“Anything we can actually do, we can afford.”
— John Maynard Keynes
How to create the political backing for the international effort necessary to achieve a fair and rapid global climate transition, even though that support would be properly denominated not in billions of dollars but rather in trillions, or even as percentages of Gross World Product?
One eye-opening approach is to make clear comparisons. In doing so we show that the likely costs of the climate transition, great though they may be, are nonetheless small and entirely affordable. This is especially true when we consider them against other, even larger expenditures, which we routinely accept as inevitable despite the fact that they’re often ill-conceived — sometimes criminally frivolous — and even self-destructive on a monumental scale.
In a way we all already know this, for we never tire of pointing out that the damage costs of inaction will far exceed the costs of any plausible mobilization. But we can also make other helpful comparisons against the sums mobilized for other purposes, and against the trillions that are wasted on every front, when luxury consumption sets the terms.
The good news here is that such comparisons are now being made routinely. Since the 2009 global financial crisis and especially since the Covid pandemic, large governmental and intergovernmental financial interventions have, in the face of cascading emergencies, become almost routine. In both cases very large numbers of people, and even significant fractions among the political elites, have been jolted into understanding that major mobilizations of public finance are sometimes absolutely, indisputably, necessary.
However, it’s still not possible to talk honestly and openly about the scale of climate finance that’s actually necessary or to keep the formal climate finance conversation from devolving into one in which private investment gets all the airtime. To be sure, there are many people who believe that transformational levels of public finance will be necessary to stabilize the climate system. But many of them also accommodate themselves to a policy world in which, so the thinking goes, the challenges of public finance can be safely set aside. In fact, public finance — and public planning and coordination more generally — will be absolutely necessary to the economy-wide transformations the climate crisis requires. Major debates remain before this point is so clearly established that it can no longer be reasonably contested, but at the same time, the conversation has clearly shifted. “Trillion is the new billion,” and this helps a great deal.
The key point here is that money is not the real problem. Keynes’s declaration, made during World War II and referenced above, “Anything we can actually do, we can afford,” applies here as well. That said, the institutional and political challenges of providing the public finance and technology support necessary to achieve 1.5°C would be immense. The issues here sprawl, but I think it’s fair to say that Keynes would also have considered them to be entirely solvable.
For the moment, here are a few useful points of comparison:
Environmentally Destructive Subsidies. Every day governments spend massive amounts of money to subsidize the destruction of our world. How much money? If you count not only fossil subsidies but a variety of subsidies for environmentally destructive activities across a range of sectors including agriculture, forestry, water management, and fisheries — activities leading not only to climate destabilization but also biodiversity loss, land degradation, and global inequality — the latest expert estimate appears to lie north of $1.8 trillion a year, or about 2% of gross world product (GWP), all of which goes into directly supporting unsustainable production and consumption.
Of this $1.8 trillion, about $640 billion comes as explicit subsidies to the global fossil industry. Actual cash. But there’s more to this story, as far as fossil fuel subsidies are concerned, in part because some of it comes as consumption subsides designed to protect the poor (a fact the fossil cartel takes full advantage of, in its endless claims to be a great benefactor of humanity) and in part because there is another, truer way, to estimate fossil subsidies. This time it’s the International Monetary Fund that has run the numbers, and despite criticism, stuck to its insistence that hidden damage costs must be counted as subsidies: In 2020 its calculation of the real fossil subsidy was about $5.9 trillion, almost 7% of GWP —which comes to about $11 million a minute.
Covid Recovery Spending. The International Energy Agency estimated that pandemic recovery spending as of October 2021 had reached $16.9 trillion. Of that, about $2.3 trillion went into long-term investments, of which only about $470 billion was for clean energy and sustainable recovery — about 3% of the total. Much of this was a one-time outlay that will not be repeated, so it’s notable that fossil energy subsidies significantly outpaced clean energy subsidies. It’s also notable that the overall economic recovery was fantastically inequitable. According to the World Inequality Lab, the richest 1% of the global population have, since the beginning of the pandemic, captured 19 times more of global wealth growth than the entire bottom 50%. Oxfam, in its Inequality Kills report, notes that “The increase in Bezos’ fortune alone during the pandemic could pay for everyone on earth to be safely vaccinated.” The extremity here is simply amazing.
