How have a series of global shocks changed the way we think about development?

This piece appears in today’s Ottawa Citizen

The past five years has been a period of extraordinary global turbulence.

The turmoil has struck as three “shocks” — the financial crisis, a breakdown in the world food system, and the Arab Spring — combined with a slow motion train wreck in the form of the seemingly inexorable onset of chaotic climate change. Together, these are having a profound impact on our understanding of how the world works.

Just how much has changed was one of the overriding impressions from updating my book From Poverty to Power: How Active Citizens and Effective States Can Change the World, first published in 2008.

The global financial crisis was a watershed event. It triggered historic geopolitical change in the rise of the emerging powers such as China and India. It also drew attention to the risks of an excessively “financialized” global economy; but it failed to lead to a reining in of the excessive size and volatility of “hot money,” condemning us to future financial crises, possibly starting with Europe in the coming months.

Simultaneous with the financial crisis, the world witnessed a food price spike. In many countries this traumatized the lives of poor people to a much greater extent than the shenanigans on Wall Street, and reversed decades of low and falling prices, threatening long-term progress on hunger and nutrition. That has led to renewed attention to the basic issues of food and hunger, and some unfortunate side effects such as “land grabs” across the developing world by investors from rich countries.

The Arab Spring confirmed the importance of active citizens in driving social and political change, and made us think much harder about the role of women (who were very active) in majority-Muslim societies.

Taken together, these events have made us much more aware of the impact of volatility, risk and vulnerability on the lives of poor people. That leads both to a focus on trying to prevent shocks from occurring in the first place and to dampen their impacts when they occur. “Shock absorbers,” from social protection to food reserves, to help for poor farmers to adapt to climate change, have become a much more central part of development thinking.

Inequality and redistribution have become mainstream debates, with even the International Monetary Fund weighing in on how high levels of inequality imperil both growth and stability. And the levels are breathtaking. I recently calculated that the amount the world’s richest 100 people added to their wealth in 2012 ($240 billion) would be enough to end extreme poverty for the 1.4 billion people living below the international $1.25 a day poverty line ($66 billion according to the Brookings Institution), four times over! With that focus has come renewed interest in how tax systems and reforms can reduce or exacerbate inequality, both at the national level, and through the international system of tax havens.

Finally, these changes are feeding into a deeper questioning of the nature of poverty itself. As the World Bank’s path-breaking and unsurpassed “Voices of the Poor” study in the 1990s showed, to be poor is as much about anxiety, vulnerability and shame as about income levels. And that anxiety has only been heightened by the turmoil of recent years.

In response, governments around the world increasingly acknowledge the limitations of income or GDP per capita as a measure of well-being, and are developing much more sophisticated metrics — aid agencies are rather lagging behind national governments in this regard.

This more subjective, people-based understanding of well and ill-being may be one explanation for a greatly increased focus on issues of power and agency in development, often linked to issues of the basic rights that are (or are not) enjoyed by poor people. The spread of “rights thinking” on areas such as gender, disability, ethnicity and sexuality appears to be a global phenomenon, bringing significant changes in national legislation and practice in many countries. The challenge for aid agencies is to ensure that their plans and methods, including the pressure to demonstrate “results” and “value for money” reflect this more human understanding of the nature of poverty and power. As the title of my book makes clear, we need to move “from poverty to power” in both our thinking and our practice.

Are we successfully completing an “age of development” or seeing the prize slip from humanity’s hands in an economic and climatic meltdown? It is hard to recall a period when developmental optimism and pessimism co-existed to such a high degree.

The stakes could not be higher. The coming decades will show whether poverty enters the history books, joining slavery and the fight for women’s suffrage, or whether an age of chaos and scarcity starts to reverse the wonderful progress of the last 70 years.

Duncan Green is the author of the book From Poverty to Power and Oxfam GB’s senior strategic adviser. He is launching his book and giving a public lecture at the University of Ottawa on Friday May 10. The event is sold-out, but a recording of the event will be made available soon on YouTube at http://www.youtube.com/user/CCICable.

What’s the link between land grabs, trade rules and climate change? Good new briefing from Sophia Murphy

You can rely on Sophia Murphy for crisp, credible analyses of agricultural trade and food issues. Her latest paper, Land Grabs and Fragile Food Systems, is up to her usual standard. She locates the current row over land grabs in some broader debates that have rather fallen off the agenda, namely globalization and trade rules. Made me come over all nostalgic for the WTO-bashing of yesteryear.

