Capitalism 2.0 in Sight But Here’s Why We are Not Quite There Yet (3)

–U.K. climate push tainted by overseas development aid cut: former UNFCCC leader

–Climate being added to profit in goal of markets

By Mathew Carr

Dec. 6-8, 2020 — LONDON: Markets have evolved for decades, but the evolution over the next 10 years is looking like it might resemble something more like a revolution.

Britain’s plan to cut emissions by 68% in the four decades to 2030 seems improbably ambitious. Up until now goals have been much-less punchy.

What has made such deep cuts possible for the U.K. has been its higher carbon prices. With its so-called “carbon floor support,” Britain’s government has levied carbon prices that were about double those in the rest of Europe and it’s reaped much more revenue from its climate policy than other European countries — effectively selling the right to pollute.

“The golden key to successful climate policy is to make the finance minister richer, not poorer,” said Yvo de Boer, former executive secretary of the United Nations Framework Convention on Climate Change. So the plan by Britain “is really marking a change or an intended change in direction,” he said by phone on Sunday.

Not only is the top-line target number ambitious, it’s the most gutsy so far of any large country. It’s also tackling some tricky emissions by banning traditional internal-combustion engine cars from 2030.

The EU, Japan, the U.S. and China are not yet quite following, but at least now it’s conceivable they will — and other nations. Selling carbon allowances or taxing emissions can replace the lost taxes from coal, oil and natural gas companies. Fossil fuel subsidies finally become superfluous.

A value-added tax on emissions would be progressive — better in a way than straight carbon prices because they would inflict more financial pain on those doing the most climate damage — richer people in all countries, de Boer contends. That tweaking to economic and market rules to save the climate would get countries closer to capitalism 2.0.

There are several other ways that markets are changing to include saving the climate as a focus. These include:

  • Denmark has stopped giving licences for new oil and natural gas exploration
  • Pension funds are threatening to sell shares, fire board members if company strategies are not adjusted to meet the implied emission-reduction targets of the Paris climate deal
  • Governments are starting to insist on more financial disclosure of company climate risks
  • Central banks are making climate risk part of prudential regulation
  • Countries are insisting on minimum prices for carbon allowances and credits to ensure taxpayers don’t sell the right to pollute too cheaply

But we’re not quite there yet.

The problem for Britain, so far at least, is that it seems to be paying for its ambition by cutting its overseas aid budget, de Boer said.

Last month the nation outlined a temporary 5 billion pound ($6.7 billion) cut in overseas development aid –  from 0.7% of gross national income to 0.5 per cent – as part of the comprehensive spending review. Chancellor Rishi Sunak said it was necessary because the country faces an “economic emergency”,  and at a time of “unprecedented crisis the government must make tough choices,” amid the pandemic, the Telegraph newspaper reported.

“We will return to 0.7% when the fiscal situation allows,” the government said, according to this statement:

While the U.K. doubled its contribution last year to the global Green Climate Fund to 1.4 billion pounds, the erosion in ODA is still a pretty awkward position for a country who’s hosting the world late next year at the delayed UN climate talks in Glasgow.

It leaves something of a bitter taste, de Boer said.

“At the moment it’s a signal from this government ‘we’re willing to be serious at home, we’re willing to engineer a change of direction at home, but to some degree we’re going to do it by cutting spending somewhere else’,” he said.

“One of the major complaints in the climate negotiations is that the industrialised countries are basically not meeting their financial commitments and almost seem to be financing their domestic action at the expense of the needs and problems of developing countries.

“You see time and time again — if there’s, you know, a war, a humanitarian crisis, a domestic crisis, the first pot of money that politicians often tend to look at is the aid budget, so it’s very often the people in developing countries who are most vulnerable who end up paying for the success stories of those in the richer ones.”

The climate talks are still a negotiation. It’s not just Britain with what are potentially hard-ball climate negotiation stances. Look at China’s plans for new coal stations. Look at Brazil burning the Amazon. Look at the U.S. boosting oil and natural gas exports. Everyone still seems to be playing with fire.

So clearly capitalism 2.0 is not quite here. There’s still a glimmer of hope.

Seeing the U.K. (and other richer nations) ultimately adopt a 75% target would get the world closer still, de Boer said.

The U.K. — and indeed the EU — are not ruling out more ambition if there’s international carbon markets under Article 6 of the Paris climate deal, where 10 times the emissions can be cut in poorer nations than in richer ones for the same money.

This is a crucial misunderstood scientific fact of climate action. The SPEED of cuts is crucial. The faster the better, because the GHG stays around in the atmosphere potentially for hundreds of years. Every time emissions are cut expensively in a rich country, that’s arguably a wasted opportunity to cut a much larger volume of emissions for the same cost in a poorer country — that slows the climate fight.

De Boer explains:

“Probably the only thing on our planet that’s not racist is the atmosphere. And if you have the choice between reducing a ton of emissions in Mali, for $5 a ton, or reducing them in the U.K. for $50, then it would make sense to go for where you get the biggest bang for your buck.”

Because it is difficult to explain to voters the logic of spending overseas, a compromise where there are significant cuts at home with a top up of action in other countries — where it’s most cost effective — that’s “the kind of shift that you need to see,” he said.

Overall, all countries and every person needs to face up to the damage being done, he said.

“The fact that you’re beginning to price pollution, or beginning to price environmental damage into the cost of products, I think is good because it confronts people with the consequences of the choices that they make.

Henley, England

“The sort of major bee in my bonnet is that it’s great to sort of correct the emissions of the past. And to focus on what I call the economies of the past which is industrialised countries.

“But don’t forget about the economies of the future. The major population growth and economic growth in the future is going to happen in developing countries. And those countries need financial and technological support in order to choose the right path in taking their economies forward, rather than the wrong one and having to correct mistakes expensively later on in time.”

(Updates Monday morning with list of some of the other ways capitalism is changing, updates overseas aid section, adds de Boer comments, updates with Green Climate Fund contribution Monday afternoon, earlier version corrected period of target)


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