We must think beyond market mechanisms to fund an internationalist Green New Deal which repairs loss and damage globally.
Calls for a Green New Deal are quickly sweeping radical movements for climate justice across the Atlantic, having been popularised by the Sunrise Movement and Alexandria Ocasio-Cortez in the US.
The UK Student Climate Network - behind #YouthStrike4Climate in the UK - have adopted the demand just weeks after the formation of Labour for a Green New Deal. One limiting factor of the proposal so far, though, has been its limitations within the nation state.
I recently made the case for an internationalist Green New Deal to rebalance the global political economy while equitably decarbonising together. Our vision for a prosperous future underwritten by climate stability must extend beyond the borders of the US or UK. Practically, this means states and companies most responsible for climate breakdown paying for the global transition through transfers of resource, skills and knowledge.
What does this mean for the budgets of those countries most liable to foot the bill? It requires abandoning austerity ideology which has gripped western politics since the 2008 financial crisis. It means rediscovering willingness to heavily spend and invest to fund infrastructure, technology and services globally.
Action Aid's recent report, authored by Harpreet Kaur Paul, 'Market solutions to help climate victims fail human rights test', offers a number of compelling proposals for mechanisms available to equitable finance reparations for loss and damage related to climate harms as part of a transformative, internationalist Green New Deal.
The report makes it clear that a departure from business-as-usual is necessary to repair for financial losses of climate change. It reviews a number of market mechanisms for raising funds, finding that none can reliably generate the revenue required to match the projected USD$300 billion per year by 2030 and USD$1.2 trillion by 2060.
Significantly, market mechanisms also fail on human rights and push the burden of funding loss and damage back onto the developing countries least responsible for climate change.
Mechanisms considered included catastrophe risk insurance which was deemed “grossly inadequate in repairing loss and damage” in terms of amounts paid out.
For-profit insurance companies don't cover “slow-onset events” like sea level rise and desertification because these inevitable impacts are sure to obliterate their profit margins.
Green bonds focus on prevention but often “do not define what qualifies as green or exclude specific categories” leaving open the possibility of supporting fracking or biomass projects which fail indigenous rights or degrade forest and biodiversity.
Catastrophe bonds which “are inherently about spreading risk” and so do not incentivise proactively building a sustainable environment. The most vulnerable states end up paying premiums and have less negotiating power.
The report proposes that by diverting the USD$5.3 trillion spent globally on subsidising the fossil fuel industry, we could fund a just transition to renewables and address loss and damage with associated savings, instead of relying on the market ideology currently precipitating climate breakdown.
The report makes the case that renewables technology exists and would cost around 35 percent of what states currently spend on fossil fuel subsidies. Evidently, this is not a question of economics but political will.
With governments predominantly in service of fossil fuel executives, we need to build a new political common sense around climate change in favour of marginalising fossil capital from public life.
In the US, Democratic Presidential candidates have begun to refuse donations from the fossil fuel industry. In the UK, hundreds of MPs have committed to divesting their pension fund.
Across the Atlantic and beyond, politicians must take the next step and commit to delivering a Green New Deal which defunds and dismantles the fossil fuel industry.
During the transition to a zero-carbon society, there are innovative finance mechanisms the report proposes to fund repairing loss and damage consistent with transforming the economy.
A small Financial Transactions Tax could raise over USD$60 billion a year to fund repairs for loss and damage. It could be structured so that it encourages investment in projects contributing to mitigation and adaption, for example through tax breaks on projects meeting certain criteria.
Leveraged against the financial institutions which continue to finance fossil fuel extraction globally, the financial transactions tax raises funds by targeting responsible actors rather than the victims of climate breakdown.
A Climate Damages Tax on oil, gas and coal extraction could raise up to $1,000 billion a year. Similarly, it targets the perpetrators of climate breakdown leveraging the tax against companies profiting from the extraction.
As well as raising funds during the transition, the tax could damage the industry's profitability and incentivise it to diversify its activities.
Some argue that a Climate Damages Tax universally implemented could pay for all of the costs of loss and damage as well as funding just transition programmes towards a fossil free economy.
These will all be true to an extent and we should advocate for progressive taxes targeting those who have profited most from inducing climate breakdown. But our aim is to remake the whole political economy.
The appeal of a Green New Deal is in transitioning the energy system not just to renewables, but to public ownership and democratic ownership away from dominance by huge corporations like Shell and BP. We mustn't let the revenue we stand to generate from taxing the bad guys stand in the way of efforts to bring them down.
These innovative mechanisms to raise funds for loss and damage are consistent with a transformational program.
A Green New Deal coming out of the US or UK must take seriously the imperative to repair loss and damage where it is already felt alongside a just transition.
The public should be enthusiastic to invest in a prosperous future for all. The Green New Deal is an investment that will pay off.
But we should be equally willing to make the banks and fossil fuel industry pay for that investment. They've stolen enough from us already. Its payback time.