Opinion by Mathew Carr
May 13-26, 2023 — London — The US debate on its debt ceiling can be resolved via a grown-up debate between Democrats and Republicans on climate-finance needs — and not just domestic ones.
The money required should not only be about taxpayers, but tweaking America’s market rules and tax system to favor climate protection by the private sector. This could help stir better market rules globally and build on efforts already underway in many other countries.
Falling fossil-fuel prices offer this opportunity, because carbon pricing won’t hurt so much if it’s replacing the high cost of oil, natural gas and coal.
Americans will be incentivized to save energy and switch to clean alternatives. The money from selling carbon allowances will help balance the US budget and provide finance at home and overseas.
Most countries could save the climate by invoking this IMF plan and by making markets think long term:
By pricing GHG such as carbon dioxide emissions — instead of giving the right to pollute away for free — the US would raise $630 billion a year at current levels and at $100 a metric ton (about the same price as in Europe).
But fossil fuel prices have come back down and the IMF /CarrZee plan is not being put into place.
This conservative news arm seems to think laying off government workers would be a better way to go:
“Non-essential federal workers need to be furloughed. There were about 2.9 million non-military federal government employees as of April. Past government shutdowns have proven that many federal government employees are indeed non-essential. Assuming 1 million of them are non-essential, at an average salary and benefits of $100,000 per year, that’s a $100 billion annual savings.”
Carbon pricing is the much better idea not just because it raises so much money. It’s because it encourages needed behavior change.
And it can be market based, which conservative voters should like. It also has a built-in sunset clause — saving the climate.
The Republicans, who control the lower house, could claim credit for a clever compromise.
Yet there are other great ideas out there, as well, that would not necessarily hurt voting American taxpayers. One view from the Democrats’ side:
The Financial Times reports Monday that a breakthrough is on the cards.
See this wrangling:
The real call on US climate money is international, because its historical emissions mean it’s most to blame for the climate crisis, even though it has only 4% of the world’s population (and especially when you take into account the emissions from goods made in China and other nations and exported to America).
The US, following President Joe Biden’s recent policy wins, has reaffirmed its commitment to global climate efforts, though it’s not doing enough to seal a G20 climate deal because it’s stoking geopolitical tension.
The nation has taken significant steps towards transitioning to cleaner energy sources and supporting climate resilience initiatives. And it already is expected to play a pivotal role in contributing to the UN climate loss and damage fund, reflecting its renewed dedication to combating climate change.
That fund is meant to be completed, or almost completed, this year.
Other Major Contributors to the UN Climate Loss and Damage Fund
The global community has long recognized the urgent need to address the devastating impacts of climate change. The new fund aims to support developing countries that are disproportionately affected by climate-related disasters, such as extreme weather events and rising sea levels. While the contributions to the fund will vary among nations, several major players have emerged as the primary financial supporters.
Recent developments have shed light on the nations that are poised to make the most substantial monetary contributions. These offerings will play a crucial role in providing much-needed assistance to vulnerable countries grappling with the consequences of climate change. Linked to changes in rules governing multilateral institutions including the World Bank and the IMF, the UN fund could be crucial.
Other expected contributors:
- European Union (EU): The European Union, comprising 27 member states, has been at the forefront of climate action. Recognizing the urgency of the situation, the EU has committed to being a significant financial contributor to the Climate Loss and Damage Fund. By leveraging its economic strength and collective resources, the EU is expected to allocate a substantial portion of its climate funding towards supporting the fund’s initiatives.
- Japan – the current leader of the G7: As a technologically advanced nation, Japan has consistently demonstrated its commitment to environmental sustainability. Acknowledging the severity of climate impacts, Japan has pledged to contribute substantial funding to the UN Climate Loss and Damage Fund. Given its robust economy and technological expertise, Japan aims to support climate-resilient infrastructure projects and promote capacity-building efforts in developing countries.
- Germany: Germany, a pioneer in renewable energy and climate policy, has emerged as a key player in addressing climate change globally. The nation has committed significant financial resources to support vulnerable countries through the Climate Loss and Damage Fund. By leveraging its expertise in renewable energy and sustainable development, Germany seeks to bolster climate resilience efforts worldwide.
- The theory of the fund is about making those who have caused the climate crisis pay up to those suffering most. China, currently the biggest emitter by far, will in theory contribute to the loss and damage fund, yet probably only if control of the fund is quite democratic on a global basis (if decision making is linked to the population represented by those voting rather than those funding/the contribution level). The US still seems focussed on demonising China rather than collaborating with it. That could change at any time. The world seems to be splitting between rich and emerging countries rather than coming together, and at climate talks at the end of last year the loss and damage element was particularly fraught. A vague deal was struck only after this:
India, the biggest country by population that’s overseeing G20 talks, may not contribute that much financially to the loss and damage fund because of its low per-capita emissions currently and its modest contribution historically. But it could act as a dealmaker. As the devastating consequences of climate change continue to unfold, the need for robust financial support becomes increasingly apparent.
Developed countries seem to recognize the urgency of addressing climate-related challenges and are committed to supporting vulnerable nations in their efforts to adapt and mitigate climate change impacts, but their actions don’t always reflect their words. This week’s G7 talks might provide more action, or not.
By pooling their resources, expertise, and financial backing, all nations should pave the way for a more sustainable and resilient future, fostering international cooperation in the face of our shared climate crisis.
With clever climate negotiations internally, the US can make its debt-ceiling talks boost that global goal.
(Updates with Senate move, more global context; FT, more to come)
Loss and damage. Some possible mechanics.
Rocky Mountain Institute Chart (slightly dated)
Source: WEF/RMI, Sept. 2022 article here.
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