How to fund Loss & Damage

As you probably know, the big win at the last climate jamboree (COP27 in Egypt) was the establishment of the Loss & Damage facility. And a big win it was! The question, now, is how we’re going to provision that facility, how we’re going to fund the fund.

The principle of this website is transitional justice — how to provide the resources needed to actually achieve the climate transition. In the next year, we’ll have a lot to say about this, and about Loss & Damage finance in particular, but today, as I dig out my email, I just want to quote a particularly pithy summary of the road forward, one written by the inestimable Lidy Nacpil, together with Thuli Makama, both of whom hail from the Asian Peoples’ Movement on Debt and Development. It’s called Rich nations can afford to pay their fair share to fix global crises and here’s their summary of the menu, as it stood just after the COP.

The first [option] 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.

Before and after the COP

Debates — honest and respectful, but sometimes sharp debates — are a sign of healthy political movement, which among much else, must avoid groupthink. I’ve been trying to do my part, as you might notice from these two webinars:

The first — a Global Just Transitions webinar organized by the Institute for Policy Studies — was What Climate Debt Does the North Owe the South? It took place before COP27, and featured (in addition to yours truly) Meena Raman, president of Friends of the Earth Malaysia and head of programs at Third World Network, and Alberto Acosta, Ecuador’s former minister of energy and mining and one of the principle drivers behind Ecuador’s storied attempt to raise international funds to keep the oil beneath the Yasuni rainforest in the ground. IPS’s John Feffer ably summarized the discussion here.

The second — How Can COP be Effective? — was organized by Jeremy Lent at the Deep Transition Network. It featured me, of course, as well as Osprey Orielle Lake, the Founder and Executive Director of WECAN, the Women’s Earth & Climate Action Network, International, and scientist and filmmaker Phoebe Barnard. Phoebe was unfortunately on a train with bad WiFi, but Osprey and I managed, between the two of us, to do a passable job of answering Lent’s extremely pressing question.

Threading the Needle at COP27

Almost nothing – but something real – changed at this year’s climate conference

There is something in the modern radical mind that wants the climate negotiations to fail. Such a failure, after all, would seem to prove that this wretched system cannot be reformed, that only a revolutionary break can re-open the human future.

COP27, the climate conference in Sharm El Sheik in Egypt, was not, however, a failure. I say this despite the fact that my inbox contains, among much else, an alert from an international organization I generally support (and will not name) that tells me that “For the 27th time in its history, COP, the United Nations Convention on Climate Change, has failed. The rapid degradation of our planet by our industrial economy will not be held in check.”

Alas, this email’s date stamp, November 18, places it two days before COP27 ended. During those two days, the rich countries that had blocked the establishment of the Loss and Damage fund folded under immense political pressure, thus allowing COP27 to finally create the fund.

The United States, the greatest of the miscreants, was the last to stand down. By some reports, it only did so after a last-minute threat by European negotiators to abandon the talks. But despite this win, the endless U.S. stalling did immense damage. In particular, it allowed the Egyptian presidency, no friend of humanity and nature, to play out an end-game gambit in which, finally, the core mitigation text—which is far too weak—couldn’t be challenged without putting the new fund at risk.

This was a failure, no doubt about it. But it was not a systemic failure. It wasn’t the fault of “the COP”—as in “COP27 is a COP out,” one of the least inspired of the recent headlines—unless this accusation extends to the UN system itself, which condemns the climate talks to consensus decision-making. This might be fair enough, save for one thing – blaming the UN lets the governments themselves off the hook, and this will not do, because the governments could yet change the rules.

Still, the Loss and Damage fund is a very big deal, or will be if we manage to provision it – to fund it adequately. As Mohamed Adow, the executive director of Power Shift Africa, put it, “What we have is an empty bucket. Now we need to fill it so that support can flow to the most impacted people who are suffering right now at the hands of the climate crisis.”

This is exactly right, and not just because a great deal of loss and damage finance is needed. So too is a great deal of mitigation finance. And adaptation finance. And just transition finance. But after COP27’s loss and damage finance battle, something very large has shifted. Back in the old days, when it was still possible to honestly imagine that mitigation alone would be sufficient, it was also possible to argue that the redirection of private capital flows would more or less suffice. But those days are over. Today, no one honestly believes that a meaningful flow of loss and damage finance will come through private channels, and this realization spills over to the transition portfolio as a whole.

The decision to create the loss and damage fund has thus queued up the real financing battle, in which international public finance takes center stage. Further, it did this even while it pushed the linked battle to phase out fossil fuels to a qualitatively new level. That battle was lost at COP27, but this was just an initial skirmish. Indeed, at COP27, the government of India, which will soon hold the G20 Presidency, came out, again and unambiguously, for the “phase down” (not “out”) of all fossil fuels, not just coal. The politics here are complex and fraught, and they promise to remain so, but this was unambiguously good news. The old days in which all major G77 politicians could be expected to reflexively argue that fossil energy is essential to development are, it seems, over.

Continue reading “Threading the Needle at COP27”

The Imperative of Cooperation

This year’s Civil Society Equity ReviewThe Imperative of Cooperation: Steps Toward and Equitable Response to the Climate Crisis — builds on previous years’ elaborations of fair shares and its many meanings and implications, elaborations that have focused on emission reductions, adaptation, loss & damage, and fossil fuel phase out.

