Do we have the courage to prevent climate disaster?
The previous approaches to solving the climate crisis are doomed to fail. But there is a simple remedy: Global Climate Compensation. A guest article by Henrik Nordborg.
I was recently asked to write a guest article for the online magazine higgs.ch in Switzerland. The text below is a quick translation, mainly using DeepL with edits. The original (in German) can be found here.
Update 2022-01-22 : I realized that some of the translations by DeepL were a bit confusing and I have there improved the text somewhat.
The Glasgow Climate Pact is a fascinating but at the same time harrowing document. Paragraph 16 acknowledges that limiting global warming to less than 1.5 degrees would be very important in principle. The following paragraph 17 states that this would require a reduction in global CO₂ emissions of about fifty percent by the year 2030. The signatories all know that this is not possible within the framework of existing economic and political systems and that this would require a fundamental change of course, which is not even under discussion. The presumption of innocence therefore no longer applies: they all knew what they were doing when they decided not to save humanity.
It is a common misunderstanding that the UN climate conferences aim to stop climate change. Anyone who thinks this should search for the word "consumption" in the above-mentioned document. Because the western lifestyle must not be questioned, it does not appear anywhere. At these conferences, the dogma of unlimited growth is still valid, even though it has been renamed "sustainable growth". The "perpetuum mobile" has become a "sustainably running machine" without anyone having considered the laws of nature.
Denying instead of acting
The main goal of climate conferences is to maintain the status quo. Nothing must happen that would endanger the global world and economic order. The only problem is that the status quo doesn't even exist anymore: Our planet is dying, and decomposition produces carbon dioxide and methane, which accelerate the demise via the greenhouse effect. If we want to have a chance to stop the complete destruction of the only habitable planet in the universe, drastic measures are necessary, but they are still considered politically unfeasible today. Instead of taking action, humanity seems preoccupied with ignoring the obvious. Indeed, a government committed to the 1.5-degree target would have to present a plan on how it intends to reduce CO₂ emissions by at least seven percent in 2022 in the next sentence, and by another seven percent in 2023. It's a simple compound interest calculation, but with negative interest.
Unfortunately, the Corona crisis has clearly shown us the limits of international cooperation and solidarity: Not even the member states of the European Union were willing to support each other during the pandemic. By analogy, international climate agreements will be valid until the climate crisis is felt. We cannot and must not assume that people who have nothing to eat and drink will still behave in a civilized manner. Especially not if they have nuclear weapons. It is therefore not the reasonably predictable climatic tipping points that should worry us, but the societal ones. If we limit ourselves to science and technology in solving the climate crisis, we have forgotten some important lessons of recent human history.
A realistic vision for the future of our planet
Fortunately, there is a simple solution to the climate crisis that requires a minimum of international cooperation, is consistent with all the principles of a liberal society, and can be implemented immediately within the existing global economic system. The only catch is that the solution is based on the polluter pays principle, which is why polluters are vehemently opposed to it.
The solution is called Global Climate Compensation and works as follows:
1. CO₂ price: All producers of fossil fuel pay a fee proportional to their production to a global fund.
2. Climate Justice: The money from the fund is distributed among the world’s nations on a per capita basis.
To make this more concrete, we assume a price of $100 per ton of CO₂. With today's fossil fuel consumption, producers will then have to pay about $3600 billion a year to the fund, but this will immediately flow back to the world's governments. If we assume that the oil companies do not want to sacrifice their profits, they will pass on the higher costs to their customers. The result, then, is a global CO₂ fee that makes the use of fossil fuels more expensive worldwide. The price of oil rises by about forty dollars a barrel, returning to 2008 levels. At the same time, every nation in the world is reimbursed an amount of $450 per capita per year: Switzerland gets $3.9 billion, Russia $66 billion, and Bangladesh $74 billion. This eradicates global poverty and makes the UN's Sustainable Development Goals attainable.
Compensation replaces other taxes and eco-labels
The advantage of this idea is that it is implementable. There are no more than 300 fossil fuel companies in the world and about 200 nations. If they agree on a CO₂ price, a global fee on all CO₂ emissions will be introduced. There will be no reason to levy separate taxes on air travel, gasoline, or heating oil. Most eco-labels can also be abolished, since every price tag in the world already takes the CO₂ tax into account. Since plastic is made from oil, this will also lead to a global tax on plastic.
All governments in the world will receive money from the fund with no strings attached. Thus, the national sovereignty of the states is preserved, and they can shape their own energy and environmental policies. Since fossil fuel prices are rising at the same time, they will use at least part of the money to invest in renewable energies and energy efficiency.
