Who should pay for climate damage?

Why is compensation against loss and damage due to changing weather events on the main agenda at COP27? What is the amount required to meet the world’s climate goals? Where does India stand when it comes to global greenhouse gas emissions?

The story so far: At the G-20 summit in Bali, rich nations including the U.S., Japan and Canada have pledged $20 billion to wean Indonesia off coal. The U.S. and Japan have led the International Partners Group to mobilise funds from the public and private sector to support Indonesia’s efforts to reach carbon neutrality by 2050. But a lot more needs to be done, and in that context it is significant that at the ongoing Climate Change Conference (COP27) in Egypt, compensation against loss and damage due to climate change is finally on the main agenda, unlike previous years.

Between 1900 and now, developed countries have benefitted from industrial development, which also led to greenhouse gas (GHG) emissions. Developing countries were relatively late in starting out on economic development. They may be contributing to emissions now, but that is a weak reason to ask them to stop economic development. A farmer in rural Africa can claim that his country has not added to emissions historically, but because of the U.S. or Russia’s industrialisation, his agriculture yields are declining. Or an urban worker in South America has to work, without choice, in unforgiving heat wave conditions caused by the developed world’s emissions of the past. Therefore, options like financing the developing or underdeveloped countries by the developed world have been discussed.

But as a popular newsletter Finshots asked, who decides who should pay whom and how much? Ourworldindata.org cites data from the Global Carbon Project to show that between 1751 and 2017, 47% of the CO2 emissions came from the U.S. and the EU-28. In total, just 29 countries.

A paper published by Springer Link under the Climate Change umbrella earlier this year shows that emissions attributable to the U.S. over 1990-2014 caused losses that are concentrated around 1–2% of per capita GDP across nations in South America, Africa, and South and Southeast Asia, where temperature changes have likely impacted labour productivity and agricultural yields.

But emissions may have also helped a few countries, such as those in Northern Europe and Canada. Moody’s Analytics estimates that by the middle of the century, Canada would see a rise in GDP of 0.3% (about $9 billion a year) as warmer climates spur agriculture and labour productivity. The Canadian Climate Institute cautioned that such a claim was not wholly true and that other factors must be considered. For example, climate change-spurred floods could cost Canada $17 billion annually by 2050.

In these war of words, the only certainty is the fast-approaching calamity. The UN Environment Programme’s annual emissions gap report for 2022 released late last month said the “international community is falling far short of the Paris goals, with no credible pathway to 1.5°C in place. Only an urgent system-wide transformation can avoid climate disaster.... The world must cut emissions by 45% to avoid global catastrophe.”

The report says that India is among the top seven emitters (others being China, the EU-27, Indonesia, Brazil, the Russian Federation and the U.S.). These seven, plus international transport, accounted for 55% of global GHG emissions in 2020. Collectively, G-20 members are responsible for 75% of global GHG emissions.