Letter: Global North leaders must redirect trillions from fossils, debt, and the 1% to address global crises

This letter from 150+ economists and policy experts calls on Global North leaders to put real global financial system transformation on the agenda at the June 22-23 Paris “Summit for a New Financing Pact” — starting by redirecting funds from three parts of our economies that are driving climate change and inequality: fossil fuels, unfair colonial debts, and the super rich. As the Summit is being billed as the first step in a two-year roadmap, the letter remains open for sign-on here.

Global North governments can redirect trillions in fossil, debt, and super-rich harms to fix global crises. The Paris Summit must be about building the roadmap to do so.

To:

Emmanuel Macron, President of France
Ursula Von der Leyen, President of the European Commission
Charles Michel, President of the European Council
Olaf Scholz, Chancellor of Germany
Kristalina Georgieva, Director General of the International Monetary Fund
Ajay Banga, President of the World Bank
Mathias Cormann, Secretary General of the OECD
All OECD and G7 heads of state not in attendance at the Paris Summit

As climate disasters intensify and as more people than ever are being forced to choose between heating and eating, or transport and shelter, public pressure has pushed world leaders to hold the Paris “Summit for a New Financing Pact” in June 2023. Hosted by French President Emmanuel Macron and Indian Prime Minister Narendra Modi, the Summit is being billed as the first step in a two-year roadmap to overhaul our global financial architecture. The Summit’s stated goal is “building a new contract between the countries of the North and the South to address climate change and the global crisis.”

We, the undersigned economists and policy experts, believe that for the Summit to make progress towards this much-needed goal, the Global North leaders who hold both an outsized say in our global financial architecture and an outsized historic responsibility for climate change must come with serious proposals for public international reparations.

Unlocking and redistributing public trillions is of course only part of what is needed — our international monetary, trade, tax, and debt rules are systematically skewed towards the Global North, allowing wealthy countries to drain a net $2 trillion a year from low income peers. We need a dramatic transformation of this system to one that is rights-based, people-centred, democratic and transparent. But underpinning almost all excuses to keep the rules as-is is the notion that wealthy governments simply cannot afford to pay their fair share. Unless we burst this bubble, it will be hard to cultivate the global solidarity needed to progress in urgent multilateral climate and humanitarian negotiations.

The reality is that public finance is not scarce, especially for Global North governments. We saw them make trillions of dollars in fiscal space available for bank bailouts in 2008, for COVID-19 responses since 2020, and for militaries and police forces year after year. They have no shortage of levers to pay their fair share for the public interest climate and cost-of-living solutions that are desperately needed — both within their borders and abroad.

Unfortunately, the most prominent proposals from Global North leaders in the lead-up to the Summit show there is a risk it becomes an effort to simply rebrand existing approaches. So far, the World Bank Group Evolution Roadmap, Just Energy Transition Partnerships, and Global North country negotiating positions on the climate ‘loss and damage’ fund all rely heavily on the idea that governments can incentivize private banks and corporations to build climate solutions and spur development with only small public contributions and rule tweaks.

From the ‘Billions to Trillions’ agenda to the still-unfulfilled $100 billion year climate finance promise we have seen this approach fail again and again, with far less private money leveraged than promised and profits prioritized over climate and inequality benefits — or often even basic human rights safeguards.

We propose that Global North leaders show they are serious about charting a new path by using the Summit to begin shifting funds away from the parts of our economies that are most dramatically driving our current crises.:

(1) Stop funding fossils — instead make companies pay for their damages: While low income households around the world have been pushed further into poverty over the last few years, oil and gas companies made record profits and wealthy countries continued to heavily subsidize them. This does not just defy economic justice, but climate science too: in the International Energy Agency (IEA) scenario that maintains a 50% chance to limit global heating to 1.5°C there is a rapid phase-out of fossil fuels, and no new investments in new fossil fuel production or LNG infrastructure. Ending fossil fuel handouts in high-income G20 countries alone would raise about USD $500 billion a year. And prominent estimates of a permanent answer to fossil fuel ‘windfall’ taxes range between $200–300 billion a year.

There is also already momentum to stop a particularly influential form of fossil fuel support, international public finance. Pledges so far would end a key $38 billion a year that plays an outsized role in enabling large fossil infrastructure lock-in in wealthy countries and shift it towards renewable solutions. If a few key laggard countries including Japan, Germany, Italy, and the United States keep their overdue promises to do this at the Summit, it will go a long way to cementing fossil free public finance as a global norm.

(2) Cancel illegitimate Global South debts: The last few years of global crises have compounded already untenable debts in many developing countries, draining public funds that are critically needed to deliver both vital social services and climate action. These debts are also unfair, having been incurred through our neo-colonial global financial system or in many cases during colonization.