Military Spending. Military spending is the gold standard of wasted economic potential. In early 2021 the Stockholm International Peace Research Institute estimated the world military spending had risen to almost $2 trillion in 2020. And this figure is growing fast. The U.S. military budget is the largest in the world (it recently came to about 40% of the global total) and the Congressional Budget Office projects that Congress will spend about $8.5 trillion for the military over the next decade. As New York Times columnist Farhad Manjoo notes, that’s “about half a trillion more than is budgeted for all nonmilitary discretionary programs combined (a category that includes federal spending on education, public health, scientific research, infrastructure, national parks and forests, environmental protection, law enforcement, courts, tax collection, foreign aid, homeland security, and health care for veterans).” Rapid growth is also taking place in China, where the military budget is about $229 billion and “modernization” programs are driving its growth up by an estimated 7.1 percent per year, and of course in Europe, where the Russian invasion of Ukraine has led to a new and treacherous prioritization for all things military.
Odious Debt. The poor are in all ways disadvantaged, and this of course means adequate climate action is often beyond their grasp, as is sustainable development itself. For some key current details, see the 2022 Financing for Sustainable Development Report, which begins not with Covid but with the “legacy of inequality” that already hung over the poor countries when the pandemic arrived. That legacy only deepened as the Covid crisis cascaded into broader economic instability (supply chains, inflation, higher interest rates) and then into the instabilities and dislocations of the Ukraine war. The chief point here, to be undiplomatic, is the billions in debt interest that the developing countries must every year pay to their creditors in the wealthy world, a burden that is sometimes so odious that the term “debt slavery” seems more a simple honest description than any kind of hyperbole.
How large is the developing world’s external debt? Estimates vary, as does the legitimacy of the debt: How defensible was it, really, to transfer South Africa’s apartheid debt to its inheritors, most of whom never had any part in negotiating it, or benefiting from it? What is clear is that the total external debt of the low- and middle-income counties has reached $8.7 trillion, and that the servicing of this debt consumes resources that are now desperately needed for both development and the climate transition. In the low-income countries alone, external debt sharply increased during the first full year of the pandemic, reaching $860 billion in 2020. No wonder a new wave of defaults has begun and that widespread debt distress appears to be on the very near horizon.
Dynastic Wealth. This brief list would not be complete without a mention of dynastic wealth, which is passed down from generation to generation within families, and of course within castes and classes. The numbers vary tremendously from country to country, but the U.S. figures alone are boggling enough. Wealth managers estimate that “nearly 45 million U.S. households will transfer a total of $68.4 trillion in wealth to heirs and charity over the course of the next 25 years.” And of course, much of such transferred funds will be protected from taxation; a report by Americans for Tax Fairness (ATF) points out that, unless currently legal loopholes in estate laws are closed, these wealthiest families will avoid as much as $8.4 trillion over the next 24 years.
Tax Avoidance. Speaking of the rich, we should mention hidden wealth, which is shielded by tax havens and secrecy laws and has now been estimated to be about 8% of the world’s household financial wealth. In 2007 this came to about $5.7 trillion. More generally, and this is probably the best bottom-line figure for this brief summary, taxing the world’s richest (those people with over $5 million) could raise about $2.52 trillion a year, or, if a progressive wealth tax was applied, $3.62 trillion. It’s not enough to support all the ongoing social services associated with a just and sustainable global society, but it would definitely help. It would certainly cover the core of the climate transition. Adding a country-specific data point, note that the wealth of the U.S. billionaire class had increased as of March 2022 by an estimated $1.7 trillion since the beginning of the Covid pandemic. And as the ATF report notes, “Under current law, none of that wealth gain — essentially income — will ever be taxed.”
Blood Fossils. Finally, given Russia’s war on Ukraine, it seems appropriate to note that a good fraction of the untold billions that are spent on fossil fuels are diverted, sometimes immediately, to support the worst kinds of infamy. The exact figure varies with the price of gas and oil, but as of this writing, good estimates from the Brussels-based economics think tank Bruegel hold that “the amount of money Europe pays to Russia each day will keep increasing, and could average $850 million per day in the first half of 2022, according to our calculations.” This, of course, is clear evidence of an intolerable dependence, and voices everywhere have risen to denounce it. What is not clear is how many of them will denounce the larger dependence, which hems us in on every side, with anything like equal vigor. Russian oil and gas, after all, is only the tip of the fossil iceberg.
Tom Athanasiou, a political ecologist and technology critic, specializes in global climate equity — the great problem of shaping a planetary climate transition that is fair enough to actually succeed, both within the United States and across the world. With the late Paul Baer he cofounded EcoEquity, a small activist think tank, where this article originally appeared. This has been amended from the original by System Change Not Climate Change editors with the author.
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