For the government of the global South, global climate compensation offer enormous benefits. Since more than three-quarters of the world's population lives in the South, they also receive three-quarters of the money from the fund. Instead of a hundred billion USD from the UN's Green Climate Fund, they receive nearly three trillion annually from climate compensation. This cuts the Gordian knot of energy poverty: although energy prices are also rising in the developing countries, they are more than compensated for this through direct payments.
Rich countries will also benefit
For the North, things look somewhat less rosy. But it must be emphasized that global climate compensation also has advantages for rich countries. First, governments do not have to introduce new taxes to meet their climate targets. When the world market price for fossil fuels rises, people are forced to change their lifestyles. Climate policy measures that have already been adopted will make more sense in the future, and politicians will be out of the line of fire, since it will be the oil companies that raise the price of gasoline and collect the taxes. Furthermore, climate compensation does not penalize wealth, but the ecological footprint. Those who pursue a credible net-zero strategy need not fear climate compensation.
The same applies to the private sector. Most large companies today have adopted an ambitious net-zero strategy. Not only do they want to reduce their own CO₂ emissions, but they are also aiming for climate-neutral supply chains. If they succeed, their production costs will not rise as a result of climate compensation, and they will become more competitive as a result.
Today, oil companies also need to act as if they take climate change seriously. Global climate compensation offer them the optimal opportunity to walk the talk, since all they have to do is play the role of tax collectors. Fossil fuel producers who agree to the plan are allowed to continue to exist. The rest openly admit that the future of humanity is unimportant to them and will hardly be able to save themselves by greenwashing.
For employees, global climate compensation offers great advantages. Today, many jobs are being lost to automation and outsourcing. Rising energy prices make both of these processes less attractive. It will again be worthwhile to do a decent job, which will certainly please the unions.
Thanks to financial reimbursement, a large part of humanity will benefit. Some political crises could probably be defused, and many refugees could return to their home countries.
A fair solution - but nobody wants it
So, we see that the climate crisis could be solved. Global climate compensation is a simple way to internalize the external costs associated with the use of fossil fuel in an efficient and unbureaucratic way. If it is done globally, competitive distortions can be avoided. If it is done equitably, a large part of humanity will benefit.
The only problem is that the financial markets and the industrial nations - formerly colonial powers - do not want a fair solution. The rich and powerful of this world have directly or indirectly acquired their money through oil and have no desire to give up either power or wealth. It is as if we are on a sinking ship, doomed because the 1st class passengers refuse to operate the water pumps. For, as John F. Kennedy once so aptly put it, "he who prevents a peaceful revolution makes a violent revolution inevitable."
Of course, global climate compensation results in a lot of money flowing from the global North to the South. Anything else would be absurd, because it is mainly the industrialized nations that are responsible for climate change, especially if historical emissions are taken into account. Instead of whining, they could move ahead with decarbonization and reduce unnecessary consumption.
Previous approaches have failed
Unfortunately, after COP26, we must conclude that international climate policy has failed. The destruction of the Earth's climate is progressing ever faster and represents a high-risk, uncontrollable and irreversible experiment with the only habitable planet in the universe. All experts agree that this will end in disaster. Wouldn't it be better to try a risk-free, controllable and reversible experiment with the economic system? Before we do it, however, we must determine how we will measure the success of this experiment. As long as we equate success with economic growth and rising stock prices, true climate protection will not stand a chance.
This brings us back to the issue of sustainable growth, which was recently referred to as Fake News in Le Monde. If economic growth and environmental protection were compatible, a system of voluntary commitments could work. If not, we need to change the rules of the game of international competition in such a way that nations are rewarded for shutting down climate-damaging industries. The Paris Agreement is based on the assumption that climate protection does not cost anything and that the countries of the world will go along voluntarily. Global climate compensation does not need this assumption and will lead to emissions reductions regardless. If the optimists are right, climate compensation will accelerate a technological energy transition. If not, the global economy will shrink. In either case, the biosphere and future generations will benefit.
Not perfect, but workable
Global climate compensation is a liberal and minimally invasive tool to implement climate mitigation, climate justice, and poverty reduction. It uses the advantages of the market economy to distribute the external costs of fossil fuels as efficiently as possible and makes polluters pay. . The idea is not new, nor is it perfect. But it is much better to have a workable plan that may need to be tweaked than none at all. The question of whether a better system can be found is legitimate. But it should not prevent us from getting started with the implementation of global climate compensation. Because we are rapidly running out of time.