Two very first steps Global North leaders can take at the Paris Summit are to unconditionally cancel public external debt for at least the next four years for all lower income countries (estimated at $300 billion a year), and to support rather than block the development of a new multilateral mechanism for sovereign debt cancellation and workout under the United Nations.

(3) Tax the rich: The wealthiest 1% have captured two-thirds of new global wealth created in the last two years, all while we are likely seeing the biggest increase in global inequality and poverty since World War II. Progressive taxes on extreme wealth starting at 2% would raise $2.5 to 3.6 trillion a year, and related proposals to crack down on tax dodging would significantly augment this.

Global North leaders can show they are serious about this by starting with an initial “1.5% for 1.5°C” tax on extreme wealth and dedicating this to the new ‘loss and damage’ fund, and by agreeing to advance a universal and intergovernmental UN Tax Convention.

Together, these modest proposals add up to at least $3.5 trillion a year — new research in Nature Sustainability estimates the fair climate debts of wealthy countries are double this at $7 trillion a year to 2050. But even this initial redirection of harmful economic flows would have staggering impacts — it would be enough to close the universal energy access gap ($34 billion), fill the ‘floor’ of the ‘loss and damage’ fund ($400 billion per year), meet the overdue climate finance target fully with grants ($100 billion per year), and cover emergency UN humanitarian appeals ($52 billion per year) with plenty to spare.

These commitments would also go a long way in opening the political space needed to retool our global financial architecture so that it can effectively and fairly channel the public money needed to steer us out of the polycrisis. We can’t afford anything less.

