Rich nations can afford to pay their fair share to fix global crises
Women are preparing food beside their damaged house in the aftermath of Cyclone Idai, in the village of Cheia, which means "Flood" in Portuguese, near Beira, Mozambique April 4, 2019. REUTERS/Zohra Bensemra
COP27 saw Global South social movements win a long-sought promise for a climate ‘loss and damage’ fund, part of wider proposals for reparations now gaining ground
Lidy Nacpil is coordinator of the Asian Peoples’ Movement on Debt and Development (APMDD) and Thuli Makama is Oil Change International’s Africa Director.
Will rich countries pay international climate reparations? Vanuatu first asked this question in 1991, and by 2013 the U.S. response was still a firm no. As State Department Climate Envoy Todd Stern put it, “The fiscal reality of the United States and other developed countries is not going to allow it.”
Throughout most of 2022, Stern’s successor John Kerry had a nearly identical response, saying, “there is not enough money in any country in the world to actually solve climate change. It takes trillions and no government that I know of is ready to put trillions into this." His counterparts in other wealthy governments held similar positions.
But the COP27 climate summit in November forced a change of script. Channelling frustration with the uneven impacts of the last few years of the pandemic, climate chaos and the energy crisis, Global South social movements made this the summit’s headline issue.
This helped cement unprecedented unity among the developing-country negotiating bloc and forced wealthy countries to agree to establish a ‘loss and damage’ fund to address escalating climate impacts. It was an important breakthrough in an otherwise disappointing summit, in which language on a just fossil-fuel phase out - notably the most critical measure to limit the amount of loss and damage - was excluded from the final text.
There is still a struggle ahead to ensure that rich nations fill this new fund with anything near their fair share of what is needed to respond to climate disasters. What is not in question is whether they can afford to.
Fossil fuel wealth
Wealthy governments control international financial systems and their domestic economies. We saw them make trillions of dollars in fiscal space available for bank bailouts in 2008 and for COVID-19 responses since 2020. And each year, they find trillions for militaries and fossil fuel subsidies. It is in this context that proposals to redistribute significant public funding to address overlapping global crises are gaining momentum.
The first is making fossil fuel companies pay. While many households were pushed into poverty this year, oil and gas companies made record profits and governments continued to subsidise them. Ending fossil fuel subsidies would raise at least $600 billion a year, and a 10% tax hike on oil and gas production about $400 billion in 2022. Along these lines, the EU and UK among others have introduced windfall taxes on oil and gas profits, and U.N. Secretary-General António Guterres and small island governments are calling for part of these to be levied toward the loss and damage fund.
There is also momentum to shift a particularly influential form of fossil subsidy - international public finance - towards renewable energy instead. At COP26, 39 countries and institutions promised to end their $28 billion a year in international finance for fossil fuels by the end of 2022. While Germany, Canada, the U.S. and Italy have yet to meet this pending deadline, a growing group of countries has.
Second, a small tax on extreme wealth would raise $2.5 trillion a year, and related proposals to crack down on tax dodging would significantly bolster this. Because the world’s richest 1% have caused 23% of greenhouse gas emissions growth since 1990, these measures are also needed to reach climate targets. In a push that mirrored the loss and damage win, last week African countries secured a key step towards these reforms by passing a resolution for the U.N. to hold its own intergovernmental talks on tax rules rather than them remaining the sole domain of the OECD.
Calls to cancel Global South countries’ sovereign debts - incurred through our neo-colonial global financial system - predate the climate crisis but are intensifying with it. Campaigners brought these asks to COP27, pointing out that low-income countries are forced to pay wealthier countries the initial $100 billion a year they have been promised in climate finance many times over in debt service payments.
The economic volatility of the last few years has compounded debts in many countries, preventing public spending on basic needs, let alone climate action. In response, some governments and agencies are finally making serious debt proposals like cancelling $100 billion a year for the next decade.
Finally, Barbados Prime Minister Mia Mottley’s popular Bridgetown Agenda to tackle debt and climate has components of many these proposals, as well as an ask for the International Monetary Fund to inject at least $650-billion worth of reserve assets into struggling economies annually through Special Drawing Rights.
Together, these modest proposals add up to well over $3.7 trillion a year. More ambitious versions, closer to the scale of the Global North’s ongoing and historical debts to the rest of the world, could free up even more. We have always had the money for a liveable future where no one must choose between heating and eating, or transport and shelter - what may finally be arriving is the political impetus for the governments most responsible for today’s global crises to pay up.
Any views expressed in this opinion piece are those of the author and not of Context or the Thomson Reuters Foundation.
- Extreme weather
- Climate finance
- Climate policy
- Climate inequality
- Loss and damage
- Climate solutions
Latest on Context