In 2022, the United Nations Environment Programme (UNEP) will turn 50. Since its establishment in 1972, UNEP has existed to set agendas and advocates for greater effort in environmental protection. Thanks to the UNEP, a number of international institutions were established, promising international agreements were signed, and most countries now have environmental ministries. Progress was made. Yet, to this day, critical environmental issues remain unresolved. Where does the UNEP fall short? The answers are often complex, but several key limitations have repeatedly been identified as central to the effectiveness of the UNEP. 

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For a long time, there has been a big gap between environmental scientific research, public awareness and political decisions at the national level. On the international stage, the gaps are even wider. After WWII, international collaborations focused mainly on reconstructing financial systems and maintaining peace and security. There was little room for environmental discussion. It wasn’t until the 1960s when impending environmental catastrophes became apparent – from the smog that suffocated Los Angeles to the devastating radioactive fallout from nuclear weapon testings – that civil societies began to re-examine the interconnections between the environment, the economy and social well-being. 

This awakening has galvanised action from local governments as well as international communities. On 5 June 1972, diplomats from 113 countries convened at the United Nations Conference on the Human Environment – the first UN summit on environmentalism – to build a collective response to the environmental crisis. One visible outcome was the creation of UNEP: a lean, flexible, and agile entity designed to serve as the anchor institution for global environmental action. It plays the following roles and functions:

1. Monitoring, assessment, and early warning
2. Developing international norms, standards, and policies
3. Catalysing environmental action
4. Coordinating the environmental activities of the UN system
5. Building national institutional capacity

Since its establishment, the  United Nations Environment Programme has chalked up some impressive achievements in international policy formulation and scientific research. It scored a major success in creating a system for environmental monitoring, cross-sectoral scientific assessment, information sharing, and data acquisition. One example is the launch of The Global Environmental Outlook (GEO) – UNEP’s flagship environmental assessment publication. 

Today, the GEO has become “one of the two most respected environmental outlook publications currently available.” Cuba, Peru, Costa Rica, Barbados, Gabon, Senegal, Congo, and Cameroon are among the many countries that have adopted GEO methodology to produce and improve their environmental reporting or used GEO to guide policy formation.

Another significant win was mending the hole in Earth’s ozone layer. In 1974, scientists discovered that chlorofluorocarbons (CFCs), a chemical primarily used for home insulation, was eating up the ozone layer at an alarming rate. Faced with this global threat, the UNEP catalysed negotiations in the Vienna Convention in 1987 and its follow-up, the Montreal Protocol in the same year, to phase out the production and use of CFCs. Eventually, the ozone layer was on track to recover to pre-1980s levels, setting a hopeful precedent for further international cooperation in dealing with a global environmental threat. 

Image 1: UNEP Ozone Layer. Credit: NASA’s Goddard Space Flight Center/Scientific Visualisation Studio

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In the years that followed, the UNEP approached a multitude of environmental challenges in a similar fashion, exercising its convening power to support scientific networks and forge strategic partnerships, including the Multilateral Environmental Agreements (MEAs). These MEAs provide technical support to developing countries in creating environmental laws and guidelines on reporting and project proposal development. 

The proliferation of new international institutions and agreements, now over 3,000, is illustrative of UNEP’s particular strength in setting global environmental agenda, but perhaps inevitably, it has also led to fragmentation and the creation of different camps. While many MEAs have been created under the auspices of UNEP, they tend to spin off in their own orbit once launched, with UNEP’s role curtailed to mere supportive functions in subsequent negotiations. Each MEA focuses on a specific area and “a narrow mission that donors find easy to understand,” which creates competition – but not collaboration. 

Several factors contribute to the gradual dwarfing of UNEP in the international environmental policy-making process, and the geographical location of UNEP’s headquarters is constantly brought up as one of the contributing factors. 