Signed,

• Yanis Varoufakis, Professor at University of Athens, Faculty of Economics, Former Minister of Finance of Greece
• Jason Hickel, Professor, ICTA-UAB
• Olúfémi O. Táíwò, Georgetown University
• Jwala Rambarran (Senior Policy Advisor), Caribbean Policy Development Centre
• Nader Habibi, Faculty, Department of Economics, Brandeis University
• Prof Dinesha Samararatne, University of Colombo, Sri Lanka
• Andrea Reimer, Adjunct Professor & Loeb Fellow, School of Public Policy and Global Affairs, University of British Columbia & Harvard Graduate School of Design
• Dr. Oguto Keroboto B. Za’Ngoti, Department of Mathematics & Physical Science, School of Science, Dedan Kimathi University of Technology, Kenya
• Alyssa Battistoni, Professor, Barnard College
• Mizan R Khan, ICCCAD, IUB
• Dr. Ellen Quigley, Principal Research Associate and Co-Director of the Finance for Systemic Change Centre, University of Cambridge
• Avi Lewis, Associate Professor, University of British Columbia
• Steve Keen, Professor, UCL
• Richard Heede, Climate Accountability Institute, Climate Reparations Initiative
• Isabelle Ferreras, Professor, FNRS/University of Louvain/CLJE Harvard Law School
• Seth Klein, Author and Adjunct Professor, Simon Fraser University
• Dr. Alex Lenferna, Nelson Mandela University
• Dr. Pedro Alarcón, JLU Gießen
• Lynda Gagne, PhD, Université du Québec en Outaouais (ISFORT)
• Dr. Neva Goodwin, Global Development and Environment Institute, Tufts University
• Dr. Emily Eaton, Professor of Geography and Environmental Studies, University of Regina
• Mohammad Jabbar, Ex-Senior Economist and Team Leader, International Livestock Research Institute, Nairobi, Kenya
• Jens van’t Klooster, University of Amsterdam
• Dr Philippe Quirion, Economist, Senior researcher
• Inge Røpke, Professor Emerita of Ecological Economics, Aalborg University
• Associate Professor Anitra Nelson, Honorary Principal Fellow, MSD, University of Melbourne (Australia)
• Professor A. Haroon Akram-Lodhi, Trent University
• Dr. Irene van Staveren, Professor of Economics, Erasmus University Rotterdam
• Dr. Jonas Van der Slycken, Ghent University
• Gaylor Montmasson-Clair, Senior Economist, Trade & Industrial Policy Strategies (TIPS)
• Ewald Engelen, University of Amsterdam
• Dr. Irene van Staveren, Erasmus University Rotterdam
• Nick Fitzpatrick, NOVA FCT University Lisbon, Portugal
• Dr. Mark Paul, Assistant Professor of Economics, Edward J. Bloustein School of Public Policy, Rutgers University
• Professor Peter Newell, University of Sussex
• Dr. Miklós Antal, Eötvös Loránd University
• Nezir Sinani, Recourse
• Dr. Thijs Van de Graaf, Professor of International Politics, Ghent University, Belgium
• Philippe Delacote, Senior Researcher, INRAE and Climate Economics Chair
• Dr. Angela Carter, Associate Professor, Department of Political Science & Balsillie School of International Affairs, University of Waterloo, Canada
• Mag. Dr. Christian Kerschner, Modul University Vienna
• Dr. Friedemann Polzin, Utrecht University School of Economics (U.S.E.), the Netherlands
• Professor Barbara Hogenboom, University of Amsterdam
• Emeritus Professor Richard Wilkinson, University of Nottingham, UK
• Dr. Óscar Carpintero, Associate Professor of Applied Economics, University of Valladolid (Spain)
• Professor James K. Boyce, University of Massachusetts Amherst
• Dr. Kerstin Hötte, Research Associate, The Alan Turing Institute & University of Oxford
• Dr. James Rowe, Associate Professor, School of Environmental Studies, University of Victoria, Canada
• Professor Juliet Schor, Boston College
• Professor John Quiggin, School of Economics, University of Queensland
• Dr Antoine Monserand, Université Sorbonne Paris Nord
• Dr. Herman Wijffels, Utrecht University
• Danielle Hirsch MSc, Both ENDS
• Manuel Rubio García, PhD (c), Grupo de Socioeconomía, Instituciones y Desarrollo/ UNAL
• Camilo Alejandro Pineda Segura, Economista, Universidad Nacional de Colombia
• Daniel Ossa, University of Denver
• Luis Ángel Numpaque Rico, Economista y Asesor en Instituto Geográfico Agustín Codazzi, Universidad Nacional de Colombia
• Dr. Markus Krecik, Economist, Free University Berlin
• Estefanía Montoya Domínguez, Candidata a Doctora en Estudios Ambientales e investigadora del Observatorio de Conflictos Ambientales, Universidad Nacional de Colombia
• Dr. Karena Shaw, Professor, School of Environmental Studies, University of Victoria, Canada
• Sara Garcia, WWF
• Dr. Arthur Rempel
• Carlos Enrique Díaz Reyes, Universidad Nacional de Colombia
• Elbert Rincón, Economista, Universidad Unimonserrate
• Dr. Andrew Fanning, Doughnut Economics Action Lab
• Dr. Patrick Bigger, Research Director, Climate and Community Project
• Gabriella Kalapos, Clean Air Partnership
• Daniel Ortega-Pacheco, Center for Public Policy Development, ESPOL Polytechnic University
• Dr. Jim Stanford, Centre for Future Work
• Professor Doreen Stabinsky, College of the Atlantic
• Dr. Fander Falconí, FLACSO
• Renée M. Chacon, Womxn From the Mountain
• MD Sohanur Rahman, YouthNet Global
• Laurie Adkin, Ph.D., Professor, Dept. of Political Science, University of Alberta
• Dr. David Barkin, Universidad Autónoma Metropolitana-Mexico City
• Mr. Steven Burak, Fuel Poverty Action
• Fiona Dove, Director, Transnational Institute
• Mary C. King, Professor of Economics Emerita, Portland State University
• Marjorie Griffin Cohen, Feminist Economist and Professor Emeritus, Simon Fraser University