Sophia argues that the globalization and the free trade agreements of the last 20 years have combined with fears over climate change to create the conditions for the current wave of land grabs. But the immediate trigger was the 2008 food price spike, which eroded the confidence of food-importing countries like Saudi Arabia and Kuwait that they could rely on the trading system to feed their people (so many of them started grabbing land instead).

The problem with the WTO is that its insistence on removing import tariffs (which we campaigned on when prices were low) was not matched by any effort to discipline export controls, making it completely irrelevant when prices rose and exporting countries slapped on export taxes to try and keep the food at home, thereby compounding the price spike. Sophia also takes a swing at the WTO’s inability/unwillingness to do anything about corporate concentration in the food sector. When the price spike hit ‘the four companies that between them control an estimated 75 percent or more of the inter­national grain trade saw their profits soar.’

Failures in other areas have aggravated the problem. Food reserves have been run down, biofuels have added a new degree of uncertainty by tying food prices to those of oil and gas (when fossil fuel prices rise, more land gets turned over to biofuels, so less food is produced, so food prices rise). Climate change, both current and rapidly approaching, has only added to that sense of vulnerability on food security.

How to reduce the pressures that are driving the wave of land grabs? The report has a rather convincing policy shopping list arising from this analysis:

• Reformed trade rules that ensure export measures are subject to transparency and predictability requirements and that allow all countries policy space for food security policies. She also proposes ways to ease food price spikes by reducing biofuel production during price surges
• Publicly-managed grain reserves to dampen the effects of supply shocks
• Readily accessible funding for the poorest food importers, which would be triggered automatically when prices increase sharply in international markets
• The development of strong national and international laws to govern investment in land, respecting the principles and guidelines set out in the Voluntary Guidelines on Land Tenure. Tanzania’s recently announced limits on how much land foreign and domestic investors can lease is a hopeful example of a national government taking the initiative to get serious about regulation.

At 12 pages, a very useful addition to the land grabs literature. And in case you missed it here’s what the fuss is about.

‘Don’t leave this to your children’: could climate finance unlock a deal on Climate Change?

Just back from the Doha climate talks, Oxfam’s Campaigns and Policy Director Phil Bloomer discusses the tensions and relative climate change records of rich and poor country governments.

The UN summit on climate change in Doha this week is entering the end game, amidst increasing frustration from all sides at the glacial pace of negotiations (and this glacier shows no signs of melting).

Amidst the rancour, Professor Nick Stern, perhaps the leading thinker on climate action and negotiations, has thrown a huge challenge into the talks, by explaining the ‘brutal arithmetic’ of our greenhouse gas emissions. To stay below an average global temperature rise of 2C, “stronger action will be required from developing countries, even if developed countries reduce their emissions to zero by 2030”. Stern goes on to say that in the interests both of fairness and getting results, developing countries’ efforts will have to be supported by rich countries’ know-how, technology, and finance.

This really matters: equity (let’s just call it fairness) is not a barrier to ambition in the talks, but rather its enabler. Rich countries’ willingness to support developing countries’ shift to low carbon development, and their adaptation to the climate change that already threatens poor people’s lives and livelihoods, is key to unlocking higher ambition from all countries. Ambition for emission cuts and equity are two sides of the same coin. The failure to grasp this at the talks in Copenhagen in 2009, led to that failure. We cannot let it destroy Doha too.

But the Doha talks look dangerously mired on this. Developing countries are facing their own financial cliff this month, when three years of $30 billion in ‘Fast-Start Financing’ for emissions reduction and adaptation come to an end. This was mostly not ‘new and additional’ money (as was the promise), but mainly diverted from aid funds to ‘climate finance’. But at least it was reasonably predictable. Developing countries now find that rich countries are refusing to recommit to scaling up this funding, preferring broad assurances that bilateral climate finance will ‘continue’ (not necessarily ‘increase’). The UK is an honourable exception to this, pledging £1.8bn over the next two years. This reluctance may be understandable in a recession, but there are innovative sources of finance like the financial transaction tax, a tax on aviation and shipping, or closing tax loopholes and havens, which could raise billions, were they to be implemented.

Despite this lack of finance, developing countries are not standing around waiting for our cash before acting: the Stockholm Environment Institute calculates that the developing countries’ pledges to reduce greenhouse gas emissions are already larger in absolute terms than rich countries’ promises. This extraordinary disparity looks set to be reinforced at Doha as the rich countries refuse to join an extended climate change agreement (USA, Canada, Russia, New Zealand and Japan), or improve on their lowly targets for reducing emissions (the US has said no further action should be expected before 2020) or only promise reductions they have effectively already achieved, partly through the economic recession (EU).

