When the incoming administration of US President-elect Joe Biden promises a fresh and rational approach to climate change, now is the ideal time to champion a World Carbon Bank that it would transfer and coordinate aid and technical assistance to help developing countries decarbonize. The proposal New green deal in the US and the European Commission European Green Deal they have laudable environmental goals but are too introspective. When an entire building is on fire, concentrating firefighting resources on one floor would only delay, not prevent, its destruction.
According to the International Energy Agency, almost all the net growth in carbon dioxide emissions over the next two decades will come from emerging markets. Although China recently pledged to achieve net zero emissions 2060It is sobering to consider that it accounts for half of the world’s coal production and half of its coal consumption.
India is also highly dependent on its abundant coal reserves, and will likely remain so despite strong advances in solar power. For all the fanfare that accompanies 2015 Paris climate agreement, the share of clean energy in global energy investment remains only about 34%, almost exactly the level of five years ago. Wind and solar energy represent only 8% of the world’s energy. The IEA estimates that allowing existing power plants to operate for the remainder of their intended useful life in their current form would in itself cause a rise in global temperature by 1.7C relative to pre-industrial levels.
Right now, the most discussed approach to encourage developing economies to reduce their CO2 emissions is a carbon border tax on imports from countries without adequate carbon pricing systems. The EU is considering Such a move and the Climate Leadership Council (whose members include incoming U.S. Treasury Secretary Janet Yellen) has also defended that.
Economists almost universally favor carbon taxes (The European carbon pricing system is a clumsier version) for producers and consumers to take into account how their actions affect the global commons. A tax adjustment at the border is aimed at encouraging developing economies to introduce their own carbon taxes. The policy is conceptually sound, but it is too static and difficult to implement.
For starters, developing economies have neither the resources nor the technology to transform overnight. Part of the reason advanced economies have been able to mitigate their CO2 emissionsemissions is that global manufacturing has migrated to emerging markets that have invested heavily in energy.
The average age of coal plants in Asia is 12 years, compared to 43 years in advanced economies. Given that the lifespan of a coal plant is approximately 50 years, and coal is one of the few natural resources that China and India possess in abundance, the cost to developing countries in Asia of decommissioning their coal plants is huge. And then there is Africa, where the number of people lacking access to electricity has risen during the Covid-19 pandemic, to almost 600 million.
The gap between the developing world’s ability to cope with climate change and the ambitious plans being discussed in advanced economies is just another example of the huge disparity in wealth and resources between the global North and the global South. In response to the coronavirus crisis, for example, advanced economies gathered fiscal and credit support in 2020 averaging more than 16% of GDP, compared to 6% in emerging markets and 2% in developing economies, according to the International Monetary Fund. And this wide gap does not take into account the possibility that the pandemic-related debt buildup will morph into a full-blown debt crisis for developing countries over the next two years, making carbonization even more difficult.
The global price of carbon is an essential part of any long-term solution to the climate crisis, but advanced economies must provide the developing world with a carrot and not just a stick. This should come in the form of highly concessional financing, combined with technical expertise and sharing of best practices, all guided by a World Carbon Bank.
The IMF, World Bank, and regional development banks have an important role to play, but their mandates are too diffuse for them to effectively tackle the climate challenge on their own. Meanwhile, those who think that government-to-government assistance should play no role in climate solutions should keep in mind that state-owned companies, which are not overly responsive to economic incentives, to dominate the global coal industry.
Is it too optimistic to think that advanced inland economies will ever be willing to commit large amounts of aid (at least $ 100-200 billion a year) to help the developing world meet climate goals? The response to the Covid-19 crisis so far offers little encouragement; The G20 debt service suspension initiative has provided few billion dollars of relief for 40 very poor countries, but that pales in comparison to the billions that rich countries have spent on their own citizens. An improved carbon tax or pricing regime could be a sustainable long-term source of finance, but the problem is too urgent to wait for this to happen.
The goal of achieving net zero CO2 emissions by 2050, which the EU has adopted and the US is likely to do soon, is to be commended. But not in my backyard, or nimby, environmentalism is not a way to solve a global problem.
• KennetLogoffff is professor of economics and public policy at Harvard University and was the chief economist of the International Monetary Fund from 2001 to 2003.
George is Digismak’s reported cum editor with 13 years of experience in Journalism