Yves here. All this talk of financial gimmickry to help reduce or reverse greenhouse gas emissions is rentierism (remember carbon trading?!?!) and/or refusing to provide for public funding and accountability.
And that’s before getting to Bitcoin and that private equity and hedge fund principals, and other top asset manager see traveling “private class” as a matter of right.
By Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development. Originally published at Jomo’s website
Finance has increased, not reduced, greenhouse gas (GHG) emissions. Meanwhile, funding for mitigation, and especially adaptation, is grossly inadequate, with little for climate losses and damages.
Global Warming Accelerating
Rich countries are mainly responsible for the fast-worsening global warming as developing nations suffer more of its adverse effects. Worse, they are much more financially constrained, e.g., due to the higher costs of and poorer access to credit.
Before the 2009 UN Climate Change Conference of Parties (CoP) in Copenhagen, rich countries promised to provide $100 billion yearly to developing nations until 2020 for climate finance, after which such assistance would increase.
But the Inter-Governmental Panel on Climate Change (IPCC) found their promise well short of needs. It also estimated total climate finance – from both public and private sources – at only $640 billion, i.e., averaging about $60 billion yearly.
Adaptation costs until 2030 have been assessed at up to $411 billion annually, with most yearly estimates exceeding $100 billion! But even this does not cover financial losses and damages due to climate change, which have barely been funded.
Climate Finance Pathetic
Official estimates claim about $80 billion was mobilized in 2020, the most ever, but still well short of rich nations’ commitments. A significant share came from private finance plus a third via multilateral financial institutions. But these estimates – especially for private finance – are widely seen as grossly exaggerated.
Commitments by rich countries to the IMF’s Resilience and Sustainability Trust Fund – to provide climate finance to a few poor countries under very restrictive conditions – have been modest despite much fanfare and rhetoric.
Bilateral official transfers during 2013-19 were under $18 billion annually, averaging between a quarter to a third of all climate finance delivered. Rich country governments have since spent several trillions on the pandemic and the Ukraine war!
Rich nations’ climate finance proposals are mainly about more loans, not grants. But more government borrowings have already worsened the climate and debt crises. Clearly, more developing country debt cannot be both problem and solution.
More concessional climate finance would not cost much as rich nations have about $400 billion of special drawing rights (SDRs) from the International Monetary Fund (IMF) – virtually ‘free’ foreign exchange reserve assets – which they hardly use.
Fossil Fuels Still Subsidized
Very limited non-concessional climate finance contrasts sharply with rich nations’ fossil fuel subsidies. Their governments have long enabled such energy generation while insisting poor countries cut GHG emissions.
The actual extent of such subsidies has been obscured by prevailing discourses, especially over statistics. The Organization for Economic Cooperation and Development (OECD) and International Energy Agency (IEA) measure of government support for fossil fuels only considers direct budget transfers and subsidies other than tax breaks.
The duo found 52 developed and ‘emerging’ country governments accounted for 90% of world fossil fuel energy supply. Their total subsidies averaged $555 billion annually during 2017-19, i.e., before the pandemic.
But this greatly understates actual government fossil fuel subsidies. IMF research recognizing implicit subsidies – including environmental costs and lost consumption taxes – finds much higher subsidies than thus acknowledged.
The IMF study estimated world fossil fuel subsidies in 2020 at $5.9 trillion – more than ten times the OECD-IEA estimate, with implicit subsidies accounting for 92% of the total!
China provided the most, followed by the US, Russia, India and the European Union. Total US fossil fuel subsidies in 2020 – mostly implicit – came to $662 billion, while the Biden administration’s climate finance commitment came to only $5.7 billion!
More recent government interventions continue to skew market incentives to favour – rather than limit – fossil fuels. Hence, private finance has mainly gone to fossil fuel energy investments, despite much rhetoric about greening finance.
Private Finance Problem, Not Solution
Better data on fuel finance – by source, destination and power generation capacity – are essential. But lack of reliable, comprehensive and transparent data – on cross-border, particularly private financial flows for fossil fuels – prevents better analysis and policy.
The UK hosts of CoP26 in Glasgow in late 2021 pledged to end coal burning for energy generation. But less than half a year later, European and other countries sanctioning Russian gas exports were pursuing the opposite.
Most foreign financing for coal comes from rich nations’ commercial banks and institutional investors. Fourteen of the top 15 lenders to new coal investments worldwide were from wealthy economies.
The main institutional investors in fossil fuel company stocks and bonds are also from such nations, with the top three – BlackRock, Vanguard, and Capital Group – all US-based.
GHG emissions by major transnational corporations – including supposedly green companies – are considerable because of such fossil fuel energy. Emissions generated by these investments exceeded all others.
Address Policy Reversals
The Ukraine war has been used by many governments to abandon their already modest and inadequate climate promises. And instead of using the oil price spike to accelerate the transition away from fossil fuels, many governments have been subsidizing domestic energy prices.
Hence, the Global Green New Deal (GGND) – proposed by the UN during the 2008 global financial crisis (GFC) – is even more relevant now. The GGND urged a strong, green, equitable and inclusive economic recovery after the GFC.
Taking account of what has happened in the interim is also essential to achieve the needed ‘big push’ for renewable energy to create the conditions for sustainable development for all.
