Who pays for climate breakdown?
Or, morbid symptoms warmed up
Well, here goes an inaugural post on here…
Some bad ideas refuse to die with dignity. To judge from the noises coming out of COP 27 this week, the idea that private finance might resolve climate breakdown seems to be subject to growing resistance, but nonetheless dug in, quite intently, in some quarters.
Kristalina Georgieva, President of the IMF, wrote before the conference that ‘public money alone is not enough’ to catch up to net-zero commitments, which would require ‘innovative approaches and new policies to incentivize private investors to do more’.
US Presidential Envoy for the Climate John Kerry unveiled a plan to allow businesses to buy carbon credits by financing emissions-reducing projects in the global south. This doesn’t seem to have gone anywhere, possibly because it effectively already exists in the form of the Clean Development Mechanism established under the Kyoto Protocol.
A joint op-ed written by Macky Sall (President of Senegal), Emmanuel Macron (President of France) and Mark Rutte (PM of the Netherlands) released just before the start of COP celebrated the launch of the ‘Africa Adaptation Acceleration Programme’ aimed at mobilizing private investment in climate adaptation in Africa.
Germany has, in recent months, spearheaded the development of a ‘Global Shield against Climate Risk’, which was formally announced at COP. Details are still sketchy, but Global Shield promises to support the development of new insurance mechanisms to protect individuals and households, as well as countries, from climate damage. (I wrote a short piece earlier this week about why Global Shield is unlikely to work as a mechanism for managing climate breakdown.) There are ongoing debates about funding for ‘Loss and Damage’, and demands from China and the G77 for a much more comprehensive framework, but thus far it’s Global Shield that has seen actual financial commitments:
Global Shield, AAAP, and Kerry’s not-the-CDM (and, for that matter, the already-existing CDM), and indeed the wider push for ‘escorting’ capital into climate and development projects that’s taken off in the last few years, have a couple themes in common that are worth fleshing out, and which are especially revealing about the politics of private finance for climate action.
The first thing to note is that there’s little sign that businesses are clamouring for opportunities to buy emissions credits, that private investors are chomping at the bit to invest in desperately-needed infrastructure in low-income countries, and little evidence that insurers are clamouring to offer weather insurance to impoverished people or developing countries. Quite the opposite, in fact. The oft-cited target of USD 100 billion/year in climate finance to the global south, renewed at COP 21, has never been met. One of the biggest reasons is that private investment has never hit so much as half the level targeted. Despite several decades’ worth of efforts to promote ‘innovative’ new forms of insurance, markets for ‘micro-’, ‘parametric’ and other forms have quite simply failed to appear on the scale their promoters would have hoped.
It’s tempting to read the continued resort to private finance in the face of failure as reflective of a kind of neoliberal dogmatism — ‘markets, and only markets, can solve our problems’ — or to see states and international organizations acting as the handmaidens of finance capital — opening up hitherto unavailable spheres for speculative profit. While I don’t doubt there’s an element of both at play here, it’s still a kind of paradox that programmes like Global Shield seem aimed at nudging capital into providing services it manifestly has no interest in providing.
There are deep-rooted social and ecological problems — poverty, faltering agricultural productivity — which will be exacerbated by climate breakdown, and which leading states face increasing pressures to act on. There are also growing political pressures for global redistribution. There is a definite push, and has been for decades, for rich countries to pay their climate debts. Even in the context of negotiations around the Kyoto Protocol in the 1990s, one of the sticking points was the need to compensate developing countries who might see avenues for industrial development choked off. Tangible climate harms have accelerated in the last decade. They have increasingly been accompanied by a growing demand for ‘loss and damage’ funding.
The roots of the resort to private finance, then, are more about the structural power of capital than the directly expressed desires of the financial sector. To meet the scale of transfers necessary (for instance, estimates of extant climate damage to the most vulnerable and poorest countries already run to half a trillion dollars, and growing fast) there is some truth that resources currently controlled by the private financial system are needed. Measures to nudge investment, to encourage the development of new markets, are a path of less resistance than the kind of direct confrontation with capital (through confiscatory wealth taxes, expropriation) that would allow the more direct exercise of public control over climate finance. Mobilizing private finance probably won’t work, for a host of reasons. But the political capacity to try to meet the climate and developmental crises by any other means don’t yet exist. The old is dying and new cannot yet be born — escorting capital is one of the morbid symptoms.