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Who will pay to save the planet? The $100 trillion question

Anthony Rowley reviews his book (Who Will Pay to Save the Planet) at a recent press conference in Tokyo. (ANJ)
Anthony Rowley reviews his book (Who Will Pay to Save the Planet) at a recent press conference in Tokyo. (ANJ)
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13 Nov 2022 12:11:10 GMT9
13 Nov 2022 12:11:10 GMT9

Anthony Rowley

Climate change protesters will be fewer in number and probably more restrained at the COP 27 climate summit held at Sharm el-Sheikh in Egypt than they were at last year’s Glasgow summit. But in any case all the shouting and banner waving misses the real point.

Instead of demanding that rich countries pay more to help poorer ones overcome the devastating impact of climate change (justified though the case may be) banner-wavers should instead be demanding to know how much it will cost to save the planet — and who will pay.

Such questions, along with that of how and by whom the great climate rescue operation is supposed to be organized, remain shockingly unaddressed even as “natural” disasters, in fact largely man-made, pile up in the shape of fires, floods, droughts and other calamities.

Climate change protesters will no doubt also use the Sharm el-Sheikh event to harangue so-called “Big Oil” and oil producers for global warming whereas they should be targeting what I refer to in my recently published book as the real “black villain,” which is Big Coal.

The fact that we have not been asking the right questions about who is responsible for global warming and how the battle against climate change can be won is typical of the misinformed and “fuzzy” approach that for decades has been taken toward this existential threat.

As far back as the 1970s, America’s Central Intelligence Agency (CIA) was reporting “strange weather patterns” while scientists were divided on whether these represented a threat to earth and its inhabitants. There are fewer climate change doubters today but ignorance persists.

The bill for rescuing earth and its inhabitants from the rapidly-increasing ravages of climate change is going to be very large – almost certainly a minimum of $100 trillion, and it is going to have to be paid by the taxpayers, savers and investors or consumers.

That’s roughly equal to one year’s annual GDP of the world, according to estimates from expert sources ranging from the International Monetary Fund (IMF) and the International Energy Agency (IEA) to individual investment banks and consultancies.

Until recently, most people were in the dark or in denial about climate change and even now that the impact is showing up in the shape of  typhoons, hurricanes, forest fires, floods and rising sea levels the world remains dangerously divided over what action to take and largely ignorant as to what the cost of action will be.

To quote what Britain’s then Prince Charles, now King Charles III, said at the COP 26 summit last year, “We know this will take trillions, not billions, of dollars. Climate change and loss of biodiversity pose a great threat and the world must go to a “war-like footing” to combat it,”

But the world has not moved forward because it is too divided ideologically to do so. This prevents countries from dealing with the estimated $100 trillion global cost of climate change, and instead, they focus on the $100 billion that rich nations are supposed to pay poorer ones.

What is the money for? A major item will be replacing fossil fuel power plants that belch carbon dioxide into the atmosphere with power plants using renewable sources or energy such as wind, water and solar power, or reintroducing nuclear power on a much larger scale than at present.

The transport sector, automobiles especially, faces a heavy cost in “going electric” while households will need to grapple with the cost of clean and green heating and air conditioning. As the IMF has observed, climate change costs will “strain public finances for at least a generation” to come.

A broader definition of climate change costs must include the severe impact it will have on physical infrastructure, health and social services and so on. Adapting basic infrastructure to cope with climate change will add trillions of dollars over time.

China is by far the biggest single source of carbon dioxide emissions nowadays, accounting for 31 percent of total global emissions in 2020 while among the world’s top five largest polluters (China, the US, India, Russia and Japan) were collectively responsible for some 60 percent.

Some argue that countries like China and India should bear the lion’s share of combatting the impact of global warming but the picture looks different when viewed from a total “stock” rather than annual “flow” perspective of emissions over decades of centuries.

While China, for example, nowadays emits the highest levels of CO2 annually it has emitted far less than the United States since the industrial revolution and the task the world faces now is cleaning up the mess accumulated in the atmosphere over the past century or more.