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“More recent government interventions continue to skew market incentives to favour – rather than limit – fossil fuels. Hence, private finance has mainly gone to fossil fuel energy investments, despite much rhetoric about greening finance.”
Yes, it seems to be a whole industry in itself: Greenwash PR
Speaking of war/military and emissions. The US military machine alone produces more pollution than entire countries. It looks like “defense” forces are not bound by climate agreements or any effort to reduce toxic emissions. It’s not a good look to force everyone to buy a new EV, or stop flying when the military gets a free ride. And the DoD budgets, as well as military aid, and extra military expenditures just keep rising.
https://www.reuters.com/business/environment/worlds-war-greenhouse-gas-emissions-has-military-blind-spot-2023-07-10/
In addition to the toxic sites all around the country and the world, the bombing campaigns in SE Asia, Serbia, Iraq, Libya, Afghanistan, Syria, Yemen and Gaza must have contributed greatly to the destruction, emissions and toxification of the environment.
It looks like it will take massive transformations in our legal/political/economic/finance structures to genuinely ameliorate the toxic status-quo
The models used to project climate change are highly inaccurate and biased towards sensational projections.
Do you think climate change researchers want to generate results that would put them out of work, i.e. nothing to see folks?
Steve Koonin’s “Unsettled” (2022) is very much worth reading. Koonin is a physics professor, former president of Caltech, and Obama DOE appointee.
Reducing pollution and increasing efficiency are good things. Financial flim flams and expensive regulations that produce no real results are not.
Hmm. If you’re intent on providing anecdata on Why Don’t Americans Trust Scientists? be my guest. I truly wish that climate change is scam. There’s probably more than a few Canadians who would venture it’s not. Gotta point out that it doesn’t need to be a scam to produce “flim flam” financial profit rockets.
I’m more concerned with draconian legislation that allows the rich to buy their way out leaving the unwashed to bear the consequences.
Koonin is Caltech physics professor and Obama DOE appointee. Is Obama in on the plot to obfuscate climate change science?
Physics is the most demanding academic discipline, and Koonin has made it to the top. He’s not an idiot.
Have you noticed that the doom and gloom predictions being made since the 90’s keep get postponed? That’s because the models bias towards over-reaction. The models are based on hundreds of submodels, each of which can have very serious problems.
Koonin explains them in his book. We could do a lot more good for the earth by thinking in terms of pollution reduction and efficiency improvement rather than CO2 levels, and no, they’re not the same thing.
This is an interview with Koonin that covers the topic extensively: https://www.youtube.com/watch?v=l90FpjPGLBE&t=282s
“The models are inaccurate” and the idea the climate researches are making billion on research funding are both inaccurate. Really, just do a search on “Steve Koonin’s “Unsettled” (2022)” and checkout the rotten reviews. “Strawmen” was the word used to describe his arguments. And from 2004 to 2009, Koonin was employed by BP as the oil and gas company’s Chief Scientist.
https://yaleclimateconnections.org/2021/05/a-critical-review-of-steven-koonins-unsettled/
https://www.scientificamerican.com/article/a-new-book-manages-to-get-climate-science-badly-wrong/
In regards to the intro, a reminder to include AI as a major consumer of electricity. According to the google:…approximate a range for the energy consumption of AI of 85-134 terrawatt-hours (TWh) of electricity each year.
For comparison:
Bitcoin alone is estimated to consume 127 terawatt-hours (TWh) a year
Warning AI industry could use as much energy as the Netherlands (The Guardian)
Just make sure to give Goldman and JP Morgan Chase all of the brokerage and Market-maker business…
Let’s start with GDP growth. GDP has recently been likened to a sports team putting all its defence on attack and counting only goals scored. GDP allows no subtractions. Anything adverse is called an externality and is ignored. At this point in the wreckage of our planet and its life, if might better be described as Gross Destruction Product. Growing GDP is increasingly making things worse. Growth is taking us backwards.
Next, GDP is almost entirely correlated with use of fossil fuels, which, despite all green energy deployed to date, is still increasing exponentially with a doubling time of around 35 years. It’s therefore unsurprising that greenhouse gas emissions are increasing with the same doubling time and biodiversity is declining with the same half-life.
And why do we need GDP income growth? To provide profit for our money system that creates money only for profit. Expecting profit seeking finance ever to be the answer to a profit driven poly crisis is as close to deluded madness as you can get.
The only way to address our worsening situation is through state financing on a war footing with immediate rationing of fossil fuels – possibly tradeable rations so wealthy fossil fuel gluttons have to purchase rations to maintain selfish, gluttonous lifestyles.
The financial sector must be wound down out of the picture rather than wound up into a farsical solution. It means taxing wealth in all its forms – not to finance anything but to get it out of the way. It means state spending, setting interest rates to zero, vastly curtailing bank’s’ ability to create new money, and coalition governments to direct meaningful fiscal policy.
Well said! Unfortunately, the finance sector will get their share of the pie even if something is state financed. When the Treasury sells bonds they get a cut; same when they buy bonds. We need to get them out of the picture.
As Yves says there needs to be massive conservation of energy. There’s nothing wrong with lesser driving, maintaining cooler temperature in homes and offices and consuming less. It results in $$$ savings for the consumer.
One might even invent the acronym GDD for Gross Domestic Destruct.
https://fooledbyrandomness.com/climateletter.pdf