Meanwhile the least developed countries’ main concern is supporting their vulnerable citizens to adapt to climate change that is already wreaking havoc through increased droughts, floods and temperature extremes. This needs finance. As Yvette Abrahams, an Oxfam partner from South Africa, said to rich country negotiators in Doha: “My family is meeting this Christmas to discuss moving (from our ancestral land). We cannot stay, as the heat has stopped the grass growing, and there will be nothing to feed our livestock. So the very little we have managed to preserve through slavery, colonialism and apartheid, we are about to lose to climate change. That is why we do not understand why climate finance is so difficult to deal with (in these talks). What I have paid is all I have. Whatever it is your ancestors have done, I appeal to you to not leave this to your children.”

Stern calls for the principle of ‘equitable access to sustainable development’ to replace the vested interests, zero sum games, and redlines that currently paralyse the negotiations. Every country, and especially the high emitters, will have to take on higher targets if we are to avoid runaway climate change. The question is whether that will be done fairly or not. This is a collective action challenge like no other and we need collective and fair action. We need to hang together or, assuredly, we will hang apart.

Science Girl; Starbucks and tax; NYC carbon; adaptation in America: videos I liked

Some Friday video light relief (well, light-ish) on climate change (with an eye on dismal dialogues in Doha) and tax evasion.

First the totally adorable Science Girl on climate change, clean energy + a surprise upside – wildfires melt Barbie & Ken before your very eyes

Next up, a sweet and funny Starbucks tax sting – two Welsh Activists decide it should return its 28% tax dodge to its customers. Background here

If greenhouse gases were visible, would it be easier to persuade publics and politicians to take them seriously? This smart video from New York City suggests the answer is yes. [h/t John Magrath]

Finally, climate change adaptation in America. Vicki Arroyo from the Georgetown Climate Center in a rather disturbing TED talk. Makes you wonder if some kind of climate survivalism is on the way

From superstorm Sandy to climate solidarity: How extreme weather can unlock climate action

From a battered New York, Oxfam climate change policy adviser Tim Gore (right) considers the wider impact of major ‘weather events’ on the climate change debate

I live in New York, half a block outside Evacuation Zone A on the East side of Manhattan. My partner and I, like many others, had our quick-run bags packed as the power went off on Monday evening (which is yet to be restored) and the storm surge grew. In the days since, we’ve been struck by the messages of good will we have been sent from all over the world. One of the first was from a friend and colleague who two years ago took me to visit the hundreds of thousands of Bangladeshis living on mud embankments shattered by Cyclone Aila.

Could such disasters, wherever they hit in the world, offer opportunities to build a global solidarity movement for action on climate change? They could, if we are smart about it.

First, let’s be clear – as CNN, Bill Clinton and New York Mayor Bloomberg have all been in the last days – that Sandy was another clear cut case of climate change in action. With increasing rigour (as I described here), scientists can now show that global warming driven by excess greenhouse gas emissions, either makes extreme weather more likely or more severe, or both. Bloomberg Businessweek’s front cover on Sandy should surely be a contender for headline of the century.

This increased confidence in attributing climate change to specific impacts on people’s lives, and on the bottom lines of businesses and entire countries, means weather extremes like Sandy should now be treated as major opportunities to leverage political action on climate change. It’s an idea that has gained increasing attention in recent years, from Alex Evans to David Attenborough (and in Oxfam, Duncan Green’s been haranguing us about getting better at seizing “windows of opportunity” for years).

In the context in which an abrupt change of course is needed to address the climate crisis – one some have compared only to mobilisation for war – crisis moments can create unique windows of opportunity for non-linear political change. That is precisely what we need. They can catalyse clear shifts in the values and priorities of citizens, business and political leaders around the world. Climate disasters in the global North and South alike are reminders of the common threat we face, and of the need to act collectively and urgently to avert yet greater harm.

While no-one could wish for a future disaster, the science shows events like Sandy and this year’s US megadrought are the new normal. So it makes sense for Oxfam and many of our partners in civil society to try to put this approach at the heart of our climate change advocacy and campaigning. To do so, we must get at least a couple of key things right.

