COP29 – Rethinking Climate Finance Responsibility

Fausto Corvino

The upcoming COP29, to be held in Baku, Azerbaijan, from 11 to 22 November 2024, will be crucial for climate finance. Governments will have to conclude negotiations on the so-called New Collective Quantified Goal (NCQG) on international climate finance, as set out in the 2015 Paris Agreement. What might a fair distribution of the NCQG burden entail? In light of this question, Fausto Corvino examines policies that shift the costs of international climate finance to the global rich, who have not only emitted disproportionately but also have the greatest financial capacity to contribute to climate action.

The upcoming COP29, to be held in Baku, Azerbaijan, from 11 to 22 November 2024, will be crucial for the climate. Governments will have to conclude negotiations on the so-called New Collective Quantified Goal (NCQG) on international climate finance, as set out in the 2015 Paris Agreement. This is the money that developed countries have pledged to provide to developing countries since 2009, on top of their other international aid commitments and on a concessional basis. And, based on a series of international treaties since the 1992 Rio Declaration, it is assumed that developed countries will have to shoulder the international climate finance burden in proportion to both their past and current emissions and their level of socio-economic development – in other words, in accordance with the so-called “principle of common but differentiated responsibilities and respective capabilities“.

The NCQG is intended to cover the resources needed by developing countries to meet the mitigation goal of keeping global warming to possibly no more than 1.5°C above pre-industrial levels, as set out in the 2015 Paris Agreement, to implement adaptation measures, and to compensate the victims of climate change that is now unavoidable. To understand the numbers we are talking about, according to the Independent High-Level Expert Group on Climate Finance, developed countries will need to provide about $1 trillion per year to developing countries and emerging economies (excluding China) to enable them to meet the above objectives.

Going beyond Annex II countries?

It is clear from all this that the thorniest issue on the COP29 negotiating table will be China. Currently, the only countries covered by the international climate finance commitments are those that were members of the OECD in 1992, also known as Annex II countries of the 1992 Rio Declaration, i.e. a group of rich European countries plus the United States, Canada, Japan, Australia and New Zealand. If things remain as they are, China will have no obligation to pay any of the costs of the NCQG,  despite being the world’s second largest economy and the world’s largest producer of greenhouse gases (in total). Developed countries are pushing to move beyond the country categorisation we have been using since 1992, and thus to call on emerging economies like China to play their part in the NCQG. China can, of course, respond that its role as a major global polluter has to be substantially downgraded, taking into account the number of people living in China (in terms of GHG emissions per capita, China is outside the top 30 countries in the world), its legitimate interest in developing rapidly as historical polluters have done, the fact that, unlike historical polluters, China now exports more emissions (embedded in the goods and services it produces for other countries’ markets) than it imports, and China’s role in unlocking and exporting green technologies.

The key question, however, is whether the best solution for a fair distribution of the NCQG burden is to broaden the base of contributors, as developed countries have been advocating, or whether we should simply stop framing the issue of responsibility for international climate finance only in terms of countries and also look at socio-economic groups. The latter view is supported by recent economic research showing that the income (or, more generally, wealth) group to which you belong now says much more about your carbon footprint than the country in which you live.

The climate responsibilities of the global rich

More generally, we are confronted with what the social scientist Dario Kenner recently called a ‘polluting elite‘, essentially made up of (US dollar) millionaires and above, scattered around the world and the main culprits in the worsening climate crisis. Recent research by Stefan Gössling and Andreas Humpe, for example, calculates that the number of millionaires in the world (in 2020 US dollars) will grow from less than 1% to more than 3% of the global population by 2050, and that by that time these people alone will have consumed about 72% of the sustainable greenhouse gas (GHG) emissions budget compatible with the 1.5ºC mitigation target. Similarly, the 2022 World Inequality Report tells us that today the average GHG emissions of the richest 0.1% of the world’s population are more than 400 times higher than the per capita average compatible with the 1.5ºC mitigation target, while those of the global poor (or bottom 50%) are close to the sustainable average and those of the global middle class (or middle 40%) are only six times higher than the sustainable average.

