OFFICIAL ASSISTANCE ALONE NOT SUFFICIENT TO FUND AGENDA 21, EUROPEAN UNION TELLS COMMISSION ON SUSTAINABLE DEVELOPMENT

Press Release
ENV/DEV/350

OFFICIAL ASSISTANCE ALONE NOT SUFFICIENT TO FUND AGENDA 21, EUROPEAN UNION TELLS COMMISSION ON SUSTAINABLE DEVELOPMENT

Official development assistance (ODA) would not be sufficient to implement Agenda 21, the representative of Italy, speaking on behalf of the European Union, told the Commission on Sustainable Development this morning. Agenda 21 is the plan of action for sustainable development adopted at the United Nations Conference on Environment and Development (Rio de Janeiro, 1992). As the Commission began its general discussion of financial resources and mechanisms, Italy's representative said that while ODA had a special role to play in least developed countries and certain economic sectors, the bulk of financing for Agenda 21 must come from the private sector.

The representative of the United States called for the elimination of environmentally unfriendly market subsidies, particularly those related to water and energy.

The representative of Costa Rica, speaking on behalf of the "Group of 77" developing countries and China, said that while changes of finance as well as consumption and production patterns in developing countries could have serious social consequences, similar adjustments in developed countries may be more easily undertaken.

The representative of India stressed that free trade must be examined in light of the fact that the social and economic costs of most economic activities were not internalized. The relationship between natural resource use and production patterns, along with the questions of information and technology transfer, should be more closely examined.

The representative of Malaysia presented the report of the Commission's ad hoc working group on finance and production and consumption patterns. He said that the report reflected the disappointment of members with regard to achieving greater private sector participation in sustainable development financing and regarding the development of new mechanisms to finance the commitments articulated in Agenda 21.

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Statements were also made by the representatives of Norway, Japan, Brazil, Cuba, Republic of Korea and Australia. The observer of Switzerland, as well as the representatives of the Organization for Economic Cooperation and Development, the Netherlands Committee for the World Conservation Union on behalf of a group of non-governmental organizations, and the Kenya Energy and Environment Organization, also made statements.

Also this morning, the Commission formed three working groups: working group I, dealing with atmosphere, oceans and seas and small island development States, chaired by Enrique Provencio (Mexico); working group II, dealing with finance, consumption and production patterns, technology transfer, trade, poverty and demographics, chaired by Daudi Nglelautwa Mwakawago (United Republic of Tanzania); and working group III, dealing with education, capacity-building, decision-making and national reporting, chaired by Paul de Jongh (Netherlands).

The Commission also decided that its Vice-Chairman, Adam Vai Delany (Papua New Guinea), will also serve as Rapporteur.

The Commission will meet again at 3 p.m. to continue its consideration of financial resources and mechanisms.

Commission Work Programme

The Commission on Sustainable Development this morning begins its consideration of financial resources and mechanisms, and of changing consumption and production patterns.

It has before it a report of the Secretary-General providing an overview of current issues and developments concerning financial resources and mechanisms for sustainable development (documents E/CN.17/1996/4 and Add.1), which states that in developing a new vision for financing sustainable development, differentiation between countries must go beyond simple regional or income categories. In view of the strong trend towards market-based economic strategies, policy reform will have to target new approaches to financing sustainable development.

The impact of economic subsidies on sustainable development should be further pursued, according to the Secretary-General. The new work programme of the Organization for Economic Cooperation and Development (OECD) would be crucial in that regard. Efforts concerning subsidies should contribute to clear definitions, designing suitable indicators, and improved impact assessment. Research should assist in formulating recommendations on the desirability of an international effort to review subsidies.

The role of pilot schemes in furthering a system of internationally tradable carbon dioxide permits was discussed by the Commission at the third session, the report recalls. In the meantime, a pilot global warming emissions trading programme was under study by the Earth Council with the goal of implementing such a programme starting in 1999. The plan had attracted strong interest from numerous industrial corporations, governments, environmental groups and international agencies.

The report reviews external conditions in financial flows and current trends in resource flows and debt. It also reviews policy issues related to sustainable development financing and official development assistance (ODA) and to remaining debt challenges. The report examines obstacles and enabling policies with regard to increased private-sector financing and evaluates the performance of economic instruments such as pollution taxes and subsidies.

According to the report, while such mechanisms as the Global Environment Facility (GEF) could make a significant contribution to mitigating environmental problems, recent discussions of finance and sustainable development were centring on such ideas as an international tax on air transport, tradable carbon dioxide permits, a global carbon tax and the "Tobin tax" -- a proposed tax on international financial transactions.

