Who Pays for Loss and Damage?  Who Pays for the Climate Transition as a Whole?

There’s a lot going on these days, and it’s easy to miss the important reports. You should definitely not miss The Loss and Damage Finance Landscape, which was just published by the Loss and Damage Collaboration (LDC) and the US office of the Heinrich Böll Foundation. 

The report is pretty comprehensive, but my question is a narrow one – how much money is the Loss & Damage fund going to need, and where is it going to come from? The authors – several of whom, I confess, I know quite well – begin by attacking the first of these questions in an entirely straightforward manner . . .

“Major climate and weather events in developing countries in 2022 caused more than US$109 billion in losses. This does not take into account smaller events which may have been devastating for a local community, slow onset impacts, nor non-economic loss and damage. Therefore, it can be said that the real loss and damage faced by developing countries in 2022 was considerably greater than US$109 billion. Updating widely used modelling of loss and damage in developing countries to 2023 US dollars, gives midpoint estimates of economic loss and damage of US$425 billion in 2020 and US$671 billion in 2030. It is therefore clear that discussion of loss and damage finance should use US$400 billion per year as a floor and acknowledge that financing needs will have to be revised upward over time.”

This is fine opening move, though loss & damage isn’t the only thing we have to worry about.  There’s also mitigation, and adaptation, and the need for a comprehensive global just transition, and the challenge of financing a reasonably fair fossil fuel phaseout. Which is to say that even though the costs of the climate transition cannot be fully reckoned in dollar terms, dollars are going to be needed, and quite a lot of them.  Further, this is now so obvious that even mainstream realists don’t deny it, not if they intend to be taken seriously. Witness this recent and very public comment by the new UN Climate Change Executive Secretary Simon Stiell . . .

“We know the scale of what’s needed is significant. Global models from the most authoritative institutions all converge in the range of trillions annually. According to the work of the UNFCCC’s Standing Committee on Finance, developing countries need nearly 6 trillion dollars to implement their climate action plans by 2030, and that’s with significant gaps in costing adaptation needs.”

You would not have heard this from the UNFCCC Executive Secretary ten years ago, or even five.  But this, it seems, is a new day!  So who knows?  Maybe other truths – now no longer plausibly deniable – will also come to be publicly noted.  We may soon have high-level diplomats telling us that all the costs implied by a sufficiently rapid climate transition can’t actually  be counted as “investments” – which are generally expected to be profitable. Or that loss & damage costs can’t realistically be packaged as loans that highly vulnerable developing countries can reasonably be expected to “pay back”. 

Continue reading “Who Pays for Loss and Damage?  Who Pays for the Climate Transition as a Whole?”

Wealth tax of 0.5% could cover UK’s fair share of loss and damage fund

The UK’s Christian Aid — a long time supporter of the fair shares approach — just released a very nicely pointed report arguing that the UK could easily cover its share of the global loss & damage need with a minuscule wealth tax.

What they’ve done is taken a plausible estimate of the loss & damage need (insofar as it can even be expressed in money terms) and multiplied it by the UK’s fair share, as estimated by the existing version of the fair shares calculator, using moderately progressive equity settings. 

The Guardian article — see here— summarizes the bottom line:

“Estimates of [potential loss & damage costs] differ, but the range of $290bn-$580bn a year by 2030 is often cited, with a midpoint of about $400bn, taking into account inflation and rising climate impacts. Christian Aid estimates the UK’s “fair share” of this to be about 3.5%, or $15bn.”

This is a lowball figure that doesn’t consider adaptation and mitigation, but this was deliberate.  They didn’t want to get “laughed out of court in a first meeting”.

The report is also interesting for the very wide net it casts, in terms of possible sources of loss & damage finance. Here, quickly, are the top three:

Wealth tax – One option would be to implement a national Net Wealth Tax in line with the parameters set out by the Wealth Tax Commission. A rate of 0.5% levied on wealth in excess of £1m is estimated to raise in the region of £15bn. This has the advantage of being targeted on those who are likely to be disproportionately high polluters in their consumption and personal investments.

Polluter producers’ tax – Another option would see fossil fuel companies generating the UK’s contribution to the Fund. The UK Government could increase the tax on excess profits from fossil fuel production to 95%, which according to Tax Justice UK could raise around £13bn.  Fossil fuel companies are enjoying record profits.

A third option could be combining smaller targeted taxes, such as the existing International Air Passenger Levy (£3.5bn), and revenues from two of the following three options: a) the Emissions Trading Scheme (£6bn); b) an expanded Financial Transactions Tax (£6.5bn) or c) the existing Energy Profits Levy (around £5bn annually). Together these would bring in revenue which could pay the £12.57bn/ $15bn fair share contribution to the Loss and Damage Fund.”

One last thing – this rather alarming chart, which Christian Aid took from the 2023 Climate Inequality Report

What you have here, briefly, is the planetary human population, divided into three slices. The poorest half, on the left, is exposed to 75% of the relative income losses projected to come with climate change, while having only 2% of the global wealth. The richest 10%, on the right, have a much sweeter deal — they enjoy 76% of the wealth, and are exposed to only 3% of the losses.

Go to the the 2023 Climate Inequality Report itself if you need the details here. It’s figure 29.