If there is one thing that all different views of climate justice can agree on, it is that the world’s rich should pay the lion’s share of the NCQG. They have emitted disproportionately more than anyone else for their own consumption, have chosen to put their capital into far more fossil fuel investments than compatible with the state of the climate crisis, have appropriated much of the wealth derived from climate-altering activities, and as a result would now have the greatest capacity to contribute to climate action.

In this context, the Chinese issue could be seen in a different light, namely that of social class rather than nationality. It is certainly true that the current governance of international climate finance, which is likely to be reflected in the NCQG, is unfair. There is no reason why a member of the global middle class living in a developed country (such as a European citizen with a gross income of less than €1,500 per month) should bear the burden of the NCQG, for instance because their government has to raise taxes or cut public spending to finance climate action in developing countries, while a millionaire living in an emerging economy like China or India sits on the sidelines. At the same time, it would be equally unfair for the global poor living in China or India to be asked, even indirectly, to deal with the climate problem for which they have no responsibility and of which they are often among the main victims.

How to make the global rich pay for climate action

But how can we ensure that the NCQG burden falls mainly on the global rich and much less on the global middle class, and not on the global poor? We would need governments to agree on harmonised policies to shift most of the costs of the NCQG onto the global rich resident in their territories. One solution, as climate expert Laurence Tubiana recently pointed out, would be to adopt the so-called Brazilian proposal, developed by the French economist Gabriel Zucman (Brazil will, among other things, chair COP30 in 2025): a 2% annual global wealth tax on (US dollar) billionaires, which could raise between $200/$250 billion per year (depending on different tax avoidance scenarios) or up to a quarter of what would be needed to finance a sufficiently ambitious NCQG (plus an additional $100/$140 billion per year if the tax were extended to all those with assets of at least $100 million). The Brazilian proposal, originally launched by the Lula government, has also received support from France, Spain and South Africa. Its main limitation, however, is that it would put billionaires who have irresponsibly invested in the exploitation of fossil fuels on an equal footing with those who have pioneered the development of green technological solutions. Another hypothesis, also mentioned by Tubiana, is that of a global progressive carbon tax, i.e. with a higher rate for the rich. One way to implement this is to introduce income thresholds that trigger higher carbon tax rates (the more money you earn, the more you pay to emit a tonne of CO₂), another is to introduce emission thresholds for the same purpose (the more emissions you produce, the closer you get to thresholds that trigger higher carbon tax rates for the emissions you produce thereafter). But of course the administrative complications of tailoring carbon taxes are enormous, especially at the global level – for example, the emissions-based version of the global progressive carbon tax requires governments to keep track of how much each of us emits, which is certainly no easy task. An alternative is to use a mix of a luxury carbon tax on the ownership and/or use of conspicuous and emission-intensive items (e.g. superyachts, private jets, supercars), which is relatively easy to administer, and a carbon tax on shareholder income, perhaps restricting the latter only to polluting investments made by people above a certain wealth threshold.

The road to this paradigm shift is clearly uphill. Reaching international agreement on one or more of the above policy options will require enormous political effort, and time is unfortunately running out. This is a classic global collective problem, and no government has any interest in acting unilaterally to hold the world’s rich to their climate responsibilities, because they have various weapons with which to retaliate. What we in public opinion can do is to continue to insist that the issue of the fair distribution of the costs of international climate finance is addressed by governments from the right perspective, focusing not only on states, but also on individuals and the social groups to which they belong, regardless of their nationality.

Fausto Corvino is a Marie Skłodowska-Curie Postdoctoral Fellow in Philosophy at the Hoover Chair in Economic and Social Ethics at UCLouvain (Belgium). Previously, he was a postdoctoral fellow in philosophy at the University of Gothenburg (Sweden), the University of Turin (Italy) and the Sant’Anna School of Advanced Studies (Pisa, Italy). He holds a PhD in Politics, Human Rights and Sustainability from the Sant’Anna School of Advanced Studies, with research in political philosophy. His main research interests are climate justice, intergenerational justice and economic ethics.

DISCLAIMER

Fausto Corvino received funding from the European Union’s Horizon Europe research and innovation programme under the Marie Skłodowska-Curie grant agreement No 101109449 (PROHIBLUX). Views and opinions expressed are however those of the author only and do not necessarily reflect those of the European Union or the European Research Executive Agency (REA). Neither the European Union nor the REA can be held responsible for them.