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Tables in the report outline net resource flows to developing countries, trends in the volume and allocation of ODA, total disbursed debt of developing countries, and a matrix of policy options and financial instruments.

The Commission also has before it reports of the Secretary-General on changing consumption and production patterns (documents E/CN.17/1996/5 and Add.1); and a report of its ad hoc intersessional working group on finance and changing consumption and production patterns (document E/CN.17/1996/7). (For detailed background of those reports, see Press Release ENV/DEV/346 of 18 April.)

Report of Working Group on Finance

LIN SEE-YAN (Malaysia), Chairman of the Ad Hoc Intersessional Working Group on Finance, presented its report. He said that the recommendations of the report relating to chapter 33 of Agenda 21, on financial resources and mechanisms, focused on mobilizing external resources for sustainable development. They also focused on mobilizing national resources, as well as on feasibility of innovative instruments and mechanisms for financing sustainable development.

The report reflected the disappointment with regard to the key question of how to achieve greater private sector participation in the financing of sustainable development, he said. Disappointment was also expressed about the real progress made so far on the question of implementing innovative mechanisms -- both at the national and international levels -- that would yield additional resources for the financing of Agenda 21. Another disappointment had to do with the insufficient progress towards achieving the post-Rio aid target of 0.7 per cent of gross national product (GNP).

The Working Group badly needed a clear renewal of political commitment and a clear political statement of direction, he continued. It required firm commitment of Member States to know that its work was relevant.

GUISEPPE JACOANGELI (Italy), speaking on behalf of the European Union, said that there was an emerging consensus on many aspects concerning the financing of Agenda 21, such as the need for external resources for sustainable development; enhancing the effectiveness of ODA, while aiming to increase it to 0.7 per cent of GNP; and using private sector investment to complement, but not substitute, for ODA. Fresh impetus was needed on the financing issue. The increasing role of the private sector needed to be taken into account, though ODA would remain critical in the least developed countries.

Official development assistance also had a special role to play in countries and sectors in which private sector capital was unavailable, he said. But ODA alone would not finance Agenda 21; the bulk of the funding

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would have to come from the private sector. Global policies should seek to stimulate private investment towards that end. It was essential that sound macroeconomic policies be established in both developed and developing countries.

Due consideration should be given to the use of economic instruments, he continued. The Commission should seek the removal of economic subsidies which were damaging to sustainable development. It should also disseminate information on the environmental impact of the financial services industry. Innovative financial mechanisms were of great interest to the European Union, which welcomed the decision by the Economic and Social Council to consider that topic at its substantive session this summer.

JOSÉ GUTIERREZ (Costa Rica), speaking on behalf of the "Group of 77" developing countries and China, said that changes of finance, as well as consumption and production patterns in developing countries could negatively impact public health. The Group of 77 and China believed that developing countries did have a share of responsibility in developing environmentally sound patterns of production and development. But they also believed that alterations in developed countries may be undertaken without a great deal of social impact. That was not so in most developing countries. Policies designed to change consumption and production patterns should vary in different countries; that was particularly true for least developed countries and small island developing States.

When it came time to revise United Nations standards for consumer protection, the Group of 77 and China would make reference once again to the issue of financial mechanisms for sustainable development, he added.

NIRMAL ANDREWS (India) said that the report of the Secretary-General had failed to thoroughly examine the role of debt in the changing of consumption and production patterns in developing countries. The international community must address that question in order to produce equitable policies. Free trade must be examined in light of the fact that the social and economic costs were not internalized in most economic activities. For years, environmental impacts had not been factored into production costs.

Developing countries already under pressure from structural adjustment regimes must take care when contemplating changes in their development policies, he said. The implications for the exports of developing countries in the face of such changes were serious. Developed countries with less than 25 per cent of the world's population were consuming 75 per cent of the world's resources. The international community must address the value systems that underlay unsustainable consumption and production.

The report of the Secretary-General seemed to imply that technological advances could solve the question of the exhaustion of natural resources, he

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continued. The relationship between natural resource use and production patterns and the questions of information and technology transfer should be more precisely explained in the reports of the Secretary-General. Without the transfer of substantial new and additional resources and the transfer of technology on concessional terms to developing countries, sustainable development would be reduced to a mere shift of marketing patterns.

ARNE B. HONNINGSTAD (Norway) said that political action was necessary in discussing financial questions. It was disturbing that ODA was declining; that issue was of great concern to Norway. Even though private investments were up in a number of countries, there remained large and grave imbalances in that picture. Levels of ODA were of great importance, especially for the least developed countries and Africa. Such assistance was also a safety net and was critical to United Nations agencies and others that were dependent on voluntary contributions for their programmes. In a lot of countries, some of the required political work for achieving the ODA target was lacking.

