The existential threat of climate change is unfolding fast, and the window of limiting average global temperatures below 1.5C — to avoid any permanent natured changes to climate, something which happens at 2C and beyond — is closing fast. That requires a global effort, and hopes are now pinned on the upcoming COP27 meetings in early November this year to make up for virtually lost opportunity in COP26 meetings in terms of detailed steps by countries to reach net-zero carbon emissions by 2050.

Just how severely the climate change crisis is evolving, the latest report of Intergovernmental Panel on Climate Change (IPCC) titled ‘Climate change 2022: impacts, adaption, and vulnerability’ pointed out as follows: ‘Climate change has caused substantial damages, and increasingly irreversible losses, in terrestrial, freshwater and coastal and open ocean marine ecosystems. The extent and magnitude of climate change impacts are larger than estimated in previous assessments. … Hundreds of local losses of species have been driven by increases in the magnitude of heat extremes (high confidence), as well as mass mortality events on land and in the ocean (very high confidence) and loss of kelp forests. Some losses are already irreversible… Other impacts are approaching irreversibility such as the impacts of hydrological changes resulting from the retreat of glaciers…’

As per a recent Guardian published article ‘Impact of climate crisis much worse than predicted, says Alok Sharma’, the Report ‘is the second of four parts of the “sixth assessment report”, the latest in a series of comprehensive summaries of the world’s knowledge of the climate, stretching back to 1988. The first part, published last August, showed that climate change was unequivocally the result of human actions and was causing “unprecedented” and in some cases “irreversible” changes. A third part, to be published in April, will set out the means of dealing with the crisis, such as investing in renewable energy and novel technologies such as carbon capture, and this October a summary of all three parts will draw together the lessons for policymakers before the COP27 summit.’

Given the stark situation at hand with regard to climate changes crisis, the response of countries overall has been less than satisfactory. Here, the main responsibility in terms of providing climate finance to cash strapped developing countries lies on the shoulders of main polluters, which, according to an article titled ‘The coming carbon tsunami: developing countries need a new growth model – before it’s too late’ published in Foreign Affairs (FA) magazine include: ‘Since the dawn of the Industrial Revolution, countries have released one and a half trillion metric tons of carbon dioxide into the atmosphere. The largest cumulative emissions have come from the United States, European countries, China, and Russia, in that order. But these countries are now prosperous enough to pay for policies that can place them on the path to net-zero emissions by mid-century. The top emitting countries of the future could come largely from the developing world—countries such as Brazil, India, Indonesia, and South Africa, which face the herculean task of bringing millions out of poverty while simultaneously adapting to the harsh realities of climate change.’

In addition to significant gaps between what is desired and what is being provided in terms of climate finance, the situation in terms of providing subsidies to polluting sectors is alarming, as pointed out by an article ‘Fossil fuel and agriculture handouts climb to $1.8tn a year, study finds’ that recently came out in Financial Times (FT) and was based on a study in this regard. According to this article: ‘Governments worldwide are spending at least $1.8tn a year on subsidies in support of heavily polluting industries led by coal, oil, gas and agriculture, according to new research, despite their commitment to climate change targets. About 2 per cent of global gross domestic product was spent annually on subsidies that encourage unsustainable production or consumption, deplete natural resources and degrade ecosystems, the independent researchers Doug Koplow and Ronald Steenblik concluded. The biggest beneficiary of the handouts was the fossil fuel industry, which enjoyed $640bn a year, while the agricultural and forestry sectors received $520bn and $155bn, respectively, the research found.’

Added to this is the huge issue of making much-needed development/stimulus expenditure by developing countries during the pandemic, on one hand, while on the other also managing a difficult debt situation. Having said that larger needed support in terms of enhanced special drawing rights (SDRs) allocation by the International Monetary Fund (IMF) to developing countries, especially as the commodity supply shock worsens in the wake of the war in Ukraine, means all the more limited space for developing countries to make climate related expenditures. For instance, net importers of oil like Pakistan whose energy sectors also use a significant amount of oil to produce electricity have recently announced that they would provide a significant level of oil and energy tariff-related subsidies, which, among other things, reportedly include cuts in otherwise much-needed development/welfare-related budgets. This shows how little space is there for climate related expenditures.

Given the enormity of challenge at hand in terms, a much greater allocation than what was made in August last year ($650 billion), is needed at the earliest possible, with lion share going to developing countries. The IMF, therefore, needs to also do away with surcharges on loans it extends to programme countries, at least during the duration of the pandemic. Joseph E. Stiglitz, a Nobel laureate in economics, in his article ‘Understanding the consequences of IMF surcharges: the need for reform’ that he co-authored with Kevin P. Gallagher pointed out in this regard: ‘A lesser known but also costly trade-off is that the IMF imposes significant surcharges — akin to the penalty rates imposed by banks — on countries with large borrowings from the IMF that are not paid back within a relatively short time. Indeed, the IMF surcharges are pro-cyclical financial penalties imposed on countries precisely at a time when they can least afford them. This brief note examines the economic implications of the surcharges from a global distributive perspective. In so doing we stress the need to eliminate excessive surcharges in the Covid-19 era and call for a more fundamental reform of IMF financing.’

Yet, lack of such funding in a meaningful manner, both in terms of SDRs and climate finance, and the result of weak regulation and lesser government presence over the decades under the overall neoliberal assault, resulting in much greater and deeper supply shock than should have been, has meant that countries, especially the developing countries, are focused on ‘now’ in terms of issues of high inflation and managing debt, rather than focusing more on the relatively much more important issues in the shape of climate change and improving public health systems for likely pandemics in the future.

A recent Project Syndicate (PS) published article ‘Will the climate agenda unravel’ pointed out with regard to this lack of proper policy prioritization as follows: ‘Despite widespread worries about global warming, more immediate economic concerns risk relegating climate policy to the fringes of political debate. …But in most countries, the surge in energy prices since last autumn and the resulting rise in inflation have elicited public anger and have diverted policymakers’ attention from longer-term concerns. Governments everywhere have rushed to introduce various patches in the hope of stemming the rise in the price level. …Today’s shortsightedness may appear puzzling, if only because the best protection against high energy prices would be to reduce reliance on fossil fuels.’ Insofar as Pakistan is concerned, any subsidy on prices of

commodities such as POL products and electricity, although necessary in view of the substantial increase in them over the recent past, is only a temporary relief. This situation, in fact, underscores the need for much greater financial support in terms of SDRs and climate finance to help Pakistan and other developing countries, which are facing similar challenges and policy response, move towards a more long-term solution in a meaningful manner.

(The writer holds a PhD in Economics from the University of Barcelona; he previously worked at the International Monetary Fund)

He tweets@omerjaved7

Copyright Business Recorder, 2022

Dr Omer Javed

The writer holds a PhD in Economics degree from the University of Barcelona, and has previously worked at the International Monetary Fund. His contact on ‘X’ (formerly ‘Twitter’) is @omerjaved7


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