Money and carbon are intimately connected. Billionaires are responsible for a million times the emissions of the average person, according to Oxfam. And the average North American emits over 10 times the carbon that the average African does. But that’s only part of the problem. Dig a little deeper and you’ll find that almost all of the growth of fossil energy consumption over the past generation has come from low- and middle-income countries. And despite this, most of the spending on energy transformation is happening in the developed economies.
The challenge is to thread the needle such that the solutions to carbon inequality don’t lead to everyone emitting as much as the wealthy, or being as poor as the lowest emitters.
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We Need a Sliding Scale for Carbon
1. Let the poor emit more. “Reducing poverty is not feasible without access to cheap and reliable energy,” writes Arthur Baker of the University of Chicago’s Development Innovation Lab. He argues that reducing poverty will also build resilience to climate change—and that is ultimately a win-win for poor and rich nations.This might mean giving, say, Bangladesh a pass on using carbon-intensive fertilizers so it can make the transition to modern agriculture and reduce deforestation. Or it might mean allowing African nations to use fossil fuels to build roads and cold-storage systems that reduce food waste and increase food security. The world’s poorest countries are responsible for just 0.5 percent of global carbon emissions, so even if those countries fueled their growth with oil and gas, their share of global emissions would still be tiny.
2. Rich countries should pay climate reparations. A recent paper from researchers in Spain and the UK calculated a fair level of climate compensation if all countries reached net zero by 2050. Even in this ambitious scenario, the Global North would overshoot its share of the planet’s carbon budget by a factor of three, appropriating half of the rest of the world’s share in the process. Crunching the numbers, rich nations would need to pay reparations $192 trillion, working out to an average annual disbursement of $940 to every person in the Global South.
3. The case for luxury carbon taxes. There is now more energy inequality within nations, than between them. So what holds for nations, should be reflected for individuals: there should be an energy floor to help the poorest even in the richest nations, and a carbon ceiling on those hogging more than their fair share. One innovative way to do that would be a carbon tax that prioritized luxury goods and services—we’re looking at you, air travel—over essentials like domestic heating. Researchers at the University of Leeds found that such a tax could reduce emissions by around 6%, without suffering hardship. Like rich countries, the International Energy Agency (IEA) notes that the richest people have the most options, and the financial means, to reduce their own carbon footprints.
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No, We Need One Carbon Rule for All
1. Carbon taxes can be fair. The atmosphere doesn’t care where carbon dioxide comes from, and every ton makes a difference. Researchers have told us for years that accurately pricing carbon is a quick, easy and scalable way to reward those who emit the least, and punish those who pollute the most. And even a cursory glance at the World Bank’s Carbon Pricing Dashboard shows that it can work across the Global North and South, with taxes and trading schemes currently covering about a quarter of global emissions. In its latest climate inequality report, the World Inequality Lab recommends that any carbon tax needs to be embedded within equitable policies that include progressive reforms of the income tax system and environmentally harmful subsidies, such as fuel subsidies. Compensating the poorest means a carbon tax might not generate much revenue overall, but it could still help to drive down emissions.
2. Try a carbon swear jar. A more popular alternative to taxes could be a Global Carbon Incentive, as suggested by Raghuram Rajan, the former governor of the Reserve Bank of India. In his scheme, countries that emit more than the global per capita average pay into a global fund—and those that emit less, take out. The beauty of such an incentive is its simplicity and self-financing structure, says Rajan. “It recognizes that what a country does domestically is its own business. Instead of levying a politically unpopular carbon tax, one country might impose prohibitive regulations on coal, another might tax energy inputs, and a third might incentivize renewables.”
3. Smarter financing can drive equity. 60% of low-income countries spend an estimated five times more on debt servicing than on climate adaptation every year, according to the UN. Instead of letting them burn more oil and gas to grow their economies and service those payments, a simpler option would be to simply increase financial aid and debt relief with a climate focus. The current levels of international climate finance—around $83 billion a year—are a drop in the ocean of the $2.5 trillion annual need, says the UN.
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What To Keep An Eye On
1. Debt forgiveness. COP28, the UN’s annual climate get-together is just around the corner. Debt forgiveness is likely to be high on the agenda, with the Global Call to Action Against Poverty noting that 54 “global south countries are stuck in a debt-climate trap, while wealthy banks, corporations and institutions profit from this unfair situation. This injustice has to end.”
2. Air fares. Bloomberg reckons airlines are poised to pass along trillions of dollars of their carbon compliance and mitigation costs to passengers, potentially adding hundreds of dollars to ticket prices, and making it the first luxury carbon tax in all but name.
3. The future of climate finance. Shockingly, “there is almost no high-quality evidence on the impact of climate finance,” according to the Center for Global Development. Is that just a gap because the area is so new, or could climate finance actually be ineffective? UK universities seem to be leading the charge to answer that question, assessing a surge in biodiversity actions, emissions trading schemes, and climate finance reporting systems.
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