No single country can hope to deal with the problem alone as global warming is no respecter of national borders. A multilateral climate authority is needed with powers to finance and coordinate national climate actions and to access funds on an appropriate scale.

Instead, we’ve seen a series of rather half-hearted initiatives taken at national and international level. Yet, while nations can claim sovereignty in some areas, climate change is not one of them. We all sink or swim together in this regard.

The primary vehicle for coordinating climate actions is what is known as the UNFCC or United Nations Framework Convention on Climate Change introduced in 1992 as a first step toward addressing climate change on a collective basis. Nearly 200 countries have ratified this convention.

Three years after the convention was adopted, these countries agreed to the Kyoto Protocol which “legally binds” developed countries to Carbon emission reduction targets” But there is no body that can sanction any country that breaches what are in any case voluntarily-offered targets.

The climate battle is not, or should not be, just about governments setting targets. It needs to be about economy-wide plans involving governments, state agencies, private corporations, savings and other financial institutions, and preferably at the international level.

Some governments have been influenced by energy lobbies – so called “Big Oil” in particular, although as noted the real villain is “Big Coal” which continues to produce more CO2 than oil in power generation but producers are less easily identifiable in developing countries.

The “greening” movement assured us that if we grew enough trees and stopped cutting down forests all would be well. But as former UK energy minister Lord David Howell says, ”We can talk about greening until we are blue in the face but that won’t solve the problem of overdependence on fossil fuels.”

What will solve the problem – or at least slow down climate change pending the advent of new technologies, is the early closure of CO2-belching power plants. But that will cost money, a lot of money.

Governments globally collect some $17 trillion a year in taxes, according to the OECD but of course, most of that revenue is already spoken for to cover general government expenditures and debt service on government borrowing.

As governments have already borrowed up to the hilt and with interest rates rising further, additional borrowing is not an option to cover climate change costs. Governments can raise taxes but that is hardly a viable option when the global economy is teetering on the brink of recession.

What about private savings and investment? In a recent blog, IMF managing director Kristalina Georgieva suggested that there is “some $210 trillion in financial assets across firms,” or roughly twice the gross domestic product of the entire world.

But a large part of these savings are under the control of asset managers and institutional investors who have preferred to inflate a bubble in so-called ‘tech”stocks rather than focus on long-term investments in climate change.

What about so-called “ESG” (Environment. Social and Governance investment)?  Under ESG,devised by former UN Secretary General Kofi Annan in 2004, some of the world’s biggest companies were urged to corporate Environmental, Social and Governance considerations  into their corporate vision and strategy.

This was a worthy idea but too nebulous to channel funds directly into climate change alleviation. And the 17 Sustainable Development Goals or SDGs announced by the United Nations in 2015 specify climate change mitigation as only one among their number.

The battle against climate change appeared to take on more solid form at the COP 26 climate summit with the launch of what was called the Glasgow Financial Alliance for Net Zero or GFANZ which is co-chaired by former Bank of England governor and now UN Special Envoy for Climate Change Issues Mark Carney.

This private sector-led grouping of more than 450 major firms and private financial institutions from 40 different countries describes itself as a “global coalition of leading financial institutions in the UN’s Race to Zero,”

The race to net zero refers to the fact that some 130 countries have set or are considering a target of reducing greenhouse gas emissions to net zero by 2050.

According to the GFANZ, “Over US$130 trillion of private capital is committed to net zero.   Yet it is unclear whether myriad pension fund investors, insurance company policyholders, mutual fund investors and others whose funds have been “committed” to the climate change fight will acquiesce in such use of their money.

It’s clear that the battle cannot be financed by either public or private finance working independently. The real money is in the private sector and yet the real organizing ability in getting climate projects implemented is in the public sector.

COP27 will need to be much more specific on the issue of who will pay to save the planet and how the rescue can be better organized if the meeting is to have any credibility.

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