• Dr. Vivian Price, California State University Dominguez hills
• Eric Pineault, Institute of Environmental Sciences, University of Québec at Montreal
• Dr Derek Sayer, FRSC, Professor Emeritus, University of Alberta
• Hussain Jarwar, Indus Consortium
• Carmen Alicia Hernández Gómez, Instituto de Estudios Ambientales. Universidad Nacional de Colombia
• Mitzi Jonelle Tan, Youth Advocates for Climate Action Philippines
• Professor Kanchana N Ruwanpura, Professor, Development Geography, University of Gothenburg
• Maxime Combes, Economist, Aitec
• Professor Roar Høstaker, Inland Norway University of Applied Sciences
• Professor Gunseli Berik, University of Utah
• Dr. Narayani Sritharan, AidData at William & Mary University
• Professor Peter Droege, Liechtenstein Institute for Strategic Development
• Professor A. Haroon Akram-Lodhi, Trent University
• Professor Kimberly Christensen, Economics, Sarah Lawrence College
• Harald Walkate, Senior Fellow, University of Zurich, Center for Sustainable Finance & Private Wealth
• Ramya Vijaya, Professor of Economics, Stockton University
• Harry Quealy, PhD Researcher, Department of Geography, The University of Manchester
• Dr. Ioannis Tsipouridis, Visiting Professor at Technical University of Mombasa Kenya (TUM), Visiting Professor at Meru University of Science & Technology, (MUST) Kenya
• Dr. Aaron Vansintjan, Author
• Shannon Gibson, Associate Professor (Teaching) of Environmental Studies & International Relations, University of Southern California
• Osver Polo Carrasco, Movimiento ciudadano frente al cambio climatico
• Felipe Pino, Fiscalía del Medio Ambiente (FIMA)
• Dr. Reed Kurtz, Purdue University
• Alejandro Aleman, Climate Action Network Latin America (CANLA)
• Mr. Michael Iveson, Research Fellow at Lakshman Kadirgamar Institute of International Relations and Strategic Studies, Sri Lanka
• Joshua Goldstein, Professor of History, University of Southern California
• Professor Michael Roos, Department of Management and Economics, Ruhr-Universität Bochum
• Ms Thea Ormerod, Chair, ARRCC (Australian Religious Response to Climate Change)
• Dr Louise Fitzgerald, Business School UNSW
• Bodo Ellmers, Program Director, Global Policy Forum
• Dr Michiel Köhne, Wageningen University
• Dr. Alexandra Köves, Associate Professor at Corvinus University of Budapest and Vice-President for the European Society for Ecological Economics
• Dr Claire Duncanson, Senior Lecturer in International Relations, University of Edinburgh
• Nick Meynen, Senior Policy Officer, European Environmental Bureau
• Dr. Filka Sekulova, Universitat Oberta de Catalunya
• Dr. Michael Chang, George Mason University
• Lorenzo Velotti, PhD researcher, Scuola Normale Superiore, Italia
• Dr Leon Sealey-Huggins, University of Warwick
• Joerg Geier, Associate Member, Club of Rome
• John Fullerton, Capital Institute
• Jeremie Fosse, eco-union
• Diane Elson, Emeritus Professor, University of Essex
• Amy Woodson-Boulton, Professor of History, Loyola Marymount University
• Genevieve Gallant, Office Religious Congregations for Integral Ecology
• Robin Roels, Associate Policy Officer, European Environmental Bureau
• Dr. Kerryn Higgs, Political Science, University of Tasmania
• Asad Rehman, War on Want
• Dr. Anna Zalik, Global Geography, York University
• Robert W. van Zwieten, Founding Partner, Route17
• Maiko Mathiesen (MA, Director of International Relations), Research and Degrowth
• Salote Soqo, Unitarian Universalist Service Committee
• Lorraine Green, Chair, Grandmothers Act to Save the Planet (GASP)
• Gwendolyn Hallsmith, Executive Director, Global Community Initiatives
• Dr. Roberto P. Guimaraes, UNICAMO, International Consultant
• Nastaran Zagari, Chairperson of the Board, Jordens Vänner/Friends of the Earth
• Prof. Dr. Gergely Tóth, Hungarian University of Agricultural and Life Sciences
• Hans Eickhoff, FCSH, NOVA University Lisbon
• Paola Giraldo, Ing. Forestal. Observatorio de Conflictos Ambientales, Universidad Nacional de Colombia
• Dr. Jim Crosthwaite, Honorary Fellow, B.Ag.Eco., M.Comm & PhD, University of Melbourne (School of Agriculture, Food and Ecosystem Sciences)
• Prof. Arjun Guneratne, Macalester College
• Mtro. Alexander Ganem, Benemérita Universidad Autónoma de Puebla
• Barbara Bradbury, Leadnow
• Simona Getova, Director of Operations and Cohesion, Research and Degrowth International
• Dr Gilad Isaacs, Institute for Economic Justice, University of the Witwatersrand
• Dr Basani Baloyi, Institute for Economic Justice
• Tom Athanasiou, EcoEquity
• Professor Cynthia Moe-Lobeda, Pacific Lutheran Theological Seminary, Graduate Theological Union
• Dr. Matthias Schmelzer, Friedrich Schiller University Jena
• Adam Parsons, Share The World’s Resources (STWR)
• Marcela Valencia, Independiente
• John Hiemstra, Professor Emeritus, Political Studies, The King’s University
  
• Marie Venner, Chair, NAS TRB Decarbonization and Env. Maintenance, AHD10-1, National Academies TRB researcher Cooperative and Strategic Research Programs for states and metro regions
• Scot McIntosh, MHA, CMPE
• Oscar Soria, Avaaz
• Olivier Koch Mathian
• Dr Peter Carter, Climate Emergency Institute
• Professor Sung-Kyu Lee, Andong National University, Korea
• Dr. Michel Bourban, University of Twente
• Davide Maneschi, Swedwatch
• Teresa Anderson, Global lead on climate justice, ActionAid International
• Victor Le Calvez
• Max Schmidt

 

Picture by Simon Dawson / No 10 Downing Street (CC BY 2.0)