Martin Wolf: Delay only makes climate action more urgent

The priority of Cop27 in Sharm el-Sheikh is to ensure a continuation of life on this planet as we know it. Yet some argue that the goal of limiting the increase in temperatures above pre-industrial levels to the recommended 1.5 degrees should be declared dead: it is no longer realistic.

Adapting our goals to our failures is a defeat. If we fail to reduce emissions faster, we will end up having to spend far more on adaptation. We will also have to discover ways of removing vast quantities of carbon from the atmosphere. We may even have to adopt the fraught option of geoengineering. True, some, perhaps even much, of this might become inescapable in the end. Indeed, adaptation already is, as Pakistan’s flood disaster shows. Yet we must stop pouring greenhouse gases into the atmosphere. This remains a priority.

Again, some argue that those who have made free use of the global carbon sink for up to two centuries owe reparations to those who have not. The disparity in cumulative emissions per head is stark indeed. Yet once again, diverting attention from the priorities of today to compensation for injustices in the past will lead not to action but to endless and unproductive disputes.

So, what needs to happen if we are to hope even to stay close to the agreed temperature ceiling? The Energy Transitions Commission presents a sobering picture: by 2030, annual CO₂ emissions need to be 22 gigatonnes lower than under “business as usual”; only some 40 per cent of this shortfall is covered by (doubtful) commitments; progress towards making new net zero commitments and putting them in law has slowed; and the likely cumulative emissions of China, India and the high-income countries over the next half century will more than exhaust the residual global carbon budget, rendering large-scale carbon removal inescapable.

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We are in sum all too likely to fail. The biggest difficulty of all lies in emerging and developing countries. How is the development their populations need to be combined with containing and ultimately eliminating emissions of greenhouse gases? Solving that challenge is not a sufficient condition for global success, but it is certainly a necessary one.

We have a global challenge that can only be solved with huge investments, notably in new energy systems

In the high-income countries and China, the challenge, albeit huge, is one of politics and policy. In developing countries, it is also one of access to technology and finance. This is discussed in the report of the Energy Transitions Commission. It is also laid out in detail in Finance for Climate Action, which comes from a high-level expert group.

The problem is soberingly clear. We have a global challenge that can only be solved with huge investments, notably in new energy systems. But our capital markets are fragmented by country risk. The only solution is for rich countries to underwrite a substantial part of that risk by providing concessional finance, both bilaterally and multilaterally, thereby promoting the desperately needed flows of private capital.

In brief, to achieve the necessary transformation in emerging and developing countries, there must be a huge acceleration in investment, a parallel surge in external private finance, a revamped and greatly enhanced role for multilateral development banks (MDBs), a doubling of concessional finance from high-income countries by 2025 over 2019 levels, and imaginative ways of managing the debt problems of developing countries. In round numbers, the world will need to mobilise $1 trillion (€1 trillion) a year in external finance for emerging and developing countries, other than China. This is not about the $100bn a year that the high-income countries promised and have so far failed to deliver. This is about something far bigger than that.

Without all this, the targets laid out in the Paris agreement and Glasgow pact will not be achieved: they will be unaffordable. Some in the high-income group, frightened by these sums, may hope that these countries will spend less and grow less. But, quite apart from being unconscionable, this would mean continuing growth along today’s destructive path of high emissions and large-scale deforestation. The more transformative and more generous path is that of rational self-interest.

This will demand radical policy reforms, notably elimination of distorting subsidies to fossil fuels and carbon pricing

The needs are indeed huge. Emerging and developing countries, other than China, will need to spend some 4.1 per cent of GDP on a “big-push” investment strategy in sustainable infrastructure by 2025 and then 6.5 per cent of GDP in 2030, up from 2.2 per cent in 2019. This will demand radical policy reforms, notably elimination of distorting subsidies to fossil fuels and carbon pricing. One way to achieve the latter might be to maintain domestic prices of fossil fuels at today’s high level as and when world prices fall. A substantial part of the needed additional financing, perhaps as much as half, would, it is hoped, come from domestic resources. But a big part must come from external sources, via public and private partnerships that make the needed flows available.

Yet, as soon as all this is spelt out, people are likely to conclude that it is unrealistic. It is not. The bulk of the additional external finance will come from the private sector and more imaginative use of the balance sheets of MDBs. The high-level group does recommend that annual bilateral concessional finance for climate should rise by $30 billion by 2025. But this would be a mere 0.05 per cent of the GDP of all rich countries.

Nobody can reasonably argue this would be unaffordable. Rather, it is not doing so that would be unaffordable. We are required to fight a war we just have to win. We cannot afford, practically or morally, to leave a world with an irreversibly destabilised climate to the future, possibly even the near future. We should not give up without trying. At Cop27, we must do so, in earnest. — Copyright The Financial Times Limited 2022