Correction: A previous version of this newsletter incorrectly listed the nations donating to the global loss and damage fund. It has been updated to reflect that Austria pledged about $50 million.
After decades of delays, excuses and outright resistance, a small but growing number of wealthy European countries have committed to paying direct aid to developing nations to help them deal with the climate crisis, which burdens them disproportionately even though they had little to do with causing it.
Delegates at COP27 will officially discuss for the first time the creation of a global fund for “loss and damage”—the idea that rich nations are largely responsible for causing global warming and therefore owe a financial debt to poorer countries struggling to deal with the costs of worsening drought, storms and other climate-fueled disasters.
For 30 years, developing countries—predominantly in the Global South—have called for such a fund and been met with resistance. But this week, several European countries committed to begin paying that debt with cash, signaling a notable shift in the decadeslong fight and marking one of the most surprising developments so far this year at the United Nations’ cornerstone climate summit.
“The COP must make progress on minimizing and averting loss and damage from climate change,” European Commission President Ursula von der Leyen said during her Tuesday speech at the conference in Egypt, during which she encouraged other world leaders to also support the loss and damage fund. “It is high time to put this on the agenda.”
As of Friday morning, Germany has pledged $170 million for the fund, while Austria has pledged about $50 million, Ireland has pledged $10 million and Belgium has promised $2.5 million. Scotland—which pledged $2.2 million to the cause when it hosted COP26 last year—increased that commitment this week by an additional $5.7 million. And in September, Denmark promised $13 million to the effort.
The announcements, however, were met with mixed reactions from climate activists and world leaders living in some of the world’s most climate-vulnerable places, including Pakistan, which suffered deadly and historic flooding this year that left a third of the country underwater for months.
At just over $250 million, the recent commitments fall drastically short of the $200 billion in annual funding for “climate reparations” that the U.N. says is needed this decade alone to adequately address the issue. It also falls far below the $100 billion in annual international climate spending that the world’s wealthiest nations previously promised in a similar 2009 U.N. agreement, but have failed so far to deliver.
Two of the most significant carbon emitters, the United States and China, were also notably absent from the slew of announcements. Since the beginning of the Industrial Revolution, the U.S. has produced roughly a quarter of the world’s total greenhouse gas emissions, making it by far the most significant overall contributor to the climate crisis, according to 2020 data from the Union of Concerned Scientists. And in the short span of China’s industrial boom, it quickly became the second leading historical contributor, responsible for 14 percent of total emissions.
Rather than committing federal dollars directly, the U.S. announced this week that it was launching a global carbon market as soon as next year, saying it would help raise money for developing countries by selling so-called “carbon credits” to companies that want to offset their emissions. Switzerland, too, announced a similar plan to leverage money raised through carbon credits to pay for its climate commitments. And China said it would be willing to participate in a global carbon market scheme once it’s up and running.
Carbon markets are financial schemes that allow a participant to pay other people to reduce their emissions rather than the participant reducing its own emissions. For example, Company A could pay Company B to plant trees or upgrade their buildings to make them more energy efficient, which in theory will reduce overall greenhouse gas emissions going into the atmosphere. But Company A isn’t necessarily reducing its own emissions—it’s paying other companies to reduce theirs.
But carbon markets, along with other voluntary market-based solutions that rely on incentives, not regulation, to reduce emissions, have long been a source of controversy in the climate community. It’s not surprising, then, that the U.S. announcement this week was met by fierce backlash from environmental advocates who say carbon markets rarely deliver the climate benefits they promise, suffer from poor management and regulation and delay meaningful efforts to reduce greenhouse gas emissions by promising to address the issue in the future. Rather, advocates say, that money should be spent on proven climate solutions, such as building new renewable energy sources.
Take California, for example, which runs one of the world’s largest carbon markets. Instead of reducing their own emissions, companies participating in the state’s carbon market—including major conglomerates like Microsoft—have poured billions of dollars into projects that planted trees. But even though an estimated 153,000 acres of forests that were part of the state’s carbon market burned in wildfires last summer, the companies can still claim those forests for credits in the program.
In fact, just a day prior to the U.S. announcement this week, U.N. Secretary-General Antonio Guterres warned delegates not to rely on carbon markets to achieve their climate goals.
“The absence of standards, regulations and rigor in voluntary carbon market credits is deeply concerning,” Gutteres said in a speech Tuesday. “Shadow markets for carbon credits cannot undermine genuine emission reduction efforts, including in the short term. Targets must be reached through real emissions cuts.”
On Thursday, U.S. climate envoy John Kerry defended the carbon market plan, saying there was “not enough money in any country in the world to actually solve this problem.”
Quickly evolving geopolitics, high inflation and soaring energy prices have prompted many governments to backtrack on climate pledges in recent months. On Friday, President Joe Biden touted U.S. efforts to help adaptation efforts in Africa, but refrained from mentioning the new carbon market plan. The U.S. initially pledged $11 billion to help developing nations, but a divided U.S. government only approved $1 billion this year for that effort—an issue that’s largely out of Biden’s hands.
“We desperately need money,” Kerry told CNN. “It takes trillions and no government that I know of is ready to put trillions into this on an annual basis.”
But debate over who should pay—and how—when it comes to dealing with the costs of climate change remains fiercely undecided. And many climate activists see this week’s U.S. proposal as the latest evidence that COP27 has been co-opted and compromised by corporate interests. Activists have chastised the summit’s organizers for allowing one of the world’s biggest plastic polluters to sponsor the conference, as well as hiring a global public relations firm that also represents major oil companies as clients.
Still, excluding corporations from COP27, even those that are greenwashing their images, would be a bad idea, said Michael Vandenbergh, a law professor and the director of Vanderbilt Law School’s Climate Change Research Network. In many ways, he told me in an interview, buy-in and cooperation from the private sector is vital for the larger international effort to be successful.
Vandenbergh, who conducts research on the private sector’s role in combating climate change, said companies are failing to meet their climate goals at the same rates as countries and cities, so exiling them now would only hurt the broader effort. Instead, he said, people should focus on reducing greenwashing and holding companies accountable to their promises.
“Climate change poses an urgent, major threat, so all options, including private sector action, should be on the table,” Vandenbergh said. “It is true that, as a globe, we are not meeting the Paris Agreement terms, but that is not a reason to give up hope or to abandon smart strategies.”
That’s how many metric tons of carbon dioxide are released every single year from the investments of just 125 of the world’s billionaires, a new study found. That’s a million times more than what’s emitted by the average person.