Unlike previous reports, this year’s is a bit of a compendium. It focuses on international cooperation as such, discussing and surveying key areas where international cooperation is both possible and necessary. In so doing, it presents opportunities for international cooperation that very explicitly apply to all countries and continents, though it also pauses to recognize how the particular situation in Africa – the host of COP27 – crystalizes some of the key inequities of the malfunctioning world order.

This report outlines areas of potential international cooperation across four broad areas:

  • International Cooperation under the UNFCCC
  • International Cooperation through initiatives and multilateral platforms to address financing, renewable energy and fossil fuel phase-out
  • International Cooperation to manage energy price instability and a fair share phase out
  • International Cooperation Towards Changing the Rules and Architecture of Global Trade, Investment, Finance and Technology

Needs-based Assessment — A Negotiator’s Brief

Just before COP27, the Equity Working Group of the Independent Global Stocktake organized a workshop entitled “Enabling a Needs-Based and Equitable Climate Regime”. It was extremely illuminating, because — as it happens — needs based assessment is fated to be key to any international effort sharing system that is scoped to include more than mitigation alone.

Consider adaptation need, or loss and damage need, or just transition need in general. All countries have such needs, and many countries require support if they are to have any real chance of meeting them, and thus successfully rising to the climate challenge. But how can such support be assessed, relative to the scope and nature of these needs? And how can this be done in any sort of meaningful way?

The challenge here is fundamental to any true global stocktake. For this reason, we distilled the takeaways from the needs-based assessment workshop into this Negotiator’s Brief, which was widely distributed, at COP27, among developing country negotiators. It was, by all accounts, quite helpful.

Fair Shares – Lessons from Practice, Thoughts on Strategy

The climate fair shares idea is no longer novel. But as the planetary crisis deepens, its profile is changing. Humanity is facing a civilizational emergency – a polycrisis with both climate and injustice at its core – and we need big ideas that can help guide us out of it.

This discussion paper, which was prepared by the Climate Equity Reference Project for the Climate Action Network International, is focused on one such idea: climate fair shares. Its purpose is to support analysis and campaigns for equitable climate action, including – quite explicitly – greatly increased international climate finance flows.

Note here a political premise — the equity challenge cannot be set aside while we concentrate on “implementation.” To be absolutely clear — we are in trouble, but a rapid global climate transition can still be achieved. We have (all) the money and (most of) the technology we need. But it is hard to see how any sufficiently rapid transition will be possible unless the benefits and promises and also the unavoidable pain and disruption are shared amongst the people of this world in a way that is widely accepted as being fair, or at least fair enough. We can not follow, yet again, the all too often repeated pattern in which most of the benefits are captured by those who are already wealthy and powerful, while most of the pain and suffering is born by those already marginalized and oppressed. 

Some highlights:

  • Lessons and Thoughts contains a careful executive summary, which is good, because the paper as a whole is pretty long.  By today’s standards. 
  • It contains a tidy chapter on planetary inequality – which is what you get when you have a world of nations, some of them wealthy and some of them not, and all of them internally stratified between rich and poor.
  • It contains a brief history of the equity debate within the international Climate Action Network, which is at this point a global network of more than 1,800 civil society organizations in over 130 countries.
  • It reviews the various fair shares projects that have been done over the past few years — in Norway, Canada, the US, the UK, Quebec, New Zealand, France and South Africa.  The lessons are both varied and interesting.
  • It contains a brief — if somewhat technical — explanation of why, when thinking about national fair shares in an emergency climate mobilization, it might help to lean into the Climate Equity Reference framework.  As opposed to some of the alternatives.
  • It lays out some preliminary — but not entirely preliminary — thoughts about “climate realism”, which is considerably different from the traditional variety.  Given the future we’re looking at, as we shoot far beyond the boundaries of a safe climate system, this conversation needs real attention.
  • It offers some advice on framing the financial costs of stabilizing the climate system, and why these costs – though certainly denominated in trillions – might be far more tractable than they appear.  Particularly given how much money we waste today, on the militaries and, of course, on the rich.
  • Finally, it asks a group of big strategic questions, and invites reflections on difficult equity challenges that go beyond even climate fair shares.

Tom Athanasiou, for the Climate Equity Reference Project.

Adam Tooze: “There Is a Fix for Climate Change. But Can We Afford It?”

In this interview from Global Reboot, the Foreign Policy podcast, its editor in chief Ravi Agrawal asks the economic historian & critic & polymath & general know-it-all Adam Tooze some key questions and then lets him run, which is basically all you can do with Tooze.

The key topics here are:

1) the financing demands of the global climate transition, which for the purposes of this discussion limited to mitigation. Hint: 2 to 4 trillion dollars a years in additional investment, about half of which is “inefficient”, which is to say that it is insufficiently profitable or risky or otherwise unwise to count on, at least in a business-as-usual world.

2) the political conditions under which this mitigation finance might be mobilized, and why, in Tooze’s view there are only two ways it might actually happen. The first is something like a global green new deal; the second is a massive public / private “derisking” enterprise of the kind that Blackrock’s Larry Fink dreams about.

The first, of course, is ruled out by the realism of the day, while the second would stink to high heaven.

In any case, this is short and focused — an interesting piece of the puzzle.