Tariffs will stifle green growth in the Global South: WRI CEO Ani Dasgupta

Dasgupta, who is based at the research non-profit’s headquarters in Washington DC, spoke to the Eco-Business Podcast two months after the United States Agency for International Development (USAID) was gutted by the Donald Trump administration, and in the same week that America’s president sent the global economy into a tailspin with a series of punitive tariffs – that were paused only a week later.

The US has since temporarily rolled back the tariffs imposed on 2 April, though Trump is keeping the pressure on China, saying that he would raise the tariff on Chinese imports to 125 per cent from the 104 per cent that has already taken effect. A 10-per-cent blanket duty on almost all US imports also remains in effect. 

“The biggest thing about [climate and nature] finance is not actually aid. It’s how to get private capital flowing on a large scale to Global South countries – which is not happening. That is the big, big problem,” said Dasgupta. Some US$340 billion to US$467 billion is needed to fill the nature finance gap every year, which cannot be filled by public sector funds alone.

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For Global South countries to grow, it’s critical that they are able to export – green growth is connected to trade.

Ani Dasgupta, CEO, World Resources Institute

The voluntary carbon market is still one of the best funding solutions, said Dasgupta. Even though the market has sufferered serious credibility issues over the last two years, it needs to be “nurtured back to life” with new ways to fund projects in countries that need help to protect their forests and adapt to climate change.

The jurisdictional approach is one way of ensuring high quality carbon projects, but doubt lingers over the market, Dasgupta noted. Companies are worried that if they did invest in carbon projects, they will get accused of greenwashing, he said.

Other ways to fill the funding gap include getting companies to pay for ecosystem services, such as clean air, soil and water, or to use trade, said Dasgupta, pointing to a partnership between China and Brazil on deforestation-free soy that WRI is working on.

Trade is critical to sustainable development in the Global South, said Dasgupta, who noted that the tariffs imposed by Trump would not be beneficial to any country – including the US.

“India has to grow. It has many poor people. Indonesia has to grow. For them to grow, it’s critical that they are able to export, because green growth is connected to trade,” he said.

Ani Dasgupta, CEO, World Resources Institute. Image: WRI India

Tune in as we discuss:

• The US and the Global South
• The impact of USAID funding cuts
• Innovation in conservation finance
• How best to push companies to take action on nature and climate?
• Hopes for COP30

The transcript in full:

What do you think the tariffs introduced by the Trump administration could mean for the world of conservation finance?

My thoughts are really initial, because the situation is still very much unfolding. Tariffs, counter-tariffs. But I have two broad thoughts: 

One, I don’t think the world will be better off if we build walls around countries. That doesn’t mean that trade practices right now are perfect. They are not. The countries that I work in  mostly Global South countries such as India, China, Indonesia, and South Africa – could all benefit from fairer trade practices. But I don’t think these tariff wars are going to make things better. If the assumption is going to create manufacturing in the United States, most economists do not think that is going to happen in the short run.

My second thought is that ountries such as India and Indonesia depend on trade for their growth. WRI is an organisation that is trying to help countries transition to economies that are good for nature, climate, and people. But that is not the economy these countries have today. How do we help them? How do they grow in greener, more nature-sensitive, and people-centric ways?

The underlying word is grow. India has to grow. It has many poor people. Indonesia has to grow. South Africa has 30 per cent unemployment right now. For them to grow, it’s critical that they are able to export, because green growth is connected to trade.

CBAM [the European Union’s Carbon Border Adjustment Mechanism] was an example (of a policy tool to promote global climate action) last year. It was not punitive, as the tariffs that we see right now are. But it was introduced to create an even playing field. And it was done in a very different way and countries understood (the motivation for the policy).

Countries need to grow – and trade needs to work for them. 

[Editor’s note: Trump has since rolled back most of the tariffs, except for those on China.]

One silver lining from the tariffs could be the development of a circular economy, as consumers buy secondhand to avoid increasingly expensive new goods…

That needs to happen anyway. If you look at India, for example, and what’s going to happen to lithium (as a key mineral to make batteries needed for the energy transition). As it’s expensive, there is much more interest in circularity. We are working on a new initiative in India to promote lithium recycling to do exactly what you are saying. 

What do you make of the funding cuts to USAID and the impact this is having on the Global South?

