The just-concluded climate summit in Egypt hit head-on with one of the world’s biggest structural problems: most of the money is in the North, but most of the needs are found in the South. Nearly three hundred years of burning fossil fuels have produced much of this Northern wealth, and now the resulting greenhouse gases are warming the planet and producing much of this Southern need. So is there a way to mobilize this money to build a more livable future? The conference went into overtime on Saturday, in part to make a small start on this very big issue.
For two weeks, the question of money plagued negotiators in the grim desert warehouse that Egypt, the host police state, offered as the seat of the annual global gathering. This is actually a relatively new lens – so far most COP the meetings have mainly aimed to put pressure on major emitting countries to set ambitious decarbonisation targets. But congressional passage of the Cut Inflation Act ultimately caused the United States to lag behind in meeting its carbon-cutting targets, and a recent meeting between President Joe Biden and President China’s Xi Jinping, speaking at the G-20 conference on Nov. 14, seemed to indicate that carbon superpower cooperation was back on some sort of track, having been derailed by Nancy Pelosi’s visit to Taiwan. For now, the industrialized world is working on its own energy transformation.
If Biden thought his efforts would win him affection at COP 27, he was only partly right. As delegates flocked to the plenary to hear his speech, they passed a crowd of activists chanting “Pay, pay, pay for loss and damage”. Many of the protesters came from Africa; it’s only the third COP on the continent, and civil society was looking forward to it, because Africa is the best example of the global economic abyss. Although it has produced only a small percentage of the greenhouse gases that are currently warming the Earth, it is rapidly falling prey to almost unimaginable floods and droughts. In South Sudan, for example, in the rapidly warming western Indian Ocean, so-called once-in-a-century rains fell in 2019 and again in 2020. Bloomberg reported that in August 2021, “with the land saturated even after average rainfall, the White Nile is flooded. [River] was stopped by the weight of the waters. It began to recede and burst its banks – the worst flooding in 60 years. There are about a million people here among those permanently displaced by climate change. Meanwhile, a thousand miles away in Somalia, the fifth consecutive rainy season without much rain is currently underway; scientists now predict a sixth and blame the drought on climate change.
You can imagine the tension – the anger – that comes from seeing your part of the world dry up or flooded, knowing that the countries whose pollution caused your problems also have enough money to repair the damage. The moral argument couldn’t be simpler: Americans produced almost a quarter of the excess carbon in the atmosphere; a quarter of the damage should be on our tab. And yet, we have not yet begun to pay it, not directly: Congress will not spend tax money on reparations for enslaved descendants of Africans; they are even more unlikely to do so for survivors of the climate crisis in Africa or Asia. At least, not in sums at a distance equal to the damage: at COPOn February 27, a handful of the usual countries (think Denmark) pledged climate aid in the range of around seventy-five million dollars, with an “M”. The initial estimate of the damage caused by the wild summer floods in Pakistan, on the other hand, is around forty billion dollars, with a “B”.
So there must be a less direct way to access the wealth of the North. More than half of the world capital is in the United States and Europe; more than a third is in the United States alone. Much of this money is in retirement accounts – money that is not charitable and will not simply be poured over to cover what the UN calls “loss and damage” from climate change, whatever be the just claim of the poor nations. could be. But the trillions in these funds could provide the financing the developing world needs for an energy transition – and if African nations have the financing to build, for example, solar panels, they can generate clean energy at a lower cost and produce a return for American retirees . At the moment, however, that is unlikely. Investing in a US wind farm is relatively easy; the pension fund can predict its earnings based on a hundred years of historical utility company returns. Investing in a Senegalese solar company that lacks a track record, and which could be at the whim of the local political and judicial system, would be another story. Since these investments are relatively risky, pension funds would charge prohibitive interest rates.
“With money at six or seven percent, solar in Africa can outperform anything and turn a profit,” said Nicholas Stern, an old warrior in these fights whom I ran into in the halls. of COP27, told me. “At fifteen percent you can’t make a profit, and so it won’t happen.” Currently a professor at the London School of Economics, Lord Stern was once the chief economist of the World Bank and is best known for writing, in 2006, at the request of the British government, the most comprehensive account of the magnitude of climate change. was going to cost the world. A lot, as it turned out. “Climate change is the result of the greatest market failure the world has ever seen,” he wrote. “Those who harm others by emitting greenhouse gases usually don’t pay.” But he continues to try to find ways around this fundamental impasse.
Basically, you have to understand how to reduce the risks of investing, so that a pension fund feels as comfortable investing in an African solar farm as in a wind turbine in Kansas, as John Kerry told me explained in October. And the risk reduction tools belong to the multilateral development banks – the World Bank, the Asian Development Bank, the African Development Bank. These bodies, among other things, manage the flow of money from north to south – and they are filled with smart people who can figure out how to sprinkle, say, a little public money into a deal so that the danger largely disappears . Stern’s estimate, in a lengthy article published just before the COP, is that it would require “grants and low-interest loans from governments in developed countries to double, from $30 billion today to $60 billion by 2025.” Spend this relatively small sum – just a fraction of the nine trillion dollars rich countries have spent on covidand an even smaller fraction of the overall cost of climate change – and private investors would likely make a trillion dollars in developing markets. But even that relative bargain may seem out of reach: Even a Democratic-controlled Congress refused to approve Biden’s request for $11.4 billion a year for this kind of aid. If future House Speaker Kevin McCarthy wasn’t sure about sending guns to Ukraine, we guess sending money to Africa might not be high on his to-do list. .
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