According to the heatmap produced by Yale’s research team, the distribution of key international organisations working on environment-related issues concentrated in Northern America, Europe, and Southeast Asia. Headquartered in Nairobi, the capital city of Kenya, UNEP is geographically removed from its convention secretariats and distant from the centers of political activity. The distance has unavoidably undermined UNEP’s “capacity to coordinate numerous environment-related agencies as well as, most importantly, its ability to attract top-tier policy staff.”

Image 2: Density of International Organizations Working on Environment-Related Issues. Credit: Maria Ivanova

Another limitation points to the institutional design of UNEP. Unlike its counterparts within the UN system, such as the World Health Organisation and the Food and Agricultural Organisation, UNEP was constituted as a programme rather than a specialised agency. The initial idea was to ensure UNEP was given the essential flexibility to navigate the complex nature of environmental issues and effectively marshal and deploy the relevant expertise housed in multiple bodies across the environmental arena. 

While the decision was not intended to incapacitate UNEP at the time, this formal status intrinsically places it in a weaker position in the UN’s hierarchy from the onset, severely constraining its authority and capacities in leading coordination activities among the MEA cluster, within the UN system and on the international stage. 

UNEP’s failure in establishing itself as an influential anchor institution within the institutional landscape entails further fragmentation of global environmental efforts. New institutions emerged on various levels of governance to fill the leadership vacuum, often eroding UNEP’s responsibilities. For example, the World Bank’s increasing engagement in environmental work overlaps with UNEP’s activities. The establishment of the Global Environmental Facility on the eve of the 1992 Rio Earth Summit also diluted UNEP’s influences. “Dwarfed by [these] newer institutions,” as one senior UNEP official puts it, “UNEP simply does not have a voice in front of the larger UN agencies,” not to mention bringing together disparate efforts into a common response.

Photo 1: The exterior of The World Bank Group in Washington, DC. Credit: Shutterstock. 

What further undermined its performance is UNEP’s relatively unreliable resource flow, predetermined by its financial model and rendered more vulnerable by its perceived lack of influence. UNEP’s core financing, the Environmental Fund, relies purely on voluntary donations from the international community. Over 90% of UNEP’s annual funding comes from a narrow donor base of as few as 15 countries, and the numbers often fluctuate dramatically in accordance with government priorities and attention, as well as their recognition of UNEP’s work. 

A case in point: In 2014, Australia cut its funding to the UNEP by more than 80% because it was “not a budget priority for the government.” This slash of funding has drawn a great deal of criticism from different parties, including the Australian Greens party, which lambasted Australia as “a global pariah on the climate front.” In defence of this decision, Greg Hunt, then Minister for the Environment, argues that most Australians would rather put $12m into coral reef protection within our region than donating “$4m for bureaucratic support within the UN system.” The response can be construed to indicate that investments can be, to a large extent, determined by whether or not governments find UNEP helpful in generating results that would satisfy their priorities. 

Photo 2: The UNEP to celebrate 50 years of work in 2022.

So far, what’s presented above is a variety of contributing factors that have caused many of UNEP’s efforts to fall short of their goals. UNEP’s influence is waning, but this diminishing of importance is not irreversible. At the time when the world is ever more divided, when exacerbated nationalism hinders cooperation, the challenge of international environmental cooperation was not only for UNEP but equally, in fact more so, for the member states. As UNEP embarks on a year of reflection ahead of its anniversary, international communities must seize the opportunity to rethink UNEP’s role, function, and structure.

Featured image by: Flickr

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As part of the European Green Deal, a radical policy framework to make the European Union (EU) climate neutral by 2050, the European Commission proposed in September 2020 to raise the 2030 greenhouse gas emission reduction target to at least 55% compared to 1990, up from its previous target of 40%. From the Czech Republic to Sweden, European countries are ramping up their domestic climate ambitions. Underneath these international efforts to shift energy generation and transmission and protect the environment from mounting risks, however, there has been a silent rise of a powerful cluster of investors, who have ensnared developing and developed countries alike, putting corporate profit before human rights and environmental and climate protection- with means provided for by international treaties.