The USAID dismantling has huge implications. It is a huge issue in the aid world. The United States government provided international grants in the range of US$50 billion to US$60 billion a year. They have reduced it by US$40 billion already. That number is irreplaceable. The gap cannot be filled by other developed countries, by the private sector or by philanthrophy. It’s just too big. That will not be filled. 

Who will be hurt most by the USAID funding cuts? Actually, poor people.

Out of the $60 billion [in USAID funding] about $11 billion went in to climate projects. The amount spent on climate is much smaller than people think. Most of it is actually humanitarian aid, disaster relief, medical supplies, and maternal health – and that’s going to suffer.

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Nature provides US$55 trillion of services that we have not figured out to monetise.

But there are also knock on effects. One is United States posturing on NATO, which has resulted in all European countries putting more money into defence, for example in Germany, in the Netherlands. All of that has so far come from development budgets.

And aid to the Global South was reducing already from what’s called ODA [Official Development Assistance] from 2019 onwards. But the (USAID funding cuts) is a dramatic step change.

This has meant that financing from multilateral development banks such as the World Bank and Asian Development Bank has become even more important. These three things are connected that creates a poorer, dramatically different climate. 

The silver lining is that the large middle-income countries such as Indonesia and China were not very aid-dependent, because of their large size. They are charging ahead. I don’t see any change in their (nature or climate) spending plans. The countries that would be most affected are the poorest, and most vulnerable.

What about WRI? Have the organisation’s climate and nature projects in the Global South been affected by the USAID funding cuts?

Yes. We have been affected directly. But not a huge amount. WRI’s own finances are very diversified. Funding from USAID was about 7 per cent or less of our annual budget. So we can manage it.

But they were really good initiatives we have developed with multiple partners. For example, an air quality project in India, Indonesia and Africa. Another was a project working with multiple partners, including the United Nations, on how to remove mining or illegal logging. That’s a relatively new project that got cut. We are trying to figure out how to put that back together with other funders.

I just want to underline that, of all these of funds (that were affected by the USAID funding cuts), more than half were on-granted to other smaller organisations. I’m more worried about those organisations than us. Because of our size and diversity of funding, we will figure out a way forward. Not without bruises, but we will figure it out.

What financing mechanisms to close this funding gap in biodiversity restoration and conservation excite you the most, for instance debt-for-nature swaps, sustainability-linked loans, and biodiversity credits?

The thing that I’m most interested in right now is how we get private capital flowing to Global South countries.

One of the bigger ways is by financing carbon markets. We have all been very disappointed in how that market has not grown. It actually shrank last year.

WRI has done a lot of work to show how the carbon markets can work well in a jurisdictional way. REDD+ [Reducing Emissions from Deforestation and Forest Degradation, a United Nations back programme to help developing countries reduce emissions by curbing deforestation] is an example.

But there’s been so much press about historically bad (carbon market) transactions – and they were bad transactions; there was too much leakage and the benefits did not go to the community.

But there are better ways to do it. Our hope is that that better way will prevail.

Companies are still worried that if they did it [invest in carbon projects], they will get accused of greenwashing. It’s a market that we have to nurture back to life. But the potential of it is big. Countries like Indonesia, Gabon, Congo, Brazil, should benefit from it [carbon projects].

There is a really interesting initiative that the Brazilian government has been pulling together, called the Tropical Forest Forever Facility [TFFF was birthed at the COP28 summit in Dubai]. Which tries to figure out how to create a much bigger fund for forest communities across the world [TFFF uses satellite monitoring in participating nations to determine which ones have preserved their forests, and rewards them based on that data].

The other way is how to get private capital flowing for ecosystem services that nature provides. Nature provides US$55 trillion of services that we have not figured out to monetise or support. WRI is working on ways to get private capital flowing for profit into nature investments.

The third way is in trade agreements.

We are trying to work with the governments of Brazil and China. Could there be a way for China to procure deforestation-free soy from Brazil? Why is that important? China is the biggest importer of soy, and Brazil is the biggest exporter of soy. One of the biggest root causes of the disruption nature is agriculture and pasture land.

There are multiple ways we are pursuing this, but it is a huge issue. We have not succeed in getting enough capital flowing for the protection and preservation of nature.

What does success look in enaging with the private sector to fill that funding gap? We recently spoke with Ankit Todi, chief sustainability Officer of Mahindra Group, who talked about the dependencies but also the opportunities for his company in investing in climate and nature. 

There are quite a few mechanisms that are innovative.

