Global Deal: $300 Billion is a Lot Less Than $23 trillion

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Three hundred billion is a very big number. It is the dollar figure being bandied about as what’s needed to finance a global climate solution. But as the developed world balks at the price tag, it’s worth considering a much bigger sum: 23 trillion.

Twenty-three trillion is also a very big number.

Twenty-three trillion years would be 6,000 times longer than the Earth has been around. Twenty-three trillion hours would be 2.6 billion years. Both are unthinkably long spans of time.

But as a financial quantity, twenty-three trillion has recently acquired the tangible quality of debt — not once, but twice over.

It’s the total sum of dollars that the Federal Government could end up paying to bailout the financial system in a worst-case scenario. It’s also roughly the dollar value of the carbon debt that the developed world owes to the Global South.

As far as we know, it is an accident that the calculations of both these things has converged on the same massive number — 23 trillion – but the coincidence is worth exploring nevertheless.

The calculations provide a measure of the indebtedness of the developed nations for the prosperity it enjoys to both other nations and the planet itself, and makes $300 billion seem like a hundred-fold bargain for averting the climate crisis.

Neil Barofsky is the special inspector general for the government’s financial bailout programs. According to the testimony he delivered in Congress about a month ago, the US government is on the hook for 23 trillion dollars worth of bailouts in a worst-case scenario. If all the economic lifelines, bailouts, bank-rescues, assumed liabilities and sundry other guarantees and expenses that were part of the bailout “required” to keep the American economy afloat came due, the bill to taxpayers would be $23 trillion.

So far only about 2 trillion dollars have been spent. That’s equivalent to 15 percent of the nation’s $14 trillion annual GDP.

Here’s what Barofsky said in his testimony:

"Since the onset of the financial crisis in 2007, the Federal Government, through many agencies, has implemented dozens of programs that are broadly designed to support the economy and financial system. The total potential Federal government support could reach up to $23.7 trillion."

It is a frightening number, an oversue of the economy’s capacity to extend credit. It is not much different from the carbon debt that has been incurred from the overuse of the atmosphere and the oceans as a dumping ground for carbon emissions.

Calculating carbon debt is likewise complex, but guessable, with help from the British economist Nicholas Stern, who suggests a value for carbon at $40 a ton in his book the The Global Deal. How much anthropogenic carbon is there? Martin Khor, writing in the Malaysian Star, calculated roughly 600 billion tons of global anthropogenic emissions between 1800 and 2050 — assuming CO2 is stabilized at 450 ppm.

Of course, carbon emissions have not been generated uniformly. By 2008, developed nations had already burned about 240 billion tons of carbon. Even assuming an 85 percent reduction from 1990 levels by 2050, the developed nations would still emit another 80 billion tons.

As Khor calculates:

Given their ratio of world population, the equitable share of the carbon budget for developed countries is 125 billion tonnes while developing countries would be 475 billion tonnes.

The developed countries, however, have already emitted 240 billion tonnes of carbon between 1800 and 2008. This is far above their “fair share” of 81 billion tonnes in that period.

Given these numbers, it possible to calculate the “carbon debt.” The developed world is currently in arrears for 159 billion tons of carbon. That translates into 583 billion tons of CO2, worth a little more than $23 trillion dollars if priced at $40 a ton.

A wild amount, one objects! It is indeed, and coincidentally equal in size to the potential debt US taxpayers will face if in a nightmare scenario all bailout bills come due.

In the context of a $46 trillion debt, what the UN Secretary general is asking to close a global deal seems modest: $300 billion a year.

(Based on reporting by Max Ajl.)