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Nestled in the Apuseni Mountains of western Romania is the nearly 2 000-year-old village of Roşia Montană. Since the 90s, local villagers and Romania civil society have been rallying to resist a proposed multi-billion dollar mining project that would have levelled four mountains and demolished four villages and nearly 1 000 houses and churches to make way for Europe’s largest open-pit gold mine- a contentious plan developed by Canadian mining company Gabriel Resources. The standoff came to a head in 2013 when the Romanian parliament had to decide on a new legislation that would have allowed the company to go ahead with the toxic mine.  

A fight lasted for over two decades and was joined by neighbouring villagers, environmentalists, students, priests, academics and citizens at large. “Save Roşia Montană!” became what was then the largest grassroots movement since the country’s 1989 revolution, forcing the government to withdraw its support for the plan in 2014. 

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But Gabriel Resources stung back. In July 2015, it lodged a lawsuit against the Romanian state before the International Centre for the Settlement of Investment Disputes (ICSID), the World Bank’s commercial arbitration court. According to a May 2019 press release, Gabriel Resources demanded a whopping USD$5.7 billion from Romanian taxpayers in compensation for losses incurred by its stalled Roşia Montană project- equivalent to 3% of the entire Romanian economy in 2016. Their allegation? A breach of obligations in its bilateral investment treaties (BIT) with Canada and the UK. The case is still unsettled.

How did this happen? Gabriel Resources has recourse to the investor-state dispute settlement (ISDS) mechanism, a common clause in modern international trade agreements and investment treaties. Initially created to protect investors in countries where the rule of law is immature or at risk, ISDS becomes a legal backdoor, rendering foreign investors sweeping powers to by-pass domestic court systems and sue states over government actions that run counter to their economic interests.  

These arbitrations often take place through a private tribunal system, where cases are typically decided by panels of three arbitrators rather than independent judges. These positions are usually dominated by a small handful of corporate lawyers, who switch roles to represent the investors, the government, or act as the deciding judge in different ISDS cases. Their appointment is generally not subject to any qualification requirement, nor are there any meaningful conflict of interest or impartiality policies in place during the selection process. According to a report published by the research and advocacy think tanks Corporate Europe Observatory (CEO) and the Transnational Institute (TNI), several prominent arbitrators “have been members of the board of major multinational corporations, including those which have filed cases against developing nations.”

The close tie between these arbitrators and the corporations involved, coupled with the “close door” nature of the system, indicate a systematic bias in these private tribunals to prioritise private profits over the public interest. 

To make matters worse, these tribunals have become investment opportunities for hedge funds and investment banks. Unlike that of the World Trade Organisation’s panels, another common international dispute-settling mechanism, an ISDS tribunal does not generally purport to overturn local laws. Instead, it awards monetary damages to investors deemed adversely affected by such laws. Third parties often provide financial resources to the investors, such as legal fees and tribunal costs, in exchange for getting a share of the money if it wins. 

In Gabriel Resources’ case, the company is financially backed by Wall Street hedge fund Tenor Capital Management. Tenor pays the company’s lawyers in exchange for a share of the money if it wins. Deals such as these have helped catalyse an avalanche of ISDS cases in recent years. According to The United Nations Conference on Trade and Development, a total of 1061 cases have been filed since 1987. While the first ISDS case was initiated in 1987, over half of all cases were filed between 2010 and 2020.

It is estimated that the ISDS clause is featured in more than 3 700 treaties globally. Many are found in bilateral investment treaties, such as that between Romania and Canada. However, no other international investment agreement in the world has triggered more investor-state lawsuits than the Energy Charter Treaty (ECT). 

ECT is a multilateral investment agreement signed in the 90s – a turbulent time when the transition from state socialism to market economy took place in Eastern Europe – by 52 EU and national governments (including Japan and Australia). Created to facilitate the integration of the energy industry of the Soviet bloc with Western Europe, it has now become the most dangerous weapon in the hands of the fossil fuel industry, one of the biggest sources of carbon emissions. 

