The Intergovernmental Panel on Climate Change (IPCC) has issued a final warning to humanity: Unless we halve greenhouse gas emissions by 2030, we would have no chance of capping global temperatures at 1.5°C above pre-industrial levels. Achieving that target would be extremely challenging, but it is possible and affordable — if we ensure that the world’s wealthiest pay their fair share.
Inequality has skyrocketed in the past few years. During the COVID-19 pandemic, as more than 160 million people were pushed into poverty, the world’s 10 richest people doubled their fortunes. The wealthiest 10 percent of the global population rake in 52 percent of global income and hold 77 percent of global wealth, while the poorest 50 percent claim just 8 percent and 2 percent respectively.
The gap continues to widen. Billions of people are suffering from rising living costs and stagnant wages, and with recession looming, prospects for achieving greater prosperity appear bleak. The world has never been so wealthy, yet most people endure chronic economic insecurity. This is a recipe for deeply polarized, dysfunctional societies, democratic decay and a dangerously unstable world.
Illustration: Mountain People
Economic inequality is reflected in climate inequality.
The 10 percent of households with the highest per capita emissions — the wealthiest households globally — contribute up to 45 percent of consumption-based household greenhouse gas emissions, the IPCC report says. The bottom 50 percent — 4 billion people, many of whom face severe energy insecurity — contribute just 13 to 15 percent.
Here, too, the gap is continuing to widen. The richest 1 percent — 63 million people earning at least US$109,000 per year — are the fastest-growing source of carbon emissions by far. This is happening as the world every month burns through more than 1 percent of its remaining carbon budget for limiting global warming to 1.5°C.
The discrepancy in emissions is only part of the story. As the IPCC’s new report highlights, there is overwhelming scientific evidence showing that an equitable approach to climate action, in which the benefits and burdens of the needed transformation are distributed fairly, is vital to build social trust, without which the 2030 target would be all but impossible to meet.
This aligns with the assessment at Earth4All. It predicts that, unless concerted action is taken, inequality would continue to grow throughout this century, leading to rising social tensions and unrest — and making it far more difficult to tackle existential crises such as climate change.
Concentration of wealth leads to concentration of power, with the wealthiest actors enjoying disproportionate influence over elections and public policy. This undermines trust in democracy, making it more difficult for governments to make long-term decisions that serve the common good.
More egalitarian countries tend to have higher levels of trust in government, in addition to better outcomes when it comes to education, health and longevity, obesity, child mortality, crime and the environment.
As the IPCC report makes clear, averting the worst effects of climate change demands a profound economic transformation in the next decade. That transformation can succeed only with broad public support, based on a new social contract that ensures a fairer distribution of wealth and income.
Specifically, by 2030, Earth4All proposes that the wealthiest 10 percent in all countries should be claiming less than 40 percent of national incomes, with their share remaining on a downward trajectory thereafter. Past experience shows that progressive taxation on both income and wealth for individuals and corporations would be an effective means of achieving this.
This means targeting the assets of the extremely wealthy wherever they are held, including in tax havens, and developing and sharing national registries of assets held in different forms. Governments should also raise taxes on luxury-related consumption that drives greenhouse gas emissions, such as the use of private jets.
In addition, government should implement a universal minimum corporate-tax rate that is close to the global average of 25 percent — far higher than the 15 percent rate agreed by the G20 in 2021. Multinational corporations should be subject to the same tax rates as domestic companies, with unitary taxation of global profits based on the share of sales, employment and assets in each country.
We also propose taxing windfall profits in sectors such as energy. While the world has confronted an energy crisis driven by the war in Ukraine, fossil-fuel companies should not have been able to pocket hundreds of billions of dollars in profits.
Likewise, governments must close international tax loopholes and eliminate outsized subsidies for fossil fuels — now topping US$1 trillion annually — once and for all. The IPCC estimates that removing subsidies could lower greenhouse gas emissions by up to 10 percent by 2030.
More broadly, governments should use progressive taxation to discourage share-buyback schemes. At a time when the world needs innovation to facilitate economic transformation, inflating shareholders’ gains must not come before investment in research and development.
Crucially, whatever additional revenues are generated by progressive wealth and income taxes must be used to protect the most vulnerable groups, support those who are displaced by the green transformation, advance gender equality, and overhaul energy and food systems.
By easing social tensions and improving well-being, progress on inequality would make democracies more stable and resilient, enabling them to respond to shocks more effectively and make rational long-term decisions for the common good, not least with regard to climate change. As the IPCC has made clear, time is running out.
Owen Gaffney, project lead of Earth4All, is chief impact officer at Nobel Prize Outreach.
Copyright: Project Syndicate
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