How can we think about climate change financing within a climate of inequality?

September 17, 2019

     By Maria Faciolince     

Starting this Friday, young people, their parents and entire communities around the world are mobilising in a special week of action to call for climate justice, 20-27 September. In this post, Harpreet Kaur Paul argues that just as the impacts of climate breakdown are not the same for everyone, neither is the responsibility for financing transformative repairs and solutions. Harpreet is a lawyer and freelance Policy and Campaign strategist with ten years’ experience in the NGO sector, including at People & Planet, REDRESS, Amnesty International. Tweeting here.

If we want to understand the climate crisis, we have to see it through a lens of unequal power relations. Globally, the poorest countries – which have the lightest climate degradation footprint – are suffering first and worst from climate change. Socio-economic disparities explain why the world’s 50 poorest countries, for instance, sustain just 11% of all environmental hazards, but suffer 53% of the world’s hazard-related fatalities.  

“The legacies and impacts of colonialism, discrimination and neo-liberal policies ensure that people already facing economic, social, cultural and political exclusion are inordinately impacted by extreme weather.”

Between 1850 and 2002, countries in the Global North emitted three times as many greenhouse gas emissions compared to countries in the Global South, where approximately 85% of the global population also resides. Within these countries, and globally, the wealthiest individuals, banks, agri-business and fossil companies are disproportionately responsible. The richest 10% of people produce approximately half of the earth’s climate-harming fossil-fuel emissions, while the poorest half contribute a mere 10%. At a corporate level, 2017 Carbon Majors Study found that just 100 fossil fuel companies were responsible for 71% of anthropogenic GHG emissions. 

Unequal power relations are at play not only in the impacts of climate change, but also in its roots. The legacies and impacts of colonialism, discrimination and neo-liberal policies ensure that people already facing economic, social, cultural and political exclusion are inordinately impacted by extreme weather. As a result, since the 1930s and 40s, countries such as the US and UK have been incurring vast ecological and climate debts. In this context, the Global North’s contribution towards responding to climatic impacts in the Global South – or majority world – is not about aid generosity. It comes down to responsibility.

Institutionalising responsibility for climate loss and damage 

Article 8 of the Paris Agreement, which addresses loss and damage linked to climate change, directly acknowledges that some regions and communities have already reached the biophysical and social boundaries of adaptation to climate change. A working definition of climate losses was put forward as “negative impacts in relation to which reparation or restoration is impossible” by a 2012 UNFCCC (UN Framework Convention on Climate Change) literature review. Climate damage, in contrast, would be reparable. Negative climate change impacts include both sudden-onset events (extreme weather events such as cyclones) as well as slow-onset processes (such as sea level rise and increasing temperatures). Loss and damage can occur in human systems (life, housing, connections to communities and place, livelihoods) as well as natural systems (glacial retreat, land and forest degradation, desertification and biodiversity loss). 

To facilitate financing to address the loss and damage associated with climate breakdown, the UNFCCC has mandated the Warsaw International Mechanism for Loss and Damage associated with Climate Change Impacts (WIM). But despite being requested (back in 2016), to prepare a technical paper elaborating the sources of and modalities for accessing financial support to address climate change loss and damage, the WIM has delayed substantive conversations on financing. 

As a climate justice advocate, I helped compile a set of actions and tools that can be taken to start repairing the already-occurring harmful impacts of climate breakdown, and to prevent unmanageable crises for future generations (read the full April 2019 report for ActionAid). 

Here are the main points related to loss and damage: 

1. Ensure meaningful climate financing for mitigation, adaptation and loss and damage in countries of the Global South. 

After evaluating both market and innovative financing mechanisms, it became evident that market-based financing mechanisms – promoted by countries of the Global North, and the focus of the WIM’s initial work plan – are grossly insufficient in meeting the needs of impacted communities. They also put the burden of financing for premiums on countries least responsible for greenhouse gas emissions to date. 

Let’s take the 2017 Hurricane Maria, which caused devastating damage in Dominica. The economic loss of this disaster alone is estimated at about $1.37 billion. Yet, the regional insurance mechanism (the ‘CCRIF’) paid out $19.3 million, less than 1.5% of the total. Insurance is only available for low probability, high cost disasters as investors bet on insured events not occurring within a specified time in order to make a profit. For-profit companies will not insure inevitable impacts which will cause inevitable financial losses. This excludes victims of slow-onset events (such as sea level rise) from protection. 

