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Will $100 Billion Per Year Tackle Climate Change?

We spend much more creating climate change and other problems.

Key points

  • Poorer countries are promised $100 billion per year to tackle climate change.
  • This value is small compared to expenditure causing climate change.
  • Humanity must change its mentality to spend money in prosocial ways.

$100 billion per year seems like a lot of money. It isn't, especially for climate change, although this amount has been pledged (but not yet delivered) by richer countries to help poorer countries. Even if it were provided, it would be ineffective in achieving its goals.

The idea of the $100 billion per year was raised through the international climate change negotiations organized by the United Nations. UNFCCC is the United Nations Framework Convention on Climate Change, an agreement signed in 1992 and steered by the U.N. Climate Change Secretariat in Bonn. In 2009, the UNFCCC negotiations promised by 2020 to reach $100 billion per year from richer countries for poorer countries.

It did not happen. A decade of trying for this target expended extensive time and energy—and continues to do so as the world looks to the next round of negotiations in November, hosted by the U.K. Even if this money became available, would it achieve what is needed?

Spending to Create Climate Change

Ilan Kelman
How responsible are world financial centers, such as in London, for expenditure choices?
Source: Ilan Kelman

A huge contribution to human-caused climate change is from the burning of fossil fuels. The International Energy Agency (IEA) tracks fossil fuel subsidies. Since it started in 2007, the lowest yearly amount appeared in 2020 at $180 billion, due to falling prices and consumption. This compares to over $400 billion just two years earlier.

Due to the complexity of defining "subsidy," and since countries calculate them differently, the numbers are not straightforward. They could potentially cover a huge range of actions, such as direct cash payments, governments owning companies or part of them, tax breaks, loopholes, trade support, or governments providing personnel, goods, and services. IEA is careful with its definitions, basing them on scientific analyses and aiming for clarity and consistency.

From these numbers, the subsidies for creating climate change—coming from the tax we pay—far exceed the money sought to address climate change. And this calculation is for only direct subsidies.

The International Monetary Fund (IMF) details what they consider to be all subsidies. These numbers incorporate estimated health and environmental costs from using fossil fuels. For 2017, their report projected these subsidies to be $5.2 trillion, which is over fifty times the ask for addressing climate change in poorer countries.

All methods are limited, all data have errors, and all calculations can be improved. Even if the subsidy values are grossly overstated, the amount of our tax money supporting the creation of climate change still far outweighs the expectation of donations to tackle it.

Spending Beyond Climate Change

Other expenditures offer similar perspectives. The Stockholm International Peace Research Institute (SIPRI) has tracked countries' declared military spending since 1949. In 2020, SIPRI declared that military spending reached nearly $2 trillion. 39 percent of that came from a single country, the USA.

Meanwhile, Global Financial Integrity (GFI) and the Organisation for Economic Co-operation and Development (OECD), among others, assess and examine ways of stopping the illegal movement of money into and out of poorer countries. Examples of illicit financial flows are bribes, trade misinvoicing, tax evasion, and money laundering. As with most other figures, defining, calculating, and estimating require numerous assumptions, provisos, and ranges. Irrespective, the suggestions for total illicit financial flows easily match total military spending, that is, trillions of dollars each year. Even the richest person in the world has far less than $200 billion in total.

We Have The Money

In other words, humanity is awash in money for tackling climate change—far more than the requested $100 billion per year—without requiring extra donations. Humanity is trapped in a mental state where, apparently, this situation is not obvious. Instead, we must simply decide to spend it to help ourselves and each other, rather than hurting everyone. This money is being mismanaged by poorer countries rather than being used to help themselves, with all their actions emulated, endorsed, and abetted by the richer countries (who, in many ways, pioneered financial and environmental mismanagement).

Everyone is complicit. Concern about climate change has pushed our thinking into a realm of throwing money at a single issue, rather than changing our behavior more widely for connecting climate change beyond a silo. It is the classic need to think beyond our usual boundaries, which in this case is "boxing-in" human-caused climate change.

Psychology is, at its basis, a study of mental states, processes, and behavior. What we spend money on, and the mental state of thinking we need the $100 billion per year, is thus fundamentally psychological.

As such, $100 billion per year more is irrelevant. This amount is easily available. If it were re-distributed from dangerous disbursement, then far more cash would still be going into creating problems than solving them. Instead, let's develop our mindset to advocate for re-allocating harmful spending.

References

Coady, D., I. Parry, N.-P. Le, and B. Shang. 2019. Global Fossil Fuel Subsidies Remain Large: An Update Based on Country-Level Estimates. IMF Working Paper. Fiscal Affairs Department, International Monetary Fund, Washington, D.C., U.S.A.

GFI. 2019. Illicit Financial Flows to and from 148 Developing Countries: 2006-2015. Global Financial Integrity, Washington, D.C., U.S.A.

GFI. 2019. Trade-Related Illicit Financial Flows in 135 Developing Countries: 2008-2017. Global Financial Integrity, Washington, D.C., U.S.A.

IEA. 2021. Fossil Fuel Subsidies Database: Fossil fuel consumption subsidies for select countries, 2010-2020. International Energy Agency, Paris, France.

Lopes Da Silva, D., N. Tian, and A. Marksteiner. 2021. Trends In World Military Expenditure, 2020. Stockholm International Peace Research Institute, Solna, Sweden.

OECD. 2014. Illicit Financial Flows from Developing Countries: Measuring OECD Responses. Organisation for Economic Co-operation and Development, Paris, France.

UNFCCC Climate Finance Unit. 2019. Roadmap to US$100 Billion. UNFCCC, Bonn, Germany.

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