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Opinion | Fuzzy maths on climate change funding fails world’s most vulnerable

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2 months ago

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My concerns billowed last week as I read an assessment of the funds needed to build our carbon-free future, and to get us to a “net zero” world by 2050. According to the Carbon Policy Initiative, climate finance will need to rise to US$8.1 trillion to US$9 trillion by 2030 and to be sustained above US$10 trillion from 2031 to 2050.
For context, climate financing in 2021-22 amounted to US$1.3 trillion. For even more sobering context, the Carbon Policy Initiative estimates that if we fail to invest at this scale, the gross cost of global losses because of steadily increasing damage and disruption linked with climate change will amount to US$2,328 trillion. Quite how anyone can calculate forecasts with such stupendous numbers, I am unable to fathom. But let’s leave that issue for another day.

05:34

Japanese cherry blossoms faced with the threat of climate change may disappear by 2100, study says

Japanese cherry blossoms faced with the threat of climate change may disappear by 2100, study says

Former US climate envoy John Kerry, showing a clearer grasp of such numbers than most of his colleagues, was blunt: “We don’t have the money.” Current political priorities and the collapse of international cooperation are drawing already hard-pressed funds in other directions.
Government debt levels worldwide are at record levels, and debt service costs are exploding because of higher interest rates worldwide. Defence spending and post-pandemic health spending are soaring, and with households worldwide ill-placed to pay more or higher taxes, the fiscal wiggle room to finance our carbon-free future is vanishingly small.

With such big numbers, a bit of context is needed. First, note that global gross domestic product is slightly more than US$100 trillion. That means funding net zero is going to cost 9 to 10 per cent of global GDP. Then note that debt worldwide is projected to reach US$336 trillion by 2030, or about three times global GDP.

The United States – which has the world’s largest economy and is likely the single more important source of funding for moving the global economy to net zero – vividly illustrates the challenge. US government debt hit US$34 trillion at the start of the year. In US President Joe Biden’s discretionary budget request for 2025, he is asking for around US$1.6 trillion. I challenge anyone to show me where he will persuade the US Congress to find the funds to contribute in any meaningful way to the annual climate financing needed to get us to net zero.

US President Joe Biden speaks about his proposed federal budget at the Finishing Trades Institute in Philadelphia on March 9. Photo: AFP
If other governments were as transparent, they would undoubtedly show the same forlorn arithmetic. Worst of all are the numbers among low- and middle-income countries concentrated in Africa and Asia. The International Energy Agency says 760 million people worldwide still have no reliable access to power. According to the World Bank, 771 million people still don’t have access to basic drinking water services. The World Health Organization says 828 million people worldwide were still haunted by hunger or starvation in 2021.
Faced with such grim and immediate realities across large parts of the world, who can believe there is either the political will or capacity to prioritise the massive funding needed to slow or halt global warming, or to eliminate fossil fuels and replace them with renewable energy?

Of course, there are things that can be done. Much of the investment needed to get to net zero will have to come from the private sector rather than government coffers.

It has long been believed that over two thirds of the investment needed to get to net zero will come from the private sector rather than from government coffers. An immediate and substantial boost could come from eliminating fossil fuel subsidies worldwide – which were estimated at around US$7 trillion in 2022 – and shifting that funding to incentives to develop renewable energy. That would not be a silver bullet in itself, but it would be an important step nonetheless.

04:44

Cop28 climate summit closes with agreement to ‘transition’ from fossil fuels

Cop28 climate summit closes with agreement to ‘transition’ from fossil fuels

The politically naive would call for cuts in defence spending, which according to the Stockholm International Peace Research Institute stood at US$2.4 trillion last year. But with Russia still dropping bombs on Ukraine and Israeli Prime Minister Benjamin Netanyahu fanning the flames in the Middle East, any hope of diverting resources from defence spending is a pipe dream.

More countries are following the European Union’s lead on introducing carbon taxes or similar measures, and additional taxes such as windfall and stock buy-back taxes on fossil fuel companies and tourism taxes are being considered. Such innovative approaches could raise an estimated US$2.2 trillion a year for renewables and climate mitigation measures such as sea walls, flood defences and improved drainage.

There is no doubting the urgent need for realistic discussions on funding at this year’s UN climate conference. A first step must surely be for our political leaders to recognise that the current arithmetic on global funding priorities fails to add up. The status quo cannot work.

David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific

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