As experts and global leaders began their engagement at Sharm el-Sheikh’s COP27 to address the climate crisis in early November 2022, Oxfam International’s report “Carbon Billionaires” came with a stunning disclosure: rich individuals contribute the most to global warming. The world already knows that rich countries have contributed the most to push the world into this crisis.

The significance of this report lies in highlighting the key factor that has prevented the 30-year-long engagement (United Nations Framework Convention on Climate Change (UNFCC) was first signed in 1992) from achieving substantial success through multilateral cooperation. Which is, it is an unequal battle of wealth and power in which the most powerful ones are being asked to shoulder the maximum responsibility.

Conflict of interest

Here is how the Oxfam report sums up its findings: “The world’s richest people emit huge and unsustainable amounts of carbon and, unlike ordinary people, 50% to 70% of their emissions result from their investments. A new analysis of the investments of 125 of the world’s richest billionaires shows that on average they are emitting 3 million tonnes a year, more than a million times the average for someone in the bottom 90% of humanity. The study also finds billionaire investments in polluting industries such as fossil fuels and cement are double the average for the Standard & Poor 500 group of companies. Billionaires hold extensive stakes in many of the world’s largest and most powerful corporations, which gives them the power to influence the way these companies act.”

It doesn’t mention India’s richest, but the World Inequality Report of 2022 did and showed a similar skewed carbon emission pattern: the top 1% contributed the maximum at 32.4 tCO2/per capita (‘t’ stands for metric ton), against the national average of 2.2 tCO2/per capita, in 2019. The top 10%, middle 40% and bottom 50% contribute 8.8, 2 and 1 tCO2/per capita, respectively.

Corporates are no different. The same Oxfam report quoted studies to assert that though corporates have, in recent years, made “many high-profile net-zero pledges”, most of them are “way off track in terms of setting climate transition plans”. Therefore, it proposed a solution that remains virtually unchanged for the past 30 years: “Governments must hold them to account, legislating to compel corporates and investors to reduce carbon emissions, enforcing more stringent reporting requirements and imposing new taxation on wealth and investments in polluting industries.”

That precisely is the point economist Mariana Mazzucato also made in her paper “The entrepreneurial state must lead on climate change” around the same time. It pointed out that several members of the Glasgow Financial Alliance on Net Zero (GFANZ) – a group of 450 financial institutions – had already quit “over concerns about the cost of delivering on their climate commitments”. By dropping out, she argued, “they have given the lie to the notion that private financial institutions can lead the transition to a carbon-neutral economy”. So, what is needed? More ambitious states to “go beyond market-fixing to become market shapers”, she suggested.

In March this year, a research paper pointed out that the world's top banks provided $742 billion in finance to the fossil fuel industry – coal, oil and gas, the leading cause of man-made greenhouse gas emissions (carbon dioxide, methane, nitrous oxide, hydrochlorofluorocarbons (HCFCs), ozone etc.) – in the pandemic year 2021. This was higher than $185.5 billion in 2020 and also higher than the 2016 and 2017 levels. This was despite most leading banks pledging to reach net-zero emissions across their financing by 2050 and despite the International Energy Agency (IEA) saying no new oil and gas fields should be developed. The dominant banks are North American ones, including JPMorgan (JPM.N), Wells Fargo (WFC.N), Scotiabank (BNS.TO) and RBC (RY.TO), all of which increased their financing.

The IEA analysis also showed that after a dip in the first pandemic year of 2020, carbon emission went up by 2 billion tons in 2021 – the highest level ever – as the world economy rebounded, “more than offsetting” the previous year’s pandemic-induced decline.

European banks are no laggards. Berlin-based non-profit think tank Finanzwende wrote in its December 2021 paper that “between 2015 and 2020, the 24 largest European banks have poured almost one trillion dollars into fossil companies and projects”.

The current energy crisis in Europe and elsewhere sparked by the Russia-Ukraine war has further shifted the focus back to fossil fuel (as also nuclear fuel).

How are rich countries doing?

How do countries engaged in climate negotiations fare in their fight against climate change?

One way of looking at it is their carbon emissions. The World Bank’s database shows, the global average per capita carbon emission (or carbon consumption) was 4.5 tCO2 in 2019 – up from 3.8 tCO2) in 1992.

In 1992, developed countries like the US (19 tCO2), UK (9.7 tCO2) and European Union (8.1 tCO2) were way above the global average and emerging/developing countries like India (0.7 tCO2) and China (2.1) far lower. In 2019, the trend continued: the US (14.7 tCO2), the UK (5.2 tCO2), the EU (6.1 tCO2), India (1.8 tCO2) and China (7.6 tCO2).

But there is a significant change. Developed countries are reducing their carbon footprints while developing and underdeveloped countries (like India by a smaller margin and China by a greater margin) are increasing theirs. This is expected since the development process involves higher energy consumption and hence, higher carbon emissions. That is why the burden of climate mitigation should be more on developed rather than developing/poor countries. This would also explain why while the former is committing to net-zero carbon emission by 2050, India and China are reluctant. India has set the goal in 2070 and China in 2060.

What about methane footprints?

Methane, one of the other greenhouse gases, has not received as much attention as it deserves.

A 2021 UN Environment Programme (UNEP) paper said “methane has accounted for roughly 30 per cent of global warming since pre-industrial times and is proliferating faster than at any other time since record-keeping began in the 1980s”. It is more dangerous than carbon emissions too. A Stanford University paper from November 2021 said: “While carbon dioxide is more abundant and longer-lived, methane – the main component of natural gas – is far more effective at trapping heat while it lasts. Over the first two decades after its release, methane is over 80 times more potent than carbon dioxide in terms of warming the climate system.

The main sources of methane are agriculture (41%), followed by energy (35%), sanitation and waste sectors (20%) – together contributing 90-95% of global anthropogenic sources. Rice cultivation (flooded paddy fields prevent oxygen from penetrating the soil, creating ideal conditions for methane-emitting bacteria), agriculture waste burning, manure management and gas from cows and sheep; oil and gas extraction, pumping, transport and coal mining and from landfills and wastewater treatment are the activities which release methane.

The World Bank data shows total methane emission (CO2 equivalents) is consistently rising – up by 27% in 2019, from the 1992 level. The US, India and China have seen a rise in methane emissions while that of the UK and EU have fallen.

India is so wary of touching agriculture and livestock that it didn’t sign the COP26 (Glasgow) pledge to cut methane (and also stop deforestation) by 2030. Its Long-Term Low Emission Development Strategy report for COP27, submitted on November 14, 2022, is silent on curbing methane and agriculture is not on the list of strategic sectors (such as electricity, transport, urban development, industry and finance) to achieve net-zero by 2070.

Loss and damage funding

This is not to suggest that the UNFCC has not achieved anything. Over the years it has adopted mitigation and adaptive measures. The COP27 added long-term strategies and commitments to achieve net zero to the short-term ones adopted earlier, from 198 participating countries.

At COP15 of 2009 (Copenhagen), developed countries pledged to prove $100 billion a year to help developing/poor countries adopt green energy. Although this commitment