How will the Global South pay for climate change damage?

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How will the Global South pay for climate change damage?

Market solutions will just push the responsibility to the countries least responsible for climate change, say Harpreet Kaur Paul and Harjeet Singh.


Lucila Cabrera, 86, sits by her house damaged by Hurricane Maria, a year after the storm hit Puerto Rico, near Barceloneta, Puerto Rico, September 18, 2018. REUTERS/Carlos Barria

The people who have done the least to cause the climate crisis are paying the greatest price. For example, victims of serious droughts in Africa, flooding or very high temperatures in Asia, Cyclone Idai, and now Kenneth through Mozambique, Zimbabwe, and Malawi causing people to move and terrible damage earlier in 2019.

Countries in the Global North had their fair share of carbon emissions years ago. US citizens reached their quota, their limit in 1936, followed by the UK in 1945, and Germany in 1963. Since then, they have been creating climate debts.

These debts bring a responsibility to change very quickly to zero carbon emissions. There is also the responsibility to pay for help, adaptation, and recovery in countries where climate impacts hit hardest. These are also the same countries whose quotas they have used for themselves.

Money talks

The UN had a meeting in Bonn, Germany, in April 2019 - ‘Warsaw International Mechanism for Loss and Damage associated with Climate Change Impacts’ (WIM). The idea was to talk about how to pay to help poorer nations which have already suffered from extreme weather.

But they took financing from the agenda completely. There were protests against this decision by the UN and at first it defended its decision not to discuss money or the technical paper on the same idea. But with more pressure there was a compromise: they could include financing in conversations about the other ‘action areas’ – such as organising responses to sea-level rise and movement of people.

In 2018 discussions in Bonn were also quiet on this same problem. The French, Swiss, British, US, and Canadians said nothing. Germany talked about insurance, a market-based solution, as a magic solution to paying for loss and damage. But these ‘market-based’ solutions are not enough.

Responsibility from the past

There is insurance for low-probability, high-cost disasters but it is not a magic solution. Firstly, countries experiencing climate impacts must pay for the insurance, not the countries who are more responsible. Secondly, it is not possible to insure against slow-onset events or extreme weather events, which happen regularly. This is because investors will only try to make a profit from weather events that do not happen in a specific time period.

Finally, when there is insurance, the insurance money is never nearly enough. For example, in 2017 Hurricane Maria caused terrible damage in Dominica. The cost is about $1.37 billion. But the regional insurance mechanism (the ‘CCRIF’) paid $19.3 million, less than 1.5 per cent of the total cost of economic losses. Green bonds can help to pay for new infrastructure, but they do not pay for recovery when there is damage.

A market for debt

Countries receiving loans organised internationally must often repay them with interest. This means loans are there to make a profit not to repair damage from climate change. The IMF has agreed a no-interest emergency loan of $118.2 million to Mozambique after Cyclone Idai. But it said Mozambique cannot receive debt relief for loans it had already.

And remember that Mozambique is the sixth-poorest country in the world. The average person in Mozambique is responsible for 55 times less carbon emissions than the average US citizen. And the IMF makes big profits from its for-interest loans.

Countries in the Global North often give wrong information about the money they give for climate change. We must not allow them to see their loans and humanitarian aid as money to pay for loss and damage.

Fair changes

So what would non-market solutions look like? Ending state subsidies for fossil fuels (about $5.3 trillion) would free money for a complete change to renewable energy (about $1.7 trillion). This would leave a lot of money to repair the problems of greenhouse gas from fossil fuels.

Progressive taxes such as a Climate Damages Tax on oil, gas and coal with a Financial Transaction Tax, a small tax to raise money from the trading of financial instruments, would help raise billions and possibly trillions for loss and damage. They can also pay for a fair change to a greener economy, that protects and re-trains workers. Fossil fuel and financial companies have the money and responsibility to repair climate damage.

The Warsaw International Mechanism must receive the money necessary for the crisis as it is needed. It must also involve communities that are most impacted by climate change in deciding how to use the money.

Harpreet Kaur Paul is a policy and campaign strategist. She is looking at ways to ensure justice for victims of loss and damage from climate change in her PhD research at Warwick Law School. Harjeet Singh is ActionAid International’s global lead on climate change.


(This article has been simplified so the words, text structure and quotes may have been changed)