First, we must recognise that while we are all now increasingly affected by climate change – rich and poor, in the global North and South alike – we are not all affected equally, and our struggles to fight climate change are not all the same. In fact, our common enemy of climate change will further exacerbate the inequalities between us. Sandy showed again that New York is highly vulnerable to climate change, but I was still thankful to be facing a hurricane there rather than in Haiti, Bangladesh or the Philippines. The US farmers who saw their crops devastated this year – sending world food prices rocketing – had losses tempered by access to drought-resilient crop varieties, investment and insurance mechanisms that could have saved lives and livelihoods amongst their counterparts in the Sahel in recent years.

It’s the poorest everywhere who are hit hardest. But we’ll only build a movement of global climate solidarity if we recognise these

Fire damage at Breezy Point, NYC

inequalities and differences up front, and make sure they are at the heart of the responses and solutions we demand. That’s how our campaigning can be inclusive, ultimately reaching more people, and building more power for action.

Second, we must assert that global climate solidarity goes beyond charity and stands for justice – it must link our basic humanitarian impulse to help those in need to passionate political action. This means knowing who or what is the source of climate injustice, who stands in the way of redress and how they can be moved. This week our friends at 350.org are doing a fine job at showing how that can be done. Their rapid response webpage helps concerned citizens donate to help those hit by Sandy, while putting the energy companies – who have kept climate change out of this year’s Presidential debate – in the frame, and demanding political action from whoever wins the White House next week.

Expressions of global solidarity in the windows of opportunity following climate disasters will likely not be the only approach we need to jump start climate action. But we can’t just rely on incremental strategies either.

To close the energy poverty gap, we need ideas, investment…and natural gas. Todd Moss responds to Hannah Ryder

CGD’s Todd Moss responds to Hannah Ryder’s critique of his ‘let them burn fossil fuels’ line on energy poverty

Thanks to Hannah for raising some good questions about my proposal that the US agency OPIC partially exempt the world’s lowest-income, lowest-emitting countries from the greenhouse gas cap. I think we both agree that 1.3 billion people without access to electricity in the 21^st Century is inexcusable. It’s a development problem that can and should be solved. We also agree that the past approach to power has been insufficient, and that to close the energy poverty gap we need new ideas and new technologies. Here’s where we disagree:

• Greater investment is necessary if we want to close the energy poverty gap. The data on additional generation capacity and access do not, as she suggests, show that increases in the former have no relation to decreases in the latter. Rather those IEA graphs in an apples-to-apples (global-to-global) comparison show the opposite: a clear decline of roughly 25% between 1985-2000 in the total number of people without access to electricity. Yes, this decline is driven by East Asia, but this is also likely to be precisely where the bulk of the investment and capacity additions have occurred (IEA doesn’t provide ungated data on capacity addition disaggregated by region – I’d love to see that). More recent estimates (in World Energy Outlook 2011) show that the number of people without electricity has continued to decline by some 300 million in the past decade. In other words, is seems safe to assume that where massive investment takes place (e.g., China), millions of people are gaining access to power. Thus, the conclusion, including in the paper Hannah cites, is that even more investment is needed (they suggest 5x current levels). If this is the case, it seems odd that we would question whether capacity should really increase or, worse, hamstring our agencies tasked to boost this investment with environmental mandates that have nearly zero effect on global emissions targets.

• Off grid renewable may be better, but it’s not realistic everywhere. Certain populations may benefit from new technologies and new models, such as off-grid renewable sources. We should absolutely leverage our policy tools to deploy these where we can. But the scale of the problem is such that sizeable populations will still require old-school on-grid power that is (at least based on current economics) probably going to come from fossil fuels. This is especially likely for underserved urban populations and heavy industrial projects. This World Bank paper reports that barely half of poor residents in Dakar and Nairobi have access to electricity.  Reaching the rest will come, not from some high-tech solar system, but from hooking up more homes to the grid and boosting generation capacity in big power plants. Ditto for the 97% of large firms in Nigeria that rely on (costly, inefficient, and polluting) diesel generators to provide nearly 2/3 of their power. Similarly, Ghana’s Valco aluminum smelter in the industrial port of Tema is running at 20% capacity for the sole reason of a shortage of low-cost power. Getting Valco to capacity, with all the jobs and spin-off industries that would accompany full production, is going to require new power investments in large-scale power.

• Natural gas will be part of the solution. My proposal specifically excludes coal, but not natural gas. This distinction is partly political, but it’s mainly pragmatic: many of the same countries that have substantial energy poverty gaps also have natural gas reserves that could be transformed into domestic energy.  Just in Africa in the past few years, Kenya, Tanzania, Mozambique, Ghana, and Cote d’Ivoire have had major new gas finds. And Nigeria still flares much of its gas. Why should we stand in the way of these countries turning these resources into electricity and jobs for their people? We shouldn’t—especially when we have placed no such constraints on ourselves.

