(Photo: Mike Baker / Flickr)Government officials from an elite group of developed countries meeting in Washington, D.C. at the invitation of U.S. climate envoy Todd Stern appear to be on the brink of instigating yet another corporate handout and big bank giveaway—this time in the name of fighting climate change.

If it follows a recently leaked agenda, the meeting will focus on using capital markets to raise money for climate finance. The goal is to fill the void left by the United States and other developed nations that have failed to meet their legal obligations to deliver funding to poorer countries for climate programs.

In this corporate-oriented approach, countries would provide generous loan guarantees and export subsidies that sweeten investments for private firms and give them the chance to net big profits while leaving governments (and the taxpayers they represent) to cover the losses if investors’ bets don’t pay off. Wealthy countries would then be able to claim that they had moved billions of dollars of new climate investments.

Unfortunately, the projects best placed to benefit from large-scale private investment and market mechanisms—like mega-infrastructure projects and fossil fuel-powered ventures that hide behind a “low-carbon” label—are likely to be those that have fewest sustainable development benefits. In many cases, the funding will channel windfall profits to corporations that would have invested profitably even without these new channels of support.

The sad fact is that this has happened before. Nations spent five years negotiating the Kyoto Protocol—the only multilateral treaty to regulate emissions of greenhouse gasses and spell out binding targets for reducing climate pollution. But before the treaty was finalized in 1997, the United States led a push to replace the enforcement mechanism—a fine for missing reduction targets paid into a clean development fund—with a market mechanism meant to lower the cost of compliance for polluting companies. The accompanying clean development mechanism (CDM) was born so that companies in the industrialized world could purchase ultra-cheap carbon pollution credits from developing nations to offset their continued pollution at home.

In the end the United States pulled out of the Kyoto treaty. But by shifting a global regulatory regime into a market-based regime centered on enticing private-sector investment with promises of profitability, Washington left its mark.

A decade and half later, carbon markets have collapsed, developing countries are awash with carbon credits for which there is no demand, and the planet keeps getting warmer.

Meanwhile, the clean development mechanism has led to private sector investment in spurious projects like mega-hydropower dams and coal-fired power plants that have delivered little in the way of sustainable development outcomes—and in some cases have further harmed the environment and human health.

Passing the Buck

And now Washington is at it again, hijacking the debate about how to support the global transition to a low-carbon, climate-resilient economy—and keeping the public, the press, and even developing countries out of the conversation. They’re repeating the same tired story that rich governments are broke and thus have to call in the private sector to finance climate change solutions.

In today’s economy, mobilizing private finance means going to the capital markets to raise money. But relying on financial markets for funding to support renewable, clean energy or to resettle climate refugees would subordinate climate action to the speculative whims of bankers.

Americans have visceral reminders of the consequences of leaving decisions about critical needs to the market—the more than 1.6 million families locked out of their homes and the $2.5 trillion in taxpayer dollars handed over to bail out Wall Street and U.S. car companies are just two. Europeans can point to the recent bailout after the carbon bubble burst. If a global climate finance bubble were to burst, we wouldn’t just lose our houses; we might have lost our chance at averting catastrophic global warming.

Governments in the developed world shouldn’t pass the buck to the private sector. They must act now. They can start by cutting subsidies for fossil fuels, including for natural gas “fracking” in the United States, and set binding regulation for reducing climate change pollution. Then governments can adopt innovative ways to raise public money, like taxing pollution from shipping or financial transactions. Indeed, even a very low financial transactions tax would generate substantial revenue and deleverage capital markets.

And of course, if there is any hope of creating a new paradigm of climate-sound development, there will have to be a role for the private sector. But the micro, small, and medium enterprises of the developing world would be preferable partners to the multinational firms that have been responsible for sucking wealth and resources out of countries for decades, leaving pollution and poverty in their wake.

At some point—and for the sake of the future generations who will bear the results of our decisions, we hope it’s sooner rather than later—the government officials who place their bets on private finance will have to learn that putting corporate profits over the needs of climate-impacted people is a risk the rest of us are not willing to take.

Oscar Reyes, an associate fellow of the Institute for Policy Studies, offered editorial support for this commentary.