Aid and Climate Policies Are a World of ‘Let’s Pretend’

Africa, whose carbon emissions are negligible, is a victim of climate change but cannot stop it. Indeed, to get the continent’s citizens out of poverty, African economies will have to generate substantial growth, encouraged by international aid that gets both home-grown and foreign companies to invest and create jobs in Africa.

Africa, whose carbon emissions are negligible, is a victim of climate change but cannot stop it. Indeed, to get the continent’s citizens out of poverty, African economies will have to generate substantial growth, encouraged by international aid that gets both home-grown and foreign companies to invest and create jobs in Africa.

With this one simple truth, I have alienated almost everyone. Those on the political left accept that Africa is a victim of climate change, and they support foreign aid. But they are suspicious of economic growth; in fact, a burgeoning movement among well-off Western progressives posits degrowth as the answer to climate change and a host of other ills. As for encouraging private investment, this is rejected as the ugly face of capitalism. Meanwhile, those on the political right love growth and investment but are repelled by aid.

This has produced an atmosphere of “let’s pretend” among Western politicians and the people making climate and development policy. They seem happily content to ignore that 60 years of development policies and 30 years of U.N. climate conferences have failed miserably: Much of Africa is still left behind, and the upward march of global emissions remains undented. Both these agendas are now urgent. Since the COVID-19 pandemic, Africa has diverged more rapidly than ever from economically faster-growing regions; and as temperatures mount, curbing global carbon emissions is becoming critical.

It is time to stop the pretense and admit that both international assistance to Africa and the U.N. Climate Change Conference approach are fundamentally flawed. The world’s governments meet several times each year to make pledges on aid to poor countries and reducing carbon emissions, but there is no system for ensuring that any of these promises are sufficient and effective. Nor is there a mechanism to enforce the pledges. Given their abysmal record, perhaps the main emission at these meetings has been hot air.

Within this world of let’s pretend, the world’s multilateral agencies feel licensed to expand their mission regardless of what they accomplish. In parallel, the global corporate community parades its achievements and good intentions in Davos, Switzerland, each year in a profitable pursuit of greenwashing. Neither the international agencies nor the World Economic Forum in Davos have proved effective at cutting emissions or enabling Africa’s economies to catch up. Yet solutions to these challenges are at hand if only we seize them. They will require an honest stocktaking at the major multilateral institutions. And most importantly, any solution will require a thorough reappraisal of these organizations’ individual remits.

Let’s start with the International Energy Agency (IEA), a minor U.N. agency headquartered in Vienna. It has taken upon itself to propose an embargo on extracting new carbon-based energy. This embargo, in turn, has been embraced with passion by the young Swedish activist Greta Thunberg. The World Bank, hungry like all bureaucracies to expand its role, has picked up the baton and now uses its aid program to poor countries as an instrument of enforcement. Recipients of the bank’s aid must commit to leaving their oil and gas in the ground. But is the embargo morally right? And is the World Bank the right agency to enforce reductions in carbon emissions? I think the answer to both questions is a resounding “no.”

None of this is to question the importance of reducing global carbon emissions. Indeed, it is because it is so important that the world of let’s pretend must be challenged.

Despite passionate support by Thunberg and her young followers, the IEA proposition is morally outrageous. The oil, gas, and coal currently being extracted largely belongs to upper-income countries, including Australia, Canada, China, Germany, Norway, Russia, the United States, and various states in the Middle East. Recently discovered but still unexploited fossil fuel deposits are concentrated in lower-income countries. For example, Tanzania has offshore gas; Ghana has oil; Timor-Leste has gas; Liberia, Namibia, and Sierra Leone may have substantial gas and oil.

Some of the carbon energy already discovered will have to stay in the ground and become a “stranded asset”—that’s energy industry-speak for worthless. Should the stranded carbon assets belong to the poorest countries on Earth or the richest? The IEA proposes to force the very poorest to forego their chance at income without even acknowledging that this is ethically problematic.

