The 2022 United Nations Climate Change Conference, also known as the annual Conference of the Parties of the UNFCCC or COP27, started on Nov 6th in Sharm El Sheik, Egypt with many delegates expecting the negotiations to be even harder than those of previous years.
Leaving aside the wider considerations of how fair negotiations could take place in a country which strongly limits civil society participation, the recent release of two damning reports from the UNFCCC and the United Nationals Environmental Programme (UNEP) was bound to set the tone for the conference.
These reports indicate that the world – and high-income countries especially – are still far away from achieving a meaningful reduction in our greenhouse gas (GHG) emissions, and that on our current course we should get ready for even more climate disruption. This is because, first, we are not meeting the commitments made in the submitted nationally determined contributions (NDCs), which only a few countries updated despite the pledges made at COP26, and even if we were, those commitments are nowhere near ambitious enough.
Two big novelties were included in these reports – first, for the first time ever, the UNFCCC cites colonialism as one of the root causes of climate change; second, there is a recognition in the UNEP report that food systems will also need to be addressed for action on climate change to have some real impact.
This latter consideration is a further contribution to the notion of bringing the role of nature back into the climate discourse, which can also be seen by an increasingly closer alignment between the objectives of the climate COP and those of the biodiversity COP.
The biodiversity COP, which has been taking place since 1994, is the lesser known – but no less important – equivalent to the more famous climate COP for delegates who are concerned with the preservation of Earth’s biological diversity. Last year, two UN institutions released their first joint-report, finally tying together, the climate and the biodiversity crises. Given the current global political climate, it is not surprising that colonialism’s contribution to climate change has resonated strongly with many low-income countries’ delegates this year for what has been dubbed the “African COP.”
Indeed, those delegates spent most of the weekend preceding the start of the conference arguing for the inclusion of a discussion on “loss and damage compensation” in the meeting agenda, which was agreed at the 11th hour. This inclusion is important for two main reasons – first, it represents a recognition that damage due to climate change is already happening, so that we should finally stop talking about it in the future tense. Second, a disproportionate amount of this existing damage is borne by low-income countries, which have little historical responsibility for its root causes and face huge financial challenges to adapt their economies to the changes which have already happened.
Indeed, there is a feeling that COP27 will be made or broken by important steps forward in climate financing for low-income countries rather than on their plans for achieving net zero any time soon. However, it would be important for any further financial commitment to be made legally binding, as there is by now comprehensibly little trust in the believability of any further pledge.
This is because there is still a significant shortcoming between the $100 billion of financing per year pledged in 2009 and what is currently been made available – a shortcoming potentially as big as $75 billion according to Oxfam. The most recent estimates from the African Development Bank put the climate financing required by African countries to achieve their NDCs at $108 billion per year between now and 2030. At the moment, they receive less than $18.5 billion per year in ODA, so the relevance of the financing problem is obvious.
Given the scale of the funding gap and the historical responsibility of high-income countries for the current situation, the delegate’s focus at COP27 will be on international financing rather than on the capacity of low-income countries to raise funds domestically. Indeed, the potential role of fiscal policies to spur positive reactions to the climate and environmental crisis is unlikely to receive much attention during the current meeting, with the obvious exceptions of a continued push for the adoption of carbon taxes, the elimination of fossil fuel subsidies and the support of renewable energy deployment.
Determining the role of fiscal policies for climate action
While some of these are worthwhile goals (the jury is still out on the relevance of achieving carbon neutrality in Sub-Saharan Africa), and it is true that the revenue-raising scope of environmental taxes is dwarfed by current climate financing requirements, the role of fiscal policies should not be underestimated.
First, tax policies are a significant component of any industrial policies strategy, which are making a comeback given the need to foster quicker economic transformation than those which would be promoted by market autonomously. While industrial policy arguments are made more commonly in high- than in low-income countries, this is starting to change.
Second, tax policies could also play an important role in tackling issues such as single use plastic and used car exhausts, which are having an increasing impact on citizens’ health.
Various low-income countries have tried to address these issues through a combination of “command and control” and fiscal policies, but impacts seem to vary significantly. Similarly, the fiscal treatment of agricultural land and forestry contributes to shaping land-use change in rural areas (the most important contributor to GHG emissions in Sub-Saharan Africa), and this summer World Trade Organisation (WTO) negotiation on subsidies to fisheries broke down on preferential treatment for the largely artisanal fleets of least developed countries. These issues have received only a fraction of the attention that the academic community has dedicated to carbon taxes, so many knowledge gaps remain.
Fiscal policies cannot – and one would argue, should not – play a significant role in closing the climate funding gap of low-income countries. They have by and large not caused the current crisis and LICs have been promised significant funds that never materialised for years. However, they can play a role in supporting a more sustainable and equitable economic development in many low-income countries.
But for this to happen, we need to acquire a better understanding of how they will interact with the different economic and institutional realities of some the most climate vulnerable countries on earth. This is what some of the ICTD’s current research is focused on and we are very excited to share more news on our results over the coming months.
With contributing edits by Diana Szpotowicz.