Who Will Pay for a Global Energy Transition?

To keep the planet from overheating, humans must budget the amount of carbon we pump into the atmosphere. From the onset of the Industrial Revolution until today, humanity has used up approximately 83 percent of its “carbon budget“—the amount of carbon the atmosphere can absorb and not exceed the Paris climate agreement’s aspirational goal of a 1.5C degree increase in global temperatures since the pre-industrial era.

Equally troubling has been the distribution of those carbon emissions. “With just below 20 percent of the world population, the Global North has overconsumed 70 percent of the historic carbon budget,” notes Meena Raman, president of Friends of the Earth Malaysia and head of programs at Third World Network.

DISPARITY IN EMISSIONS AND WEALTH

Because of this large disparity in emissions and in wealth earned alongside those emissions, the rich countries of the north owe the poorer countries a kind of “climate debt.” Now, when carbon emissions have to be controlled severely, the north has a historic responsibility to help the south make its own transition to a post-fossil-fuel future.

This responsibility is not simply a function of carbon emissions. The extraction and burning of fossil fuels by the Global North during and after the “We need to talk about all of these external debts—foreign, financial—which involve colonialism, the exploitation of labor, racism, and patriarchy,” observes Alberto Acosta, Ecuador’s former minister of energy and mining. “These ways of expropriating nature have been from the beginning instruments of domination over the Third World or developing countries or poor countries. These countries on the periphery have been historically bled out.” Raman adds: “So, we need to talk about debt cancellation as part of reparations.”

Avoiding the worst-case scenarios of climate change will require money: a lot of it. “Regardless of how we frame the discussion—climate debt, climate reparations, climate fair share—the challenges are immense,” points out Tom Athanasiou, co-founder of EcoEquity.

Industrial Revolution went hand in hand with an ongoing process of looting the Global South. The colonial era established an unequal power balance between the north and south, which has continued into the post-independence era. The Global South continues to supply the Global North with natural resources, increasingly to support a “clean energy” transition. The countries of the Global South also remain locked into various forms of debt servitude to the financial institutions of the Global North.

“We need to talk about all of these external debts—foreign, financial—which involve colonialism, the exploitation of labor, racism, and patriarchy,” observes Alberto Acosta, Ecuador’s former minister of energy and mining. “These ways of expropriating nature have been from the beginning instruments of domination over the Third World or developing countries or poor countries. These countries on the periphery have been historically bled out.” Raman adds: “So we need to talk about debt cancellation as part of reparations.”

Avoiding the worst-case scenarios of climate change will require money: a lot of it. “Regardless of how we frame the discussion—climate debt, climate reparations, climate fair share—the challenges are immense,” points out Tom Athanasiou, co-founder of EcoEquity.

“There is no conventional politics that can properly address both the climate crisis and the inequality crisis. The science tells us that we have to phase out fossil fuels globally in only a few decades. That means that the countries of the Global South must rapidly decarbonize even while they are still poor, even if they have fossil resources they hope to extract and sell for development.” But where will this money come from and what political structures are necessary to rectify the imbalance of power and wealth between the north and south?

PREVIOUS PROMISES

The richer countries have made commitments. In 2010, they promised to reach $100 billion per year in climate financing. “The number was plucked from a hat,” Meena Raman reports. “It was not based on what developing countries needed.” By 2021, the richer countries claimed to have mobilized around $80 billion, but in reality the figure was, as Oxfam estimates, about one third that much. “So, the $100 billion goal was shifted in 2021 to delivery by 2025,” she continues, noting as Oxfam does that the developed world counts even loan and insurance as part of that 100 billion.

Another mechanism of paying off the climate debt is the Green Climate Fund, an initiative pushed by the Group of 77 and based in Incheon, South Korea. “Since 2014, it has delivered only $13.9 billion, which is very little in terms of the scale,” Raman reports. The Adaptation Fund, created in 2001 under the Kyoto Protocol, has committed only $850 million.

Compare these numbers—under $100 billion a year—with the scale of the challenge. According to one research report last year, the world needs to spend $5 trillion by 2030 in climate finance to meet the Paris goals by 2030. But as Raman points out, this figure is based on only 30 percent of the costs. Meanwhile, on the adaptation side, the UN Environment Program estimated in 2016 that $140 to $300 billion a year was necessary to cover adaptation costs in the developing world (which it placed closer to the upper range in its 2021 report). These numbers don’t take into consideration the loss and damage costs. According to one study, the developing world will be paying somewhere between $290 billion and $580 billion per year by 2030 to deal with the consequences of climate change.

In addition to the compensation for loss and damage are the opportunity costs associated with keeping fossil fuels in the ground. “What about compensation to countries like Ecuador that possess fossil fuels but refrain from extracting these resources?” Athanasiou asks.

Other costs would include those associated with climate refugees forced to resettle because their homes have become uninhabitable. “Even if we determine what should be paid, who will pay? There are three possibilities,” Tom Athanasiou suggests. “Fossil fuel corporations. The rich countries of the north. Or the rich people of the world.”

Fossil fuel corporations have historically profited enormously from peddling the products that have produced climate change. Even worse, they are making windfall profits now as a result of the Ukraine war, which has put restrictions on the amount of Russian oil and gas that’s available to Western markets. In the second quarter of 2022, for instance, BP “earned” profits of $8.5 billion, its biggest take in 14 years. In total, according to the International Energy Agency, fossil fuel companies have pulled in $2 trillion in profits over the course of the war so far.

The second option is the traditional climate debt approach, to make the rich countries of the north pay. “These countries obviously have to pay the greatest part of the bill because they have the greatest historical responsibility and the greatest capacity to pay,” Athanasiou adds. “Yes, but there are lots of poor people, poor by global standards, in the countries of the north, including in the United States, the richest country the world has ever seen. And there are also some very rich people in the countries of the south.”

Because wealth is not so neatly divided between north and south, “maybe it should be rich people and not rich countries that pay,” Athanasiou suggests. “What if we tax the emissions of just the richest one percent of the global population regardless where they live—at a rate high enough to pay for the entire cost of the emergency climate transition?”

The bottom line, Athanasiou concludes, is that “with so many governments going neo-fascist, it’s not really very likely we’ll get tens of trillions from central bankers in the next several years. You can’t just print that money. It has to come from the rich.”

John Feffer is director of Foreign Policy In Focus at the Institute for Policy Studies. www.fpif.org, www.johnfeffer.com. Latest book: Right Across the World; latest novel: Songlands

Peace Magazine 2023-01-01

Peace Magazine 2023-01-01, page 15. Some rights reserved.

Search for other articles by kgsimons here

Peace Magazine homepage