The world has an enormous structural problem that’s posing a barrier to real climate action: most of the money is in the Global North, but most of the need is in the Global South. The North has burnt fossil fuels for 300 years, which has produced fabulous wealth. That prosperity, however, has resulted in greenhouse gasses that have heated the planet, and the South has experienced the brunt of the climate effects. If climate justice is to happen, according to Bill McKibben, we will need to mobilize Northern affluence to build a more livable future for all.
An activist, writer, and professor, Bill McKibben helped found 350.org, the first global grassroots climate campaign, which has organized protests on every continent, including Antarctica, for climate action. In a recent New Yorker column, McKibben describes the negotiators’ frustrated dilemmas at COP27 where protesters chanted ahead of US President Joe Biden’s plenary speech to “Pay up, pay up, pay up for loss and damage.”
The tension and anger were palpable.
And why wouldn’t they be? The protesters have experienced firsthand the effects of climate pollution. Water stress and hazards like withering droughts and devastating floods are hitting communities, economies, and ecosystems hard. Rainfall patterns are disrupted, glaciers are disappearing, and key lakes are shrinking. Rising water demand, combined with limited and unpredictable supplies, threatens to aggravate conflict and displacement.
The protesters know that the countries whose pollution caused their problems have enough dollars to repair the damage.
McKibben explains that the “moral argument couldn’t be more straightforward: Americans have produced almost a quarter of the excess carbon in the atmosphere; a quarter of the damage should be on our tab.”
More than a third of the world’s capital is in the US alone, and we have not yet started to pay our share, at least not in any straightforward way, and it seems as if Congress is unlikely to assist survivors of the climate crisis in Africa or Asia in relation to the damage.
At COP27, Denmark and a few other countries pledged about $75 million for climate relief aid. Pakistan’s recent flooding cost about $40 billion.
Is there a more indirect way of accessing the wealth of the North that might be amenable to the power brokers?
Investing in Climate Justice — An Exercise in Nuance
The North’s failure to deliver various COP climate finance commitments of $100 billion per year by 2020 has eroded trust around the globe.
Released just prior to COP27, a research study out of the London School of Economics described how acting on climate is about transforming our economies, particularly our energy systems, through investing in net zero, adaptation, resilience, and natural capital. It’s clear that achieving this transformation will not be easy. The key investment priorities, the study authors say, must encompass transformation of the energy system, response to the growing vulnerability of developing countries to climate change, and restoration of the damage to natural capital and biodiversity.
It requires strong investment, innovation, and the right scale of finance of the appropriate kind and at the correct time. This would require “grants and low interest loans from the governments of developed countries to double from $30 billion today to $60 billion by 2025.”
If the Global North were to spend that “relatively small sum,” McKibben predicts that private investors would likely plow a trillion dollars into developing markets. This approach can seem out of reach — the US Congress refused to approve Biden’s request for $11.4 billion annually for this kind of aid.
McKibben says that much Northern money lies in retirement accounts, which isn’t charitable and won’t be converted to the “loss and damage” of climate change, “no matter how just the claim of the poor nations might be.” He does outline, though, that the trillions of dollars in those funds could provide the financing that the developing world needs for an energy transition. Think solar arrays, wind farms, hydroelectric power plants, and electric vehicles.
These investments can generate lower cost clean energy as a mechanism for climate justice and produce a return for US retirees — if the fund managers are willing to take the risk on companies that lack track records and which could be at the whims of local political and judicial systems. Usually, a pension fund can predict their earnings based on a hundred years of historical returns from utility companies.
It’s not so simple to invest in the Global South and promote climate justice. How can such investments become de-risked? What variables can make pension fund managers feel as comfortable investing in an African solar farm as in a Kansas windmill?
There are already some tools in place for de-risking — but they belong to the multilateral development banks—the World Bank, the Asian Development Bank, the African Development Bank. McKibben says the problem with these organs is that they spread a little bit of public money into a deal so that the hazard largely disappears.
Then again, a call for the IMF to issue half a trillion dollars in special drawing rights or other financial instruments could help boost investment in the Global South and fully integrate climate into their mandates.
Themes about “loss and damage” are a fairly new focus at the annual climate summits; most have pressed the big emitting nations to set ambitious targets for decarbonization. The London School of Economics study relates how the scale of the investments needed over the next 5 years and beyond will require a debt and financing strategy that tackles festering debt difficulties, especially those of poor and vulnerable countries. That could lead to a “major expansion of both domestic and international finance, public and private, concessional and non-concessional.”
COP27 is one more reminder, McKibben notes, “that justice only proceeds, fitfully, through politics.” Rebalancing the world’s wealth even slightly will likely take a political sleight of hand. “These steps will not produce 40 billion dollars when a country like Pakistan floods, at least not anytime soon, nor will they repair the grinding, slow-motion crises—desertification, drought, sea-level rise—that pose some of the worst risks on an overheating planet.”
No, none of the loss and damage financial schemes precisely address the demand that the most vulnerable nations are making: for money to cover their devastating losses and damages.
“Yet our chances for a livable world may depend on it,” he reminds us.
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