The response to the coal phase-out is a case in point. In September 2019, German energy company Uniper, who invested more than €1.6 billion to build a coal power plant in the Netherlands, threatened to recourse to ISDS to sue the Dutch government over its law to ban coal for electricity production by 2030. The law was part of the country’s commitment to reduce reliance on fossil fuels and transition to renewable energy. Uniper may be able to claim up to €1 billion in compensation. 

To get on the path to limit global warming to 1.5–2°C above pre-industrial temperatures by 2100, countries must work together to keep “one-third of known oil reserves and over 80% of coal reserves” under the ground. If the Paris Agreement holds, company-held fossil fuels will be in effect unburnable, trillions of dollars invested in extracting, processing, and burning these fossil fuels will be rendered worthless – leading to massive market losses for the fossil fuel industry.

London-based think tank International Institute for Environment and Development (IIED) predicted in its latest report “Raising the cost of climate action: ISDS and compensation for stranded fossil-fuel assets” that investors are more likely to resort to ISDS to seek compensation, or “strengthen its position in negotiations with governments” to push back against climate measures that cause asset stranding and conflict with their supposed right to the profits of free trade. In turn, these legal actions will drive up the costs of ambitious climate policies and increase the likelihood that governments give in to corporate demands to avoid the risk of losing and exorbitant costs.

Up till December 2020, 131 ECT investor lawsuits were launched against government actions. Policymakers are acknowledging this worrying trend, which, according to nearly 140 members of the European Parliament and national parliaments who signed a joint statement, “threatens the climate ambition of the EU domestically and internationally.” In an open letter, a group of 169 climate leaders and scientists called on the EU and the 53 signatories to the ECT (also to the Paris Agreement) to withdraw from the “outdated” Energy Charter Treaty and stop attempts to expand the treaty internationally to low and middle-income countries in Africa, Asia and Latin America.

It says, “If governments want to be seen as leaders on climate change, then they need to step away from investment agreements that tie their hands and continue to protect fossil fuels at the taxpayers’ expense.”

Aggressive action on climate change is non-negotiable, and so is the reform of the ISDS clause and re-evaluation of its role in international treaties. As IIED director Andrew Norton said: “Ending dependence on fossil fuels is crucial to being able to tackle climate change, and our research shows that rethinking investor-state dispute settlement is a key part of making that possible. It is vital that people are not made to bear the costs of compensating fossil fuel companies and that the state instead invests in clean, green alternatives.”

Featured image: Flickr 

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In complete contrast to the climate skepticism and inaction that has dominated the Trump administration’s environmental policies, the Commodity Futures Trading Commission (CFTC), a federal government agency, issued a report acknowledging that frequent and devastating shocks from climate change are a menace to the financial stability of the US. Central banks and corporates are waking up to the crisis and taking steps to build resilience, but political inertia can stand in the way.

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“It’s the first time something like this has been done under the auspices of a US financial regulator,” said Dave Jones, a former insurance commissioner for California and one of the 34 industry leaders who put the report together. The 200-page report gives a comprehensive look at climate-change-induced risks to all financial markets, translating data and scientific revelations into language that Wall Street professionals and regulators understand. It includes projections of the fiscal impact that climate change and subsequent inaction could have on the US ‘ troubled economy amid the coronavirus pandemic and predictions of intensifying downpours and more potent hurricanes. It also offers 53 recommendations on how the sector and policymakers can address the elephant in the room.

The warning could not have come at a more vital time. The risks of climate change (and inaction) are looming and ever-growing across the US and around the world. The impacts of climate change are already manifesting in the largest state economies. The “one-two punch” of hurricanes along the Gulf Coast, the blazes sweeping across California and the now-routine flooding in Florida are only a fraction of the climate-related calamities that have wreaked havoc on US soil.