One is nature-based adaptation measures. Mahindra is a very good example. They have a sprawling supply chain inside and outside of India. Their own supply chains are dependent, so how do you start investing in nature-based solutions for adaptation? 

 Also, how do you get jurisdictional investments [in nature]? We need to have common standards for investments in nature. Now there are so many different standards, but we need a common market that’s tradeable.

Second, is the monitoring of nature. Once a transaction is done, it must be dependable. We are doing work that allows companies to measure every tree in the world, if it’s growing or not, if it’s there or not – that’s the level of technology we have now.

Third, companies that are investing in nature need to benefit from it – not be shamed by their investments.

Right now, the environment is such that if companies do a nature transaction, it’s more likely than not that someone will say, “you did a terrible thing”.

Companies don’t have the expertise or the patience to figure out where the money’s going. They want to buy a dependable product so that they get some kudos for it.

And that is where we have failed right now. Because of all the newspaper articles [The Guardian’s reporting on carbon projects verified by Verra found that 90 per cent were adjudged to be ineffective at carbon removal].

This is a system that has to work – and the system is not working.

The innovation that I see going on is in the margins of this. We are trying to figure out if we can put together a private offering that allows people to buy ecosystem services and then trade them. There is a lot of interest in nature preservation finance mechanisms. But I don’t see a silver bullet out there right now.

What is WRI’s approach to pushing corporates to take more action around climate and nature? What is the most effective way?

Our view is after the Paris Agreement, many companies got very excited and signed up to ambitious goals of decarbonising to net zero. But once they started doing it, they realised how difficult it is to decarbonise.

There are two different types of companies. One that is actually doing something about it. The other group is pretending to do something about it. 

Our job is to find the first group, recognise they are doing good, and support them publicly – even if they are in transition, sometimes succeeding and sometimes failing.

It’s not black and white. It’s not as if companies can flick a switch off and tomorrow they are green, especially if these are big companies. It’s a transition. 

There is willingness to [take action]. Ninety-seven per cent of world’s Fortune 500 companies use the GHG protocol [a system for measuring greenhouse gas emissions] now. There are 10,000 companies have signed up to SBTi [the Science-Based Targets initiative].

What are your hopes for the COP30 climate talks in November?

COP30 is going to happen in a weirdly difficult global environment. Not only the wars that are going on, which was already a worry. But these trade wars that have started just now – they are not going to end by COP30.

But there is also good news. There is a clear recognition that we need to make climate finance work. And this finance disaster (due to the tariffs) is going to force people to figure out how we can make climate finance work.

The biggest thing about (climate and nature) finance is not actually aid. It’s how to get private capital flowing on a large scale to Global South countries – which is not happening. That is the big, big problem.

I think (the tariffs) will force people more to figure out how to de-risk this capital.

Also good news is that the Brazil (COP30) team is fantastic. We are working closely with them. They are really serious and professional. We will see a very different COP this year.

Plus, large Global South countries such as India, China and Indonesia are going to become more important in the geopolitics of the world, given what’s happening. These countries are shaping the global agenda, and they have realised that greening the economy is their path to growth. Even Indonesia, which has a government that is thinking about what to do, but hasn’t changed their climate policies.

So there will be a pressure from the Global South, especially from China, to keep the multilateral system going and not abandon it. 

Because it is beneficial for their own countries. Unlike the Gulf countries or Russia and United States, they don’t actually have a lot of oil and gas. Their future is clean energy, not because they like climate, because it is a more secure path to growth.

The worst thing that has happened is that a unilateral step by United States (regarding USAID) has broken trust between Global North and Global South, which was already in a difficult place.

So my plea to the Europeans about whatever they do with their budget, is to least do it in a way that you preserve some trust, because without that, it will be very difficult. 

What can you say about the impact of the withdrawal of the US from the Paris Agreement on countries such as Indonesia? The country’s climate envoy recently suggested that the country may withdraw, although Indonesia’s climate policies have not changed.

We will see what happens with Indonesia’s NDCs [Nationally Determined Contributions to the Paris Agreement].

A few years back, during Glasgow (at COP26) they were debating in cabinet which year they should set a net zero target, and what would be better for the economy. [Note: Indonesia’s net zero target is currently 2060.]

Through that exercise, they found that the sooner they decarbonise the better it would be for the economy, because their natural capital is such a big amount of the economy. 

I think that (at COP30) we will see more ambition and leadership from large middle-income countries than ever before.

This transcript has been edited for brevity and clarity.