Living in the COVID World ... and Beyond #37: Where is the Money to Address the Climate Crisis?
It has been estimated by McKinsey, a global consulting firm, that $275trillion will be required over a 30-year period (up to 2050) to successfully address the climate crisis. This breaks down to a bit over $9trillion per year.
Where will this money come from?
I believe that there are four (4) key financial sources that can be drawn upon:
1) Individual wealth accumulation,
2) Corporate profits, especially gained through environmental degradation,
3) Government subsidies currently allocated to fossil fuel companies, and
4) Government military spending.
Individual Wealth Accumulation
The number of billionaires has doubled over the last 10 years and their combined wealth has also doubled, so that there are now over 2,000 billionaires with wealth of approximately $12 trillion. The world’s richest 1% has about 38% of the global wealth. The wealthiest 10 multi-billionaires now own more wealth than the most impoverished 3.1billion people, and the wealth of those 10 people has doubled since the start of the pandemic in March 2020. Clearly, economic inequality is great, and getting greater.
Not only are the rich getting richer at unprecedented rates, but they also contribute the most carbon emissions. The world’s richest 10% are responsible for almost one half of all emissions.
There are proposals to tax wealth, to tax financial transactions (largely exercised by the wealthy), and to increase taxes on high earners. These taxes would generate trillions of dollars per year.
Corporate Profits
The profits of the five largest oil and gas companies has doubled in 2022 compared to 2021 (see Blog #27 for details).
After having previously announced plans to curtail new fossil fuel projects, given the increased profitability of the industry, these same companies have now generated and communicated plans for many new projects.
A recent analysis documented the global emissions of the top 21 fossil fuel companies between 1988-2022. The study attributed one third of the damage from fossil fuel emissions -- $23trillion – to fossil fuel companies. Taking responsibility for their damage caused, these companies are accountable to pay $893billion per year from 2020-2050. And they can afford to do so based on their profits.
Windfall taxes can be initiated on the profits generated from fossil fuel companies.
Government Subsidies for Fossil Fuel Projects
The United States, Germany, and other Global North countries are using public monies to support fossil fuel projects. In early September 2023, it was reported that over $4billion was recently pledged for new projects.
Subsidies from the government for fossil fuel are not only for extraction projects but also to underwrite the purchasing of oil and gas. In 2020, global subsidies related to fossil fuel were $5.9trillion and this increased in 2022 to $7trillion.
Governments can decide to stop all subsidies for fossil fuels.
Government Military Spending
The United States defense budget is $800billion in 2022, and global defense spending was $2.1trillion. This represents only defense department spending and not the entire military industrial complex which includes many companies that generate profits from making and selling armaments for wars.
The United States military is the world’s largest institutional oil consumer. It causes more greenhouse gas emissions than 140 nations combined and accounts for one-third of America’s total fossil fuel consumption. The United States Department of Defense also uses huge amounts of natural gas and coal, as well as nuclear power plants at its bases around the country.
Military spending can be reduced, and taxes increased on war profiteers.
Conclusion
There is enough money that could be collected and allocated to successfully address the global climate crisis. The issue before us to change the policies, attitudes, and behaviors that are guiding the current financial choices. And that will be the topic for an upcoming blog. Stay tuned!