“By the end of this century, the negative impacts on the United States from climate change will amount to about 1.2 percent of annual gross domestic product (GDP) for every 1 degree Celsius increase,” the report estimates. This is tantamount to wiping out nearly half of the average annual GDP growth rates in recent years. “There is great uncertainty about how those losses may be distributed across the US and within any given sector or asset class,” but how some sectors are impacted can hint towards what could come in the next decade.

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(Source: CTFC, 2020). 

The farming industry, which contributed USD$1.053 trillion to US gross GDP in 2017- a 5.4% share according to the Economic Research Service– now bears the brunt of the damage caused by climate change. In 2019, historic rainfall and flooding devastated the Midwest, costing the region more than $400 million worth of livestock and more in damage and flooded farmland. 

The scorching heat can be just as damaging to the health of an economy as excessive precipitation. By 2090, total impacts from extreme heat attributed to climate change could result in more than 2 billion lost labour hours, representing $160 billion (2015) in lost wages. “Companies that rely on outdoor and manual labour may face physical risks from declining labor productivity and higher costs associated with workers’ compensation, health insurance and general liability insurance,” the report says. 

Physical risks such as these have taken up much of the media’s front pages. Less visible, but just as powerful, are the transition risks that constitute a bigger part of the story of the economic threats. Transition risks arise when companies fail to adapt to changes in policy, technology and consumer behaviour as the world moves towards a net-zero economy. 

(Source: CTFC, 2020) 

These risks are already nascent in banks and companies’ balance sheets. In 2018, Germany saw its weakest economic performance in five years. The recession hit in part due to the new EU emission tests, which have hampered auto production, one of the country’s pillar industries. That same year, Jaguar and Land Rover wrote off £3.6 billion, largely due to uncertainties around Brexit and diesel engines. Their depreciation could make them a risky investment to investors and banks. 

What happened in Germany could happen to the US at any time. The report says that the financial system might be able to absorb the effect of climate change here and there, but when its spillover effects start to happen, more fundamentally, it is the underlying drivers of these risks that need to be addressed. 

“A fundamental flaw in the economic system lies at the heart of the climate change problem- the lack of appropriate incentives to reduce greenhouse gas emissions,” the report says. For decades, economists have contended that pricing carbon emissions is one of the simplest and most efficient ways to address the “negative externalities” of fossil fuels. Negative externalities are situations when there is an external cost that accrues to other people or society as a whole. 

In the case of greenhouse emissions, an additional cost has been shifted to society as a negative externality in the form of future climate impacts. As estimated in 2016 by the federal government, the quantifiable economic damage associated with a small increase in carbon emissions amounts to $52 per metric ton of CO2 in today’s dollars. However, many experts agree this is far lower than the true costs of carbon pollution. In the absence of an “economy-wide price on carbon that reflects the true social cost of the emission,” all manner of financial instruments- stocks, bonds, futures and bank loans- will not factor in those risks in their calculus. Hence, the mismeasurement of known risks, which, as they build up, can eventually cause “a disorderly adjustment of prices.”

Undeniably, there has been a growing nervousness among US investors about swiftly mounting environmental risks in the sector. Last year, executives from more than 75 companies, which altogether represented a market value of $2.5 trillion and employed over 1 million US workers, traveled to Capitol Hill to call for a federal carbon price. More companies, including energy companies such as Equinor and Shell are providing some climate-related disclosure as a measure to mitigate the risk. Still, actions such as this have primarily been voluntary- and disordered, “presenting a challenge for investors and others seeking to understand exposure to and management of climate risks.” 

For the past few years, carbon pricing efforts have largely remained at the state level as Congress remains gridlocked on climate policy. “While there is an ongoing debate about the right price for emissions, what we do know is that inaction creates a large and growing liability,” says subcommittee chair Bob Litterman, a founding partner of the investment adviser Kepos Capital, in his foreword to the report.