But where market options fail, innovative financing mechanisms offer hope. New sources of financing are required, and could include a Climate Damages Tax (on oil, gas and coal extraction) together with a Financial Transaction Tax (a small levy to raise revenue from the trading of financial instruments). Other options include the International Airline Passenger Levy (IAPL), Solidarity Levy, or Bunker Fuels Levy.  

These financing options would not only help mobilise billions – and potentially trillions – for addressing loss and damage. They can also operationalise the ‘polluter pays’ and ‘Common but Differentiated Responsibilities and Respective Capabilities’ (CBDR-RC) principles of international environmental law, given that frequent flyers, fossil fuel and financial companies have the means (and responsibility) to repair climate harms. The CBDR-RC principle recognises the varying contributions to climate change made by different states, and that states least responsible for our climate crisis are also least equipped to respond to the impacts.   

2. Receive, retrieve and allocate funds in consultation with – and prioritising – those most impacted. 

“An intersectional approach to allocating loss and damage funds has the potential to repair and transform the root causes of exclusions and vulnerabilities.”

The WIM was created after three decades of struggle – led by Small Island Developing States and majority world countries – to fully institutionalise a dedicated UN mechanism to address the unmitigated and unadaptable impacts of climate change. It has the opportunity to build on its important mandate and guarantee that the voices of those most impacted by climate breakdown are centred in discussions about how to respond to already occurring loss and damage, and to ensure the fair allocation of financing retrieved. Currently, there is no clear process in place to enable this, and increased transparency about the WIM’s processes would be a first step towards enabling meaningful democratic participation from those at the frontlines of experiencing the climate crisis. 

The ActionAid report also outlines a framework for institutionalising an intersectional approach to allocating accumulated funds among those most vulnerable to climate change impacts. The goal of intersectionality in policy analysis is to identify and address the way specific policies address the inequalities experienced by various social groups. An intersectional approach to allocating loss and damage funds has the potential to repair and transform the root causes of exclusions and vulnerabilities. 

3. Take measures to prevent deepening loss and damage associated with climate change impacts. 

The IPCC’s 6 October 2018 special report on the impacts of global warming of 1.5°C highlighted the significant advantages of limiting global average surface temperature warming to 1.5°C, rather than 2°C. 420 million fewer people would be subjected to frequent heat waves. 50% fewer people would experience climate change-induced water stress. Limiting global warming to 1.5°C above global average surface temperature, compared with 2°C, could also likely reduce the number of people both exposed to climate-related risks and susceptible to poverty by up to several hundred million by 2050. Yet, current Paris Agreement mitigation commitments put us on track for a rise of at least 3°C global average surface temperature increase.  

In this context, it is shocking that Global North countries continue to incur climate debts by eating up the largest shares of the emissions budget and continue to lower the cost of fossil fuel energy production. Currently, the EU’s target is to reduce greenhouse gas emissions by at least 40% by 2030 compared to 1990 levels. In June 2019, an amendment to the Climate Change Act commits the UK to reaching net zero carbon emissions by 2050. But by 2050, the UK would have eaten through its fair share of emissions many times over.  

It is possible to fund a radical justice transition with an ambitious – but attinable – decarbonisation target date of 2030. Reducing the ongoing state subsidies for fossil fuels could raise USD$300 billion, increasing to USD $5.3 trillion when indirect subsidies are included. The USD $5.3 trillion saving could be re-directed to a more just energy, infrastructure, political, social and economic transition. The same would apply to agricultural subsidies, which disproportionately support large-scale agri-businesses that negatively affect access to food, water and health for local populations, and contribute to global heating and loss of biodiversity

“We have to start focusing on mechanisms for social protection with democratic participation by those most impacted, instead of false fixes such as insurance mechanisms, catastrophe bonds and loans.”

No false fixes please

Allowing rich countries to promote unfair market mechanisms and count their contributions to humanitarian assistance or adaptation efforts as ‘loss and damage financing’ deviates the focus from the responsibilities they have over accrued climate debt. Instead, innovative approaches to climate finance are needed, and quick. We have to start focusing on mechanisms for social protection with democratic participation by those most impacted, instead of false fixes such as insurance mechanisms, catastrophe bonds and loans. The WIM’s upcoming five-year review is an important opportunity to promote financing options that repair economic and non-economic losses in a way that protects human rights.

Featured image: Fires in the region of the Chiquitania, in the Bolivian Amazon basin. Juan Gabriel Estellano / Oxfam IBIS.