How to Make Rich Countries Pay For Their Climate Impact
Today, the front line of the climate crisis lies between the Tropics of Cancer and Capricorn, where 40% of the world lives. This belt around the equator is where temperatures will reach the most intolerable, and sea levels will rise the most. It’s also home to those who have contributed the least to the greenhouse gases that cause global warming.
On a per capita basis, the U.S. contribution to this historical stock is more than 18 times that of India, for example. And while wealthy nations like the U.S. ask today’s big developing-country emitters like India to reduce emissions now, those developing countries rightfully demand that their rich neighbors do more, given the wealth they’ve gained from years of burning fossil fuels unchecked. The result is a finger-pointing contest that leaves the world neither doing enough now to deal with the realities of climate change, nor planning to do so in the future.
The Bridgetown Initiative, developed with the help of international academics and civil society, gathered in Bridgetown, Barbados, in July of this year to seek reconciliation by recasting the problem and solution around global needs and opportunities, not nations. One critical initiative is on climate loss and damage.
Those on the front line cannot insure themselves against the climate crisis. They face large and certain losses—increasing in size and frequency—that are clearly correlated to the actions of others. Commercial insurance requires risks to be quite different: uncorrelated, uncertain, and unrising. If those on the front line were to insure themselves it would, essentially, be “victim pays”—in installments over the coming years.
Bridgetown calls for a new global mechanism where there is an automatic release of international cash and material support for reconstruction wherever an independently verified, significant climate disaster occurs, or when slow-onset disaster happens. This support cannot come in the form of new debt, as climate-vulnerable countries already struggle with high debt because of previous climate costs.
Read more: The World Can’t Afford World Bank Inaction on Climate Change
We also need this grant mechanism to be funded in a way that does not draw too heavily on current budgets and does not exacerbate today’s cost-of-living crisis. One opportunity lies in the fact that while the Russian invasion of Ukraine has elevated fossil-fuel prices by 30% to 40% over pre-COVID levels, it is unlikely that these levels will be sustained, whatever the short-term manipulations of supply. This is especially true if we continue to transition out of fossil fuels and reduce the energy intensification of GDP. Nations could put a levy on the production of fossil fuels that could start at zero and rise by 1 percentage point for every 10-percentage-point decline in fossil-fuel prices from today’s levels. The revenues would go to a fund, modeled on the International Oil Pollution Compensation Funds, that could be accessed immediately by any country experiencing an independently verified climate event that has cost more than, say, 5% of GDP.
The annual conference on the climate crisis, COP27, must address loss and damage. Otherwise, the climate crisis will quickly become a debt crisis as climate-vulnerable countries add more debt to pay for increasingly severe climate disasters.
In some Caribbean countries, over 50% of the increase in debt in recent decades comes from costs related to natural disasters. Increasing debt means less to spend on public health, welfare, and education, so this would quickly become a development crisis, with international spillovers on conflict, migration, and even pandemics. We live apart and invisible from one another, but also on top of each other.
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