The climate transition will cost trillions of dollars. The developing world, locked into a neocolonial relationship of debt and dependency, doesn’t have the resources. So, where will the money come from to help the Global South leapfrog into a post-fossil-fuel era?
“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. “People around the world want to push for a windfall profit tax for both tactical and strategic reasons,” he continues. “And I wouldn’t argue with them!”
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,” he 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. “This is not as crazy an idea as you might think, especially if you follow Thomas Picketty and his colleagues at the World Inequality Lab. They argue that more than half of inequality on the planet is now within countries rather than between countries. So, 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?”
Assessing individuals rather than countries would still conform to a fair share approach by geography. “About 6 percent of luxury emissions come from China, so it would have significant fair share,” he explains. “The United States, with 57 percent of the global luxury emissions, would have a far larger share, about ten times the size of China’s.”
He cites the work of Olufemi O Taiwo and his recent book on reparations: “Taiwo says that we need a constructive approach to reparations or to climate debt, a forward-looking, world-building approach that supports mobilization and cooperation. Such an approach cannot simply reference the climate debt that the north owes the south, huge though that is. It must also spotlight the responsibility to pay of rich people wherever they live in whatever countries.”
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. It’s complicated how it will be done. But it’s extremely important that the luxury consumption of the super-rich be made a big issue on this planet. And there’s no way of doing that except by taxing it. Such a tax will not in and of itself solve the problem. But to create a sense that a just world is being built, there has to be a sense that the rich are being reined in.”
In 2020, the world subsidized fossil fuels to the tune of nearly $6 trillion (in both direct and implicit subsidies). Of that figure, the G7 countries shell out around $88 billion a year in direct subsidies, which they recently pledged to phase out by 2025. “This is a wasted resource,” Meena Raman points out, “which could be redirected to the developing world to address both the climate crisis and the development crisis.”
A second mechanism for raising money is, as mentioned before, taxes. In addition to a tax on luxury emissions, a tax on financial transactions (also known as a Tobin tax) has been long discussed as a generator of funds to address climate change. Such a tax has been introduced in a watered-down version in the European Union, but a stronger global version could help finance a just global transition, as Albert Acosta has suggested. He also recommends going after tax havens, which have cost governments around $500-600 billion annually in lost revenue (with poorer countries losing around $200 billion of that amount).
A third mechanism would be for the international community to pay countries to keep their fossil fuels in the ground. Acosta, who created an initiative for Ecuador to raise money internationally to keep oil beneath the Yasuni rainforest preserve, believes that “rich countries have to pay more to preserve the equilibrium of the planet. We have to keep underground two-thirds of all fossil fuel reserves, whether oil, gas, or coal. If we don’t, global temperatures will increase past the 1.5-degree limit.”
Another mechanism for redirecting resources southward would be the “special drawing rights” or SDRs that the IMF issues. During the pandemic, when the global economy teetered on the precipice, the IMF issued $650 billion in SDRs. “These went to rich countries,” Meena Raman reports. “The IMF can do this, but it’s not doing it for the developing world.”
The prime minister of Barbados, Mia Mottley, is attempting to change this situation. She has called for redirecting $500 billion of these SDRs to the developing world annually for decarbonization. “We in civil society have to push for this as well,” Raman urges.
At the same time, any number of “false solutions” to the climate crisis have been proposed. “Beware of green colonialism,” Alberto Acosta warns. “Beware of carbon markets and the mercantilization of human rights.”
Through carbon offsets, as Meena Raman explains, “you can continue to emit a ton of carbon if you sequester another ton through planting trees.” Ultimately, the polluting enterprises continue to operate as before. No net decarbonization takes place, and the same economic and energy system remains in place.
“Elites in the north, in cooperation with corporations, are now looking at geoengineering, the removal of emissions from the atmosphere through technical ‘solutions,’” she continues. “How do we veer away from false solutions to protect systems that are still intact? The last frontiers in indigenous communities are now under threat of land grabs. Free trade agreements allow corporations to sue governments for doing the right thing through investor-state dispute settlement mechanisms.”
On the other hand, some leaders are coming to the fore, like Gustavo Petro and Francia Marquez in Colombia. “These new leaders are talking about new development models, post-extraction and post-fossil-fuel solutions,” she adds. “But it’s not easy having to fight to dismantle structures and proposing alternatives like canceling the debt.”
To address climate change effectively, countries have to work together across any number of divides: north and south, east and west, rich and poor, and those rich in fossil fuels and those rich in sustainable energy sources. That is the challenge facing the annual Conferences of the Parties or COPs, the latest of which just took place in November 2022 in Sharm al-Sheikh in Egypt.
Excerpted: ‘Rich Countries Have an Historic Responsibility to Help Global South Transition to Post-Fossil-Fuel Future’.