Hew added that without the active use of economic instruments, it would be almost impossible to achieve sustainable development. Norway had vast experience in the use of economic instruments and was willing to share such experiences with interested countries.

MANSUR RAZA (Pakistan) expressed disappointment that the ODA target and greater participation by the private sector had still not been achieved. The Commission should consider requesting the Economic and Social Council to consult with the private sector with a view to increasing participation in the environment field.

Pakistan found that environmental problems were being treated in a piecemeal manner, he said. Those problems should be embedded in the larger macroeconomics context. Also, initiatives in eco-efficiency should not be a substitute for the required changes in consumer lifestyles. For instance, producing more energy-efficient cars when the number of cars was increasing did not achieve the objective of reducing pollution. Pakistan was also dismayed at how little progress had been made in concretizing the commitments contained in the Agenda 21.

MARK G. HAMBLEY (United States) expressed support for any work that concentrated on phasing out environmentally unfriendly input subsidies. Energy and water subsidies, for example, were a major contributing factor to unsustainable energy and water use patterns in many countries, he said. He said that the United States also believed that it was extremely useful for the Commission to discuss more fully the current and prospective role of the private sector as a key player in the mobilization of financial resources for sustainable development. Also, more studies on innovative financing mechanisms for sustainable development should be nationally focused.

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The United States did not support pursuing studies on an international air transport fee because aircraft emissions had not been shown as one of the most significant causes of global pollution, he went on. It was, therefore, inappropriate to single out that industry for levying a user fee. Also, aircraft were already subject to a range of costly environmental and noise pollution controls and levying such a fee would increase the cost of air travel to the detriment of the consumer, particularly in the developing countries.

He also said that the United States would promote measures that both increased economic efficiency and minimized the impacts of production and consumption on the environment.

He urged the Commission to stress work in key areas, including the creation of a core set of sustainable development indicators to measure progress towards more sustainable production and consumption. It should also stress work on public awareness of the need for more sustainable patterns of production and consumption. The Commission should also call on governments to report to it on progress in the area of implementation of section 4.23 of Agenda 21, which calls on governments, through their procurement processes, to take the lead in promoting sustainable consumption patterns.

ZHANG KUNMIN (China) said that the international community should strive to meet the 0.7 per cent of GNP target for ODA. He agreed that governments should formulate policies to effectively encourage the use of private sector capital for sustainable development goals, but there were many limitations on those funds. The primary role of private capital was to generate profits; it did not do much to achieve sustainable development.

Many industries from developed countries had transferred their environmentally unsustainable activities to developing countries, earning huge profits in the process. Agenda 21 had clearly indicated that ODA was still the major source of external funds for many developing countries. The international community should continue its discussion of new, innovative financial mechanisms for sustainable development, be they an airline ticket levy, the Tobin tax or other proposed mechanism.

With regard to production and consumption patterns, Agenda 21 had indicated that global environmental impacts were primarily due to the unsustainable activities of developed countries. In recent years, there had been an unfortunate trend to place pressure on developing countries to change their production and consumption patterns in ways that were incompatible with their levels of development. Developed countries should follow the principle of common but differentiated responsibilities. The idea of "shared responsibilities" should not be used to cloud the issue.

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TAKAO SHIBATA (Japan) said that ODA had been in decline ever since the United Nations Conference on Environment and Development (UNCED). Japan had already provided 90 per cent of the commitment that it made at the UNCED to provide between 90 and 100 billion yen in ODA in the five years to 1997. The international community should seek a "win-win" solution, based upon sustainable development and global security. Japan wanted to see a new global strategy for ODA, based on the global partnership called for by Agenda 21.

Developed and developing countries shared a clear vision of the kind of world they wanted to see after the turn of the century. Such a clear vision would convince the taxpayers of donor countries of the need for increased levels of ODA. Policy-makers from different sectors should be combined in the effort to develop policies aimed at sustainable development. Some two thirds of financial transfers to the developing world was now composed of private capital. But ODA still had a vital role to play in countries not taking advantage of those flows, such as least developed countries. The overwhelming proportion of funds for sustainable development would have to be raised at the national level, he said.

Japan believed that the impact of economic subsidies on sustainable development should be examined, he continued. Such studies should include the social, economic, and environmental impact of subsidies on a country-by- country basis.