How will these recommendations be taken forward? Some deem it likely that they will be shelved. Others remained hopeful that it could be a policy roadmap for the next administration now that Joe Biden is the president-elect. That said, the task force agrees that whoever comes next to the Oval Office should not make the same mistake twice. Likening climate change to the COVID-19 pandemic, which has caught the ill-prepared country off guard and thrown it into an economic crisis, Litterman writes, “time is of the essence. We do not know precisely when the planet’s climatic system will be pushed past catastrophic tipping points. But what we do know is that the cost of delay in responding to the risk can be devastating.”

Featured image by: Flickr

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Donald Trump recently signed into law the Great American Outdoors Act, a historic bill that will provide dedicated funding to acquire and preserve the country’s 419 national parks, 193 million acres of forests, wildlife refuges, and more, in what the National Parks Conservation Association (NPCA) calls the ‘largest investment the country has made in its national parks and public lands in more than 50 years’. 

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Passed with bipartisan support and hailed as one of the most important environmental bills in decades, The Great American Outdoors Act comprises two major components, one of which is The Restore Our Parks Act. The act will use 50% of the government’s energy revenues to provide up to US$1.9 billion a year for five years to repair critical facilities and infrastructure in national parks, forests, wildlife refuges, recreation areas and American Indian schools.

For many conservationists, this is crucial. Across the US, national parks and public lands are facing a funding crisis caused by a surge in popularity. In 2016 and 2017 alone, national parks saw a record high of 330.9 million visitors, but this has led to public lands being overrun with visitors and demand overtaking parks’ capacity. As such, state funding has failed to keep up with parks’ mounting needs.

Now, with the passage of the Great American Outdoors Act, local governments will have the resources to address $11.9 million worth of long-overdue maintenance and help restore the nation’s 419 national parks— from the trails in the Yosemite National Park to the sewage system in the Grand Canyon, the campgrounds in the Great Smoky Mountains National Park to the failing electrical system in Kalaupapa National Historical Park in Hawaii.

The act also guarantees full and dedicated annual funding of $900 million for The Land and Water Conservation Fund (LWCF), the nation’s bedrock land acquisition program. Since its establishment in 1964, more than $22 billion has been diverted from the fund for other unknown and unaccountable purposes. In signing the act, the congress attempts to redress this lapse and ensure that the funding- coming almost exclusively from royalties from oil and gas drilling activities- is used to support much-needed land conservation as was intended 56 years ago.

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The enactment is as much a victory for public lands as it is for the rural communities that depend on them. Outdoor recreation tourism has long been one of the backbones of the nation’s economy, generating $125 billion in tax revenue and supporting 7.6 million jobs. However, with the shutdowns caused by the COVID-19 pandemic, the sector has suffered the hardest blow. 

“The unusual show of bipartisanship that led to enact this legislation is largely due to the political and economic consequences of the COVID-19 pandemic,” Professor Linda Bilmes, the Daniel Patrick Moynihan Senior Lecturer in Public Policy at Harvard Kennedy School (HKS) told The Harvard Gazette. “The US tourism industry is facing massive job and revenue losses. The Great American Outdoors Act is expected to create more than 108 000 new jobs to repair park infrastructure, including access roads and bridges in these adjacent communities,” she continues.

Economic benefits aside, the passage of this act mandates the conservation of huge landscapes that soak up floodwaters, recharge aquifers and provide clean drinking water to millions of Americans.

In these uncertain and often polarising times, the bill has successfully united the country’s politicians, environmentalists and economic groups. “We’ve always needed our public lands,” congresswoman Torres Small says about the importance of public lands to a country roiled by the COVID-19 pandemic. “They boost our economy, they connect us to the generations who came before us, and they provide an opportunity to relax, to marvel and to learn about our natural world. As we work to rebuild our country and heal from this pandemic, we’ve never needed our public lands more.”

More importantly, it has secured the public’s equitable access to natural spaces. As Land Tawney, president of the Montana-based nonprofit Backcountry Hunters and Anglers, said in a statement, “the Great American Outdoors Act is a once-in-a-generation conservation and public access legislation that will have impacts for generations to come.”

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