North. At the same time, the climate crisis is already hitting these countries exceptionally hard. To secure policy ownership and substantial action, vulnerable countries should be able to participate in decision-making on project funding.
Microinsurance can be used to protect smallholders and farmers from harvest-related risks. Is it a sensible option?
To date, roughly 100 million people have been entered microinsurance contracts. But in order for the insurance to apply, the risk of crop failure can’t happen more often than once every 15 years. But hurricanes and droughts occur much more frequently, which means many risks aren’t insurable. In addition, insurance individualizes risk. Many communities band together to help one another after natural catastrophes. In the future, this sense of community could erode if, for instance, one person has insurance A, another only has insurance B, and yet another has no insurance at all.
Which financial instruments do work?
I’m a big fan of energy auctions! A given country officially announces that, in the future, it wants to produce a certain number of gigawatts of renewable energy, and companies from around the globe can submit tenders. Ideally, this goes hand in hand with technology transfer, skill transfer and green jobs along the value creation chain. My research has covered investment patterns and socio-economic effects of energy auctions in South Africa. Due to a highly successful auction instrument, today more than 100 of these projects are generating five gigawatts of electricity. To ensure that foreign companies don’t just fly in their own staff, projects need to demonstrate that they employ and train local personnel. Roughly 40 percent of these projects operate at a high level of communal ownership. Anyone who hasn’t yet begun addressing the energy transition can learn quite a bit from the Global South.
CLICCS Quarterly
The article was published in CLICCS Quarterly, the news magazine from the Cluster of Excellence.
Find full issue -> here.