Why high carbon energy is the wrong solution for low income countries

DFID staff break their duck as guest writers on FP2P with this post from Hannah Ryder (right), a regular blogger on the DFID site and Senior Economist specialising in climate change and low carbon growth

Economists have a reputation for being sceptical – there is even a book called “the Skeptical Economist”. This has a lot to do with how it is taught. For instance, we are encouraged to be sceptical of the idea that one thing (a “variable”) might directly cause another variable to change. A number of development economists have recently been stressing that “complexity” should make us even more sceptical of these relationships.

Now, I usually avoid wearing the sceptic’s hat. But the other day I came across an article that assumed a linear, causal relationship between two variables. The article was by Todd Moss at the Center for Global Development. He was arguing that the American organisation that provides investment to developing countries “OPIC” should be able to help low-income countries invest in high-carbon energy – such as coal or diesel powered stations, to help stimulate access to energy in those countries. He argued that the limits that OPIC has on this kind of investment are “strategically counterproductive and morally dubious”.

I, like Todd, certainly feel strongly about access to energy. Around the world, 1.3 billion people have no access to electricity. Over 80% of those people live either in sub-Saharan Africa or in South Asia. Access can vary dramatically within regions – over 95% of people lack electricity access in Chad and Liberia versus 25% in South Africa. Although problems are currently worse in rural areas than urban areas, even so about 56% of urban dwellers in Sub-Saharan Africa lack access to electricity.

Han’s Rosling’s latest TED talk cleverly explains why increasing energy access helps reduce poverty. It can expand people’s choices and productivity, particularly for women. It also helps business. A recent survey of manufacturing firms in Nigeria showed that 83% of respondents identified electricity as their top problem. In many cases, even when people or firms get access to electricity they still suffer from blackouts (such as experienced recently in India) and lack of affordability. Related problems exist in developed countries. In the UK, around 19% of households were “fuel poor” in 2010 – meaning they had to spend over than 10% of their income on fuel for adequate heating. Energy poverty matters.

The problem is that, from a quick skim of historic data, there is no good reason to expect that investment in conventional high-carbon energy will solve the energy access problem. These two graphs from the 2003 and 2002 IEA World Economic Outlooks (respectively) illustrate:

Although the dollars invested in the power sector and installed capacity – most of it based on conventional fuels such as coal, gas and oil – have increased strongly since the 1970s, the number of people with access to electricity has increased somewhat, but not a great deal.

Of course, the problem couldsimply be population growth outpacing investment growth, but the data suggests it isn’t. A 2011 study by a set of global energy experts foundno distinguishable relationship between investment in energy infrastructure and the degree of energy poverty once you control for total population. These expertsinsteadsuggestedthe problem was inequality.  Effectively, in many countries, new energy investment tends to benefit people that already have access. They therefore recommended a five-fold increase in overall energy sector investment in low-income countries, particularly in grid extensions, off-grid solutions and renewable energy – rather than the conventional, high-carbon methods used to date.

Added to this, looking forward, reports such as the European Report on Development and McKinsey’s Resource Revolution provide evidence that commodity prices are likely to rise and become more volatile in future. A number of economists such as Shalizi and Lecocq think some developing countries might regret building infrastructure now that locks them into needing to buycoal or oilor relying excessively on their volatile revenues. While there isn’t much evidence on this yet, it’s probably sensible for most countries to begin to plan for a diversified energy sector, especially if they are also going to try to target poor energy consumers more strongly in future.

These are the reasons why I was sceptical when I read Todd Moss’s article calling for OPIC to invest in high-carbon energy. It’s also why the UK supports the UN Secretary General’s Sustainable Energy For All Initiative, and why DFID specifically helps low-income countries invest in diverse sources of energy, particularly through vehicles such as the Scaling Up Renewable Energy Program, the Results-based Financing Facility and Green Africa Power. Pushing OPIC and others to look in new directions and help forge a new relationship between investment and energy access might actually be a good thing. And with that, I shall remove off my sceptic’s hat.

Todd Moss responds tomorrow

Extreme weather, extreme prices: what will more erratic weather do to food prices?

Oxfam Climate Change Policy Adviser Tracy Carty summarizes her new paper, published today

With greenhouse gas emissions at an all time high, and the world lurching towards a third food price spike in four years following the worst US drought since the 1950s, there is an alarming gap in our knowledge – how will an increase in extreme weather caused by climate change affect future food prices?