SERGIO FLORENCIO (Brazil) said that all efforts to change patterns of production and consumption should take into account the need for sustained economic growth and improved standards of living in developing countries. Environmental concerns should not be allowed to restrict trade and, thus, negatively impact developing countries, nor should elimination of subsidies in developing countries be allowed to negatively effect per capita growth. Enhanced ODA was an essential commitment of Agenda 21; the Commission could undertake to remind governments of the 0.7 per cent of GNP target for ODA which had been reaffirmed at UNCED.

As regarded private capital flows, he said that private investment should be employed to finance sustainable development, but many least developed countries had low levels of private capital inflows. Continuing ODA would be essential to meet the goals of sustainable development. The mobilization of public and private capital at the national level was essential, but it could not make up for the failure to achieve the 0.7 per cent target for ODA. The present situation of "ODA fatigue" should not be allowed to transfer responsibility for sustainable development from developed to developing countries.

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ORLANDO REY SANTOS (Cuba) expressed regret that ODA levels had continued to decrease since the 1992 Earth Summit. Cuba could not accept a reformulation of the commitments made in Rio through the proposal to get private capital to finance development.

He said that it was imperative to promote dialogue. There should be regional studies on production patterns. Developed countries had a special obligation and must extensively change their models of development. There should also be national and regional studies on environmental problems.

YOUNG-JU OH (Republic of Korea) said that further analysis was required to address the question of changes in production and consumption patterns in developed countries and their impact in the developing countries. Although ODA fell short of the desired target, it continued to have a major role in the area of sustainable development. Efforts were, therefore, necessary to increase ODA in line with the commitments made in Rio.

She said that the use of economic instruments should be encouraged and their impacts addressed. Further studies were also needed for developing innovative mechanisms to promote sustainable development.

MARILYN YAKOWITZ, of the Organization for Economic Cooperation and Development (OECD), said that ODA flows had not decreased. The OECD was increasing its work on subsidies. There was need for effective development cooperation to back the efforts of countries and people to help themselves.

JEREMY EPPEL, also of the OECD, said that the organization was currently involved in a two-year programme aimed at exploring the issue of changing consumption and production patterns. It had organized an expert workshop to clarify the debate relating to that issue. There should be further examination of the inter-linkage between production and consumption patterns.

MONICA LINN-LOCHER (Switzerland) said that changing production and consumption patterns went to the heart of Agenda 21. Public and private sector flows needed to complement one another. Switzerland's ODA focused on those areas in which private sector investment was not available -- principally in least developed countries and regions.

The internalization of environmental costs was an essential element of changing production and consumption patterns. In December 1995, the Swiss Parliament had adopted new policies which mixed incentives and policy restrictions -- new types of taxes, environmental labelling and a whole series of voluntary initiatives aimed at increasing transparency.

Regarding innovative approaches and new financial mechanisms, she said that further analysis and research were necessary. Switzerland agreed with the view that the financial services industry was having an increasing impact

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on sustainable development and supported the work of the United Nations Environment Programme (UNEP) in that regard.

JOANNE DISANO (Australia) said that the private sector should have a primary role in sustainable development, particularly as regarded technology transfer. Australia supported the use of education and public campaigns as a means of raising consumer awareness. Those kinds of efforts would also lay the groundwork for developing new financial instruments. Australia was pleased to see emerging agreement regarding the need to remove environmentally unsustainable economic subsidies.

SIMONE LOVERA, of the Netherlands Committee for the World Conservation Union, presented a statement drafted by 60 non-governmental organizations which had met over the weekend under the theme "Alternatives to Globalization and Consumerism". She welcomed the efforts of the Commission to address unsustainable development. Efforts to promote sustainable production and development must address equity issues between the North and the South. The new international regimes for investment, production and trade adopted in the wake of the Uruguay Round could undermine sustainable development. Widespread deregulation was already under way in the South in the name of trade and investment. That would undermine sustainable livelihoods, consumption and production patterns. The conflict between sustainable development and free trade was coming to the fore now more than ever.

Education on sustainable consumption and production patterns would be critical for achieving sustainable livelihoods, she said. Most commercial advertisements today were a form of negative education, promoting alien, unhealthy, unsustainable consumption patterns.

OJIJO ODIAHMBO, of the Kenya Energy and Environment Organization, also speaking on behalf of the non-governmental organizations, said that the Commission should call for a halt to the reduction of ODA in favour of profit- oriented private investment. The move by the OECD to impose an international trade treaty without the world participating in its negotiations should be resisted. Free trade undermined food security in developing countries. The Commission should call for a ban on the patenting of living material and the dumping of unsustainable products, such as surplus food production.

The policies of multilateral financial institutions were still aimed at unsustainable, destructive infrastructure projects. The Commission should call for a code of conduct for multilateral corporations. It should also examine various proposals for "green taxes" to finance sustainable development.

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