In recent decades, the economics profession has been happy to connive with the IEA’s bureaucrats, privileging the question “What is efficient?” over the distributional question “Who gains and who loses?” Until recently, most economists have shrugged the latter question off as the responsibility of politicians. Such a shrug presupposes that once the IEA succeeds with its embargo, some other agency and profession will take over and decide how to redistribute from winners to losers. It is the shrug of irresponsibility.

For sure, the redistributing agency is not going to be the World Bank, because it has no remit over the high-income winners. Despite its gleeful expansion into climate change, it is not an appropriate agency for the issue. It would be better to focus on why, despite the bank’s past efforts, Africa has continued to fall behind; clearly, the bank needs to experiment with new approaches to economic development and growth. Besides Africa’s failed and failing states, there are enough well-led countries—such as Botswana, Ethiopia, Rwanda, and Zambia—that the World Bank could support more effectively.

The only international agencies with sufficient remit over developed Western economies, wealthy Middle Eastern countries, and China are the United Nations and the International Monetary Fund (IMF). The U.N. has been trying to encourage change for the past 30 years through the Climate Change Conference process but lacks the teeth to be effective. That leaves the little-loved and much-feared IMF as the only international agency with the span and heft to make an impact. Potentially, regular consultations whereby IMF staff review and comment impartially on a range of macroeconomic policies could be used for this purpose. The rapid evisceration of then-British Prime Minister Liz Truss’s extraordinary economic program at the annual IMF-World Bank meeting in 2022 demonstrates how much damage hostile criticism can cause.

Would IMF criticism of the environmental and development policies of the United States and China—or the latter’s satrap, Russia—carry much weight with their decision-makers? Neither Washington nor Beijing would take direction from the IMF, but they are competing for influence over the poorer half of the world. Africa is a crucial voting bloc in the U.N. General Assembly and a standing presence at the G-20; India and Indonesia are too populous to ignore. Indirectly, this competition may make the two superpowers sensitive to IMF criticism that highlights behavior detrimental to the interests of poor countries. Among European countries, critiques by the IMF may be even more effective, not least because the fund has always been led by a European. Pressure on major carbon emitters such as the Britain, Germany, and Italy—and rich fossil-fuel producers such as Norway—could prove highly embarrassing for their governments.

We need the governments of most big carbon emitters to come on board, which means that all actions must target the interests of each individual government during its term of office. Fear of criticism by the IMF is a start, but it is unlikely to be enough. Unless the IMF’s 190 member countries agree to widen the Article IV remit to include emissions policies in IMF consultations, we may never even get that far.

For IMF or any other pressure to work, the short-term costs of carbon reduction by governments must be radically lowered. One way to do so would be to distinguish between reversible and irreversible environmental damage and focus immediate action and resources on the latter. Accepting the former can provide a temporary cushion that lowers the cost of essential change until next-generation technology makes non-carbon energy cheaper than oil, gas, and coal—not just for generating electricity, but also for difficult-to-replace industrial use and transportation, which the promoters of a fossil fuel embargo seem to ignore in their campaigns.

As we become more honest about what our climate and development policies can achieve and the speed at which they can achieve it, we should also not be purists. For example, maintaining biodiversity is vital, but doing so does not require us to protect every species everywhere, regardless of cost. Nature is resilient and reparable: The salmon that thrived in the Thames during the 18th century have returned in the 21st, despite water pollution so bad during the 19th and 20th centuries that they disappeared. The price we may have to pay for 30 years of let’s pretend is unpalatable but temporary damage to the environment, which the next generation can reverse. We can rely on it to put our negligence right.

And finally, I return to why we should do it all. Westerners should act primarily to help the despairing left-behind communities that are still so common in our 21st-century world. I work in Africa, where a young generation is very conscious that the world of opportunity lies beyond its grasp. The most enterprising take appalling risks to reach the promised land—Europe—where they are met with indifference or worse. In Latin America, the same desperate flight north meets a similar fate. Africans and Latin Americans cannot, however, collectively find hope in mass escape. Instead, their economies must catch up, and Westerners should play their part in supporting a collective journey to a better, more resilient future. That would be climate justice for real.