To date, research on food prices and climate change has looked almost exclusively at the averages: how gradually rising temperatures and changing rainfall patterns will affect long-run average prices. It points to a future of higher food prices: Oxfam-commissioned research last year suggested food prices could double in the next 20 years; with up to half the increase caused by climate change (see also research by IFPRI and Stanford University).

Alarming, but only half the story. Climate change will also lead to an increase in extreme weather, such as droughts, floods and heatwaves. As today’s US drought lays bare, extreme weather can wipe out harvests and drive up prices precipitously in the short term. But current research does not account for how these extremes might affect future global food prices. (Though there has been some regional analysis).

Oxfam felt it was time to have a go, so we commissioned some more research from the Institute of Development Studies. Published today, it uses CGE modelling to look at the impact of extreme weather scenarios on global food prices in 2030. CGE models have their flaws and are certainly not predictive instruments, but they do help us think through broad possible scenarios for whole systems.

The research highlights some top line trends that can plausibly be expected in a world of more frequent and intense weather extremes. While average prices could double by 2030, the modelling suggests that one or more extreme events in a single year could bring about price spikes of comparable magnitude to two decades of projected long-run price increases.

The research suggests that in 2030 the world could be even more vulnerable to the kind of drought happening today in the US, as dependence on US exports of wheat and maize is predicted to rise, whilst climate change increases the likelihood of extreme droughts in North America. The US Department of Agriculture recently estimated that climate change could cost corn belt farmers between US$1.1 to $4 billion annually by 2030. Even based on a conservative scenario, the modelling shows a drought of similar magnitude to the US drought in 1988 could raise the price of maize by as much as 140 per cent in 2030 (see fig 2).

The modelling also shows dramatic impacts in sub-Saharan Africa in 2030 – the consumer price of maize and other coarse grains in southern Africa could increase by as much as 120 per cent, on top of already higher average prices (see fig 3).

Food security experts working on the next IPCC Assessment recently warned that governments should take more account of how weather extremes could affect food supplies. Because if the climate becomes increasingly erratic, food production and prices will too, with devastating consequences for the lives of livelihoods of people living in poverty. 

Governments ‘stress-tested’ the banks after the financial crisis.  Our global food system is also too big to fail, and needs stress-testing to fully assess and address its critical thresholds in relation to climate change. Stress testing would seek to understand feasible worst case scenarios and identify the levels, locations and likelihood of vulnerability that could occur.  This includes major crop producing regions most at risk; the impact of multiple harvest failures in the same year, as well as the cumulative impact of significant yield shocks becoming more common; impacts on food deficit low income countries; and interactions with other major threats to the food system, such as high oil prices.

This research is just one more contribution to the overwhelming case for action. The necessary policy responses are well documented: reducing emissions, adapting to climate change, and building the resilience of markets and people in poverty (see here, here, here and here). The real unknown is how bad things have to get before we start to see concerted action.

Tracy Carty is Climate Change Policy Adviser at Oxfam GB

If fossil fuel subsidies are so bad, why can’t we get rid of them? Time for some politics

My mate Matthew Lockwood (right) has decided (again) to abandon development and focus on UK climate change issues. In an earlier exit (from development to climate change) he wrote The State They’re In, a brilliant book on the political economy of African development. This time, as he heads for the exit, he is writing some valedictory posts on some of the biggest dilemmas he has worked on as head of the climate change team at IDS. He is always worth reading.

“In trying to put together the climate policy and development agendas over the last couple of years, one issue that I really think is very important but doesn’t receive enough attention from both policy makers and researchers is why it is proving so hard to reform subsidies for oil, electricity and coal in developing countries.

In recent years $500 billion a year or more has been spent globally on making high-carbon fuels cheap, with around 40% of that coming from developing countries, including some of the big emerging economies such as China, India, Indonesia and South Africa.

From a policy perspective, reducing fossil fuel subsidies is a no-brainer. To begin with, they are a kind of negative carbon pricing (i.e. a carbon subsidy). Moreover, the lion’s share of the benefits is captured by the middle classes rather than the poor. The IEA estimates that of $22.5 billion spent by India on fossil fuel subsidies in 2010, less than $2 billion benefitted the poorest 20% of the population. Such patterns are fairly typical – ratios for Indonesia, Thailand, Pakistan and South Africa were similar, and only slightly better for China. As a form of social protection, subsidies are very poorly targeted.

