The real world. No place for wishful thinking. Part 4. Climate (and other) reparations.

Don’t fix the blame. Fix the problem.” – (origin unclear…)

Happy Thanksgiving!

Climate reparations are indeed no place for wishful thinking – but perhaps the topic could stand a bit of thankful thinking. And when better to acknowledge this than over the holiday itself[1]?

Here goes.


Reparations have been part of the global conversation for quite a while – in the context of slavery, wars, genocide, and more. Here’s a working definition: the making of amends for a wrong one has done, by paying money to or otherwise helping those who have been wronged.

The special climate case is more recent, but has its own Wikipedia entry. An excerpt: Climate reparations are loss and damage payments for damage and harm caused by climate change, which may include debt cancellation. The term climate reparations differs from simple “loss and damage,” in that it is based on the concept of reparations, that compensation holds countries accountable for historical emissions, and is an ethical and moral obligation.

“The idea behind calls for loss and damage funding is that the countries that have done most to pollute the atmosphere, and grown rich doing so, should compensate…” 

The damage and harm caused by climate change grows more evident with every passing year. It touches every aspect of life on Earth and reaches every corner of the globe. The array of woes includes the effect of rising temperatures on life and health of humans and ecosystems; the growing number of deaths, damage, and disruption caused by floods, drought, and other extreme events; sea-level rise; impacts on agriculture and food security; and more. And the tab is eye-watering – exceeding $150 trillion dollars by some estimates.

At the outset, the issue raises questions. Here are two: who should pay? And why?

In answering the first question, some cast a wide net. Developed nations, the fossil-fuel extraction sector, polluting companies, and even those individual philanthropists whose have fortunes derived in part from historic fossil-fuel use are in the frame. (An aside: the scale of the loss and damage requires special means for moving money in such large amounts, from diverse sources, and to myriad claimants.  Catastrophe bonds, debt for loss-and-damage swaps, dedicated finance facilities and other exotic instruments have all been proposed as fund-transfer mechanisms.)

Answers to the why? stem from a stark mismatch. Generally speaking, those peoples and nations hit hardest by the negative impacts of climate change are not the countries and individuals largely responsible for the problem. It’s this that makes the issue not merely economic, but moral and ethical. For example, the African continent’s historic contributions to carbon emissions have been minimal. But in some cases African countries find themselves poised to spend several times more to cope with climate change than their current budgets provide for other basic needs, such as healthcare. By contrast, it’s the G20 nations who are responsible for more than two-thirds of the historic CO2 emissions. Another, more recent case: Pakistan, responsible for less than 1% of emissions, experienced $30B in damage from 2022 flooding attributed in part to climate change. The numbers of such case examples and claimants are large.

Almost exactly a year ago, the UN Climate Change Conference of the Parties (COP-27) concluded with an agreement providing for “loss and damage” funding for countries beset by climate-related disasters. At the time this was hailed as a groundbreaking step in international response to climate change. A year later, two realities are clear. First, the early, tentative funding amounts supplied by donors are falling far short of the need – by an order of magnitude or more. Second, developed nations, including the U.S. in particular, are emphasizing that the fund is a loss and damage fund, not a reparations fund, for vulnerable countries hit hard by climate disasters. John Kerry made this clear in July. The point is U.S. refusal to acknowledge any legal or moral culpability for past damages (the distinction made explicit in the Wikipedia article). On that basis, contributions by the United States and other developed countries to the fund can be decoupled from any actual damages or losses and can be determined by ability or willingness to pay. America would be supporting the fund out of a spirit of generosity instead of obligation.

Two examples of wishful thinking are evident. First, it’s wishful thinking on the part of developing nations to expect the developed world to acknowledge any blame or legal liability without argument, especially given the inter-generational nature separating the historical carbon emissions and the losses incurred. But it’s equally wishful thinking on the part of the developed world to think that the poorer nations are in any position to shoulder the costs of disaster recovery on the scale they’re experiencing. Money in the amount of $150 Trillion can only be collected from the haves-, not the have-nots. (This also accords with game theory: the well-off nations are the ones with the most to lose and will therefore foot the bill; see for example, the insightful book by Scott Barrett entitled Why Cooperate? The Incentive to Supply Global Public Goods.)

But the reality all parties are so reluctant to embrace is also rosier than one might think. To begin, there are several positive motivations for the well-off to pony up. First, the $150 Trillion dollar figure needs to be compared with global GDP, which is already essentially $100 Trillion per year and growing. The loss and damage payout will be spread out over decades, meaning it will amount to, say 5% of GDP over the period. That’s a large figure, but not unimaginably large. Second, the most reasonable priority for such funding is to minimize or forestall future damage (here it’s a bit higher but not inconsistent with the earlier Stern-review estimates of this cost). What’s more, a healthy fraction of that will be spent on labor – and much of that labor will come from the world’s poorer countries – and even in richer countries like the United States, from the poorer subpopulations of those countries.. Wages are lower in these countries. At the same time, putting people, especially young people, to work in these countries will improve their lifetime prospects and pay an enormous peace dividend, greatly reducing the surge of climate-driven mass migrations, terrorism, war, polarization, and unrest worldwide. In short, the investments will achieve many of the purposes of reparations even if lacking the label.

