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140+ Experts to Rich Nations: Redirect Trillions in Public Money to Curb Climate, Inequality Crises

June 20, 2023

More than 140 economists and policy experts on Monday published an open letter calling on the leaders of rich countries to combat the life-threatening crises of climate change and inequality through the downward redistribution of trillions of dollars in public money.

“Stopping climate breakdown is not rocket science,” economic anthropologist Jason Hickel, who signed the letter, said in a statement. “Governments need to stop subsidizing fossil fuel companies; international banks need to cancel the external debts of Global South countries; and we need to tax extreme wealth.”

“These steps would liberate trillions of dollars for public investment to achieve democratically ratified social and ecological objectives,” said Hickel. “Recent research shows that millionaires alone are on track to burn 72% of the remaining carbon budget for 1.5°C. This is an egregious assault on humanity and the living world, and none of us should tolerate it. We need to understand that it is dangerous to continue supporting an over-consuming elite in the middle of a climate emergency.”

The letter comes just days before the start of the Summit for a New Global Financing Pact. The stated aim of this week’s meeting, hosted in Paris by French President Emmanuel Macron and Indian Prime Minister Narendra Modi, is “to build a more responsive, fairer, and more inclusive international financial system to fight inequalities, finance the climate transition, and bring us closer to achieving the sustainable development goals,” but recent reporting suggests that participants are not on track to deliver.

In this context, dozens of social scientists and justice advocates urged delegates from the Global North, which has played an outsized role in shaping the world’s financial architecture and in polluting the atmosphere with heat-trapping gases, to ensure that substantive reform is on the summit’s agenda.

The time has passed for wealthy governments to pay their fair share toward lifesaving climate action and poverty reduction, the scholars and activists argued, starting by halting subsidies to fossil fuel corporations, nixing debts held by formerly colonized nations, and hiking taxes on the superrich—all of which would free up funding to slash planet-heating emissions and rectify the maldistribution of resources.

“Unlocking and redistributing public trillions is of course only part of what is needed—our international monetary, trade, tax, and debt rules are systematically skewed towards the Global North, allowing wealthy countries to drain a net $2 trillion a year from low-income peers,” states the letter. “We need a dramatic transformation of this system to one that is rights-based, people-centered, democratic, and transparent.”

“But underpinning almost all excuses to keep the rules as-is is the notion that wealthy governments simply cannot afford to pay their fair share,” the letter continues. “Unless we burst this bubble, it will be hard to cultivate the global solidarity needed to progress in urgent multilateral climate and humanitarian negotiations.”

“The reality is that public finance is not scarce, especially for Global North governments,” it adds. “We saw them make trillions of dollars in fiscal space available for bank bailouts in 2008, for Covid-19 responses since 2020, and for militaries and police forces year after year. They have no shortage of levers to pay their fair share for the public interest climate and cost-of-living solutions that are desperately needed—both within their borders and abroad.”

Signatories warned that

“the most prominent proposals from Global North leaders in the lead-up to the summit show there is a risk it becomes an effort to simply rebrand existing approaches.”

“So far, the World Bank Group Evolution Roadmap, Just Energy Transition Partnerships, and Global North country negotiating positions on the climate ‘loss and damage’ fund all rely heavily on the idea that governments can incentivize private banks and corporations to build climate solutions and spur development with only small public contributions and rule tweaks,” the letter notes. “From the ‘Billions to Trillions’ agenda to the still-unfulfilled $100 billion year climate finance promise we have seen this approach fail again and again, with far less private money leveraged than promises and profits prioritized over climate and inequality benefits—or often even basic human rights safeguards.”

As an alternative, the signatories implored Global North leaders to “show they are serious about charting a new path by using the summit to begin shifting funds away from the parts of our economies that are most dramatically driving our current crises.”

To that end, the letter implores wealthy governments to:

1. Stop funding fossils—instead make companies pay for their damages.
While low-income households around the world have been pushed further into poverty over the last few years, oil and gas companies made record profits and wealthy countries continued to heavily subsidize them. This does not just defy economic justice, but climate science too: In the International Energy Agency (IEA) scenario that maintains a 50% chance to limit global heating to 1.5°C there is a rapid phaseout of fossil fuels, and no new investments in new fossil fuel production or [liquefied natural gas] infrastructure. Ending fossil fuel handouts in high-income G20 countries alone would raise about $500 billion a year. And prominent estimates of a permanent answer to fossil fuel ‘windfall’ taxes range start between $200300 billion a year.

There is also already momentum to stop a particularly influential form of fossil fuel support, international public finance. Pledges so far would end a key $38 billion a year that plays an outsized role in enabling large fossil infrastructure lock-in in wealthy countries and shift it towards renewable solutions. If a few key laggard countries including Japan, Germany, Italy, and the United States keep their overdue promises to do this at the summit, it will go a long way to cementing fossil-free public finance as a global norm.

2. Cancel illegitimate Global South debts.
The last few years of global crises have compounded already untenable debts in many developing countries, draining public funds that are critically needed to deliver both vital social services and climate action. These debts are also unfair, having been incurred through our neo-colonial global financial system or in many cases during colonization.

Two very first steps Global North leaders can take at the Paris summit are to unconditionally cancel public external debt for at least the next four years for all lower-income countries (estimated at $300 billion a year) and to support rather than block the development of a new multilateral mechanism for sovereign debt cancellation and workout under the United Nations.

3. Tax the rich.
The wealthiest 1% have captured two-thirds of new global wealth created in the last two years, all while we are likely seeing the biggest increase in global inequality and poverty since World War II. Progressive taxes on extreme wealth starting at 2% would raise $2.5 to 3.6 trillion a year, and related proposals to crack down on tax dodging would significantly augment this.

Global North leaders can show they are serious about this by starting with an initial “1.5% for 1.5°C” tax on extreme wealth and dedicating this to the new ‘loss and damage’ fund, and by agreeing to advance a universal and intergovernmental U.N. tax convention.

According to the signatories,

“Together, these modest proposals add up to $3.3 trillion a year—new research in Nature Sustainability estimates the fair climate debts of wealthy countries are double this at $7 trillion a year to 2050.”

“But even this initial redirection of harmful economic flows would have staggering impacts,” says the letter. “It would be enough to close the universal energy access gap ($34 billion), fill the ‘floor’ of the ‘loss and damage’ fund ($400 billion per year), meet the overdue climate finance target fully with grants ($100 billion per year), and cover emergency U.N. humanitarian appeals ($52 billion per year) with plenty to spare.”

“These commitments would also go a long way in opening the political space needed to retool our global financial architecture so that it can effectively and fairly channel the public money needed to steer us out of the polycrisis,” the letter concludes. “We can’t afford anything less.”

 

Teaser photo credit: Child labour in a quarry, Ecuador. By Maurizio Costanzo – Flickr: Ecuador – Morona Santiago. Gold washer 1990, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=20257122

Kenny Stancil

Kenny Stancil is a staff writer for Common Dreams.

Tags: debt jubilees, economic inequality, fossil fuel subsidies, wealth tax