Subsidies take up fiscal resources that could be spent on public services or better targeted social protection. In some Indian states in the mid-2000s, as much as 50% of the state budget went on subsidies to (largely coal-fired) electricity. Up until 2009, Indonesia spent more on energy subsidies than on health, education, social security and defence combined.

Small wonder then that in the run up to this year’s G20 and Rio+20 summits on-line campaigning group Avaaz called for an end to “black subsidies”. The group wanted to see a “climate spring”, launching a petition that would persuade world leaders to phase out fossil fuel subsidies once and for all. Simples.

Or not so simples. Reform of subsidies has in fact been on the G20 agenda since the Pittsburgh Summit in 2009, but has proved difficult to achieve in practice, despite the fact that large rises in oil prices in recent years have ratcheted up the fiscal costs for governments.

Where attempts at subsidy reduction or removal have taken place, they have often been reversed within a few days (e.g. Ghana in 2008, Nigeria in 2012), postponed (Indonesia in 2012), or at best been highly partial (India since the 1990s). Fuel price rises often provoke violent street protests – the most recent example is Sudan, which follows a series of riots this year sparked off by reform attempts in Nigeria in January and Indonesia in March.

David Victor, a Stanford political scientist working with the Geneva-based Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development, argues that governments give subsidies as part of a political bargain – they are “a visible way to deliver benefits in exchange for political support”, and administratively cheap and easy to deliver compared to alternatives. Once a subsidy is there, it gets locked-in and often increased, as it becomes a key symbol of populist action by successive politicians.

The political role played by subsidies is then key to understanding how a reform package might be more successful. Victor suggests several lessons for reformers. One is that any reform strategy must begin with the political logic that led governments to create the subsidy – powerful interests that currently benefit have to be compensated or reform has to be inoculated from their opposition. A second is that transparency about the costs and purpose of subsidies usually aids reform. Another is that it is very helpful to have available or to develop better administrative tools for redistribution, to replace broad spectrum subsidies, which are a blunt instrument.

Thus, for example, Ghana’s 2005 reform of fuel subsidy reductions succeeded where previous efforts failed partly because good information about the costs and the incidence of subsidies was widely shared with key stakeholder groups like trade unions. In Indonesia in 2005, a new alternative form of compensation for poor households was introduced in the form of a means tested safety net which allowed subsidy reduction without major protests. The GSI has started to propose reform packages for specific countries based on this explicitly political approach.

But perhaps one of the most difficult issues in the politics of subsidy reform concerns the compensating measures that are widely seen as necessary to legitimise reform. Even though poor households capture only a small part of the direct benefits of subsidies, the effects of subsidy removal on their incomes is proportionately higher than for better off households. This is partly because of the indirect effects of subsidy reduction or removal – higher fuel costs increase the price of everything that is moved by road, including food. As a result, a key component of reforms is now the introduction of better targeted social protection for the poor. For example, in Indonesia in 2008, following unsuccessful attempts at subsidy reduction in 1998 that led to protests that ultimately toppled the government, a reform programme included a cash transfer scheme called Bantuan Langsung Tunai (BLT) to compensate for the fuel price increase. This was an ambitious scheme designed to reach about a third of the population. Current plans for further subsidy reform, due to be renewed in the autumn, include an updated version of BLT called BLSM. However, the BLT has proven controversial, in large part because the targeting process left the door open to corruption and politicisation of the benefit. Unlike a fuel price, which people can monitor easily, a non-universal benefit is inherently more open to discretion (and thus, corruption). Unhappiness about the history of BLT is now a big factor in resistance to the current round of reform.

A possible explanation of what is going on here comes from new institutional economics in the form of a “commitment problem”. If corruption is a major problem, promises to compensate people for the loss of fuel subsidies with a targeted benefit face a big credibility problem. People see that there is no incentive for ruling regimes to eliminate corruption and distribute resources fairly, and there is no impartial third party which can enforce the promise. This partly explains why Nigerian demonstrators held placards saying “Remove corruption, not subsidy”.

Thus in some situations, while there may be a set of ideal, or “first-best” designs for reforms, these may not be possible, and second-best responses will be more realistic. For example, if compensating targeted benefits are not a credible element of a reform package, then alternatives will have to be considered. These may include consumer food subsidies, which do often have drawbacks, but may not be as damaging as fossil fuel subsidies.