We also have an historic example proving that this can work: the Marshall Plan following World War II. At that time US GDP was about $150B/year. U.S. national debt, after a decade of the Great Depression and World War II, was about $180B. Did the U.S. retrench? No! Instead, our forbearers decided to spend $15B – 10% of that GDP – over the next four years abroad, in Europe, and not just among our allies, but also among our enemies. The result was decades of unity between Europe and North America that saw them through the fraught years of the Cold War.

Imagine asking Americans today to invest $2.3T over the next four years in the U.N. Climate Change Loss and Damage Fund!

Well, that’s exactly what we need to imagine. And this is where the Thanksgiving season comes in. Once a year at this time, Americans sit at a ridiculously abundant dinner and go around the table asking each member present, “what are you thankful for?” And the answer comes back – we’re thankful for each other, and the abundance of the feast before us…etc, etc. But we can and should also give thanks that experience and science have made us aware that our planet is in trouble; and provided us with the technologies to set things aright, while there’s still time. We can be grateful that the first steps are being taken. We can also give thanks that indigenous people with a lot to lose welcomed our ancestors here in 1620 and earlier; that the millions who have emigrated from other countries since and the billions more who have partnered with us in international trade have blessed us. We can be thankful that all this history and generosity have put America in a position where we can give back. We could contribute $2T a year for four years to such a cause without breathing hard.

Okay, maybe we’d be a little out of breath. But only a little. And after all that food, we might need the exercise.

Happy Thanksgiving.

[1]A shout-out/thanks. Had been noodling this post along for a couple of days, when a close colleague reminded me today “you always do a Thanksgiving post.” That gentle nudge has changed my emphasis here quite a bit, and for the better…

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One Response to The real world. No place for wishful thinking. Part 4. Climate (and other) reparations.

  1. Climate reparations? Not a good idea.
    1. Implies harm. If we can’t even attribute weather events to “climate change” (e.g., see the IPCC report), where’s the harm? Agricultural productivity has been increasing; since the start of this century, it’s actually increased – where’s the harm? Over the last 100 years, deaths from climate events have decreased by a factor of 100 – where’s the harm? Deaths from extreme cold exceed those from extreme heat by a factor of seven or so – where’s the harm? As Pielke and others have shown, the increasing cost of disasters are due to putting things where they shouldn’t be – in harm’s way. While sea levels are rising, the harm is primarily to those cities where subsidence is a major contributor.
    2. Implies “guilt.” Frankly, I feel no guilt for living in a country that worked its way up from a hard scrabble agrarian past to become a diversified economic powerhouse. I feel no guilt for the hard work that my grandfather and millions of other immigrants invested in making that happen. Why must I feel guilt for past sins that I don’t see as sins but rather as blessings bestowed on us by our forefathers? If we look at the primary emitters of CO2 today, they’re India and China. Shouldn’t they be paying reparations for today’s emissions?
    3. And reparations, per se, have proven to be problematic (to be kind). Think of the reparations after WWI – now there was real and provable harm! Trying to pay off the imposed reparations touched off some of the most horrendous inflation any country has experienced. A wheelbarrow full of money to buy a loaf of bread. The burden ultimately was borne by the poor and the middle class in Germany. The result – a Hitler. If it had not been a Hitler it would have been another “man on horseback.” Reparations of the sort you imply would have a similar economic impact on the poor and the middle class; why wouldn’t the political result be similar? Are reparations worth that risk?
    4. Turning to the recipients – it’s fair to ask “What will you do with the money? Do you have a workforce with the skills to use Western technology? Will the money actually be used to improve your infrastructure, or to line some bureaucrats’ pockets?”
    5. Do we get a discount for all that we spend or have spent on foreign aid? You mentioned the Marshall Plan – shouldn’t that count against the burden of “guilt” reparations imply our forefathers bear? What about the money we poured into Japan to fuel its amazing recovery? After WWII, why didn’t we ask for reparations for all the REAL harm – all the lives lost or ruined by devastating wounds – done by these countries to us during the war? Because we had the example of history that reparations don’t work.
    6. Once again, who will reparations harm – not in our country but in the rest of the world? Our ongoing trade deficits in effect have been a wealth transfer of ~$10T from the US to the rest of the world – isn’t that “reparations?” And if we don’t buy those things that we buy from foreign countries to pay “reparations (after all, the money has to come from somewhere),” who’s going to buy the goods that we won’t be able to afford? What other market is there? The fossil fuels that have fueled our economy have done the same for the rest of the world’s economy. Again, where’s the harm?
    7. And one more. The US national debt is already almost unpayable. The value of our currency is down to only the confidence in the US government. To pay reparations, we will add to that debt – fueling more inflation because who will have confidence in the value of the dollar? The biggest losers will be the savers and those who live on fixed incomes. Just as they have for decades, they will see their savings and the value of their Social Security eaten away.

    Morality? I frankly can’t find it in reparations.

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