There is a real need for more research to look at the dynamics of reform from these perspectives. As oil prices rise, as the climate challenge grows, the pressure to resolve the fuel subsidy issue will only increase. It is of course a laughable cliché for an academic to say that “more research is needed”, but this really is an area where a better understanding of the political economy of reform could help bring about practical change that benefits poor people and the environment in a major way.”

Matthew Lockwood is a Research Fellow at the Institute of Development Studies at the University of Sussex. From October 2012 he starts work on a four year project on innovation and governance in the UK energy sector.

Climate Change, the Olympics and Hunger: What’s the link?

This guest post from Tim Gore (right), Oxfam’s climate change policy adviser, explores the parallels between climate change and the Olympics, ahead of tomorrow’s UK-hosted ‘hunger summit’

‘Faster, higher, stronger’ is not just the motto of athletes competing at the London games, it’s also a pretty accurate description of our weather over the past 12 months. And the similarities don’t end there.

In June, the US Government reported that sea ice in the Arctic has melted faster this year than ever recorded before. June also saw another 2 records topple, the highest global average land surface temperature was reached at 1.07°C (1.93°F)  above average, alongside the highest Northern Hemisphere land and ocean average surface temperature ever recorded, at 1.3°C (2.34°F) above average.

Meanwhile, the 2012 Atlantic hurricane season, which officially began on 1 June and ends on 30 November, has seen for the first time ever four tropical storms forming before July – one of which – Tropical Storm Beryl – came ashore in South Florida on 28 May, as the strongest pre-June tropical cyclone to make landfall in the United States.

It’s been a huge record-breaking year for the US overall, and not just in the Olympic swimming pool. The US has won gold for July 2012, as the nation’s hottest month on record, contributing the warmest 12 month period experienced in the country since records began.  Not to be outdone in the medal table, the UK has won gold for the heaviest ever rainfall from April to June, while claiming another record for the highest ever maximum temperature last October and a silver for the second warmest November in 100 years. Throughout the year and around the world, more new records have been set for extreme weather this year than in the London Olympic stadium.

Is this just a coincidence – natural variability – or is it evidence of man-made climate change? Just as the relative performance of athletes will be pored over by their coaches in the coming weeks and months, scientists are now working on analyses that can help answer that question.

Last month, a collection of studies was published which showed that some individual extreme weather events are more likely to have occurred due to greenhouse emissions. For example, they found that the probability of a drought occurring in Texas of the same severity as the state experienced in 2011 has increased twenty times as a result of climate change.

That’s not to say all extreme weather events are made more likely by climate change. New research commissioned by Oxfam into the UK’s record-breaking weather year confirms that the odds of the heavy rainfall of 2012 have not changed under our warmer climate. Although some of the same scientists found that greenhouse gas emissions increased the risk of the destructive UK floods of autumn 2000 substantially, and the chance of a November in the UK as warm as last year’s by around 62 times.

What this means is that greenhouse gas emissions are to our climate what steroids are to an Olympic athlete – they don’t guarantee records will be broken, but they make it much more likely. Just as the doped-up athlete has a better chance of winning an Olympic medal (providing she or he isn’t caught), pumping greenhouse gasses into our atmosphere increases the likelihood of extreme weather.

But that’s where the comparison ends. Because while we celebrate our Olympic successes and hope they inspire a generation, the litany of extreme weather leaves nothing but devastation in its wake, hitting the poorest and most vulnerable amongst us hardest.

Nowhere can this be seen more clearly than in the impact of the current US drought – the worst since the 1950s – on world food prices. As US farmers struggle with crop losses of more than 16%, prices of staples like maize and wheat have rocketed, which is the worst news possible for people in poor countries that spend up to 75% of their incomes on food.

The most vulnerable live in countries reliant on food imports, or that have suffered their own weak harvests. In Yemen, which imports 90% of its wheat, 10 million people are already hungry and 267 000 children at risk of death from malnutrition. An increase in extreme weather, compounded by a flawed global food system, means extreme food prices and rising hunger.

So it is perhaps fitting and very welcome that tomorrow, as the heat and light of the Olympic flame dies down, David Cameron will host a hunger summit for world leaders in London, with Olympic greats Haile Gebrselassie and Mo Farah in attendance. It’s vital they act to reverse decades of under-investment in smallholder farmers, end biofuel programmes that put 40% of US corn into cars not mouths, and redouble efforts to fight climate change. For the close to 1 billion people who will go to bed hungry tonight, what they decide could be the real legacy of London 2012.

You can follow the hunger summit on twitter (#globalhunger) or watch 131 years of global climate change in 26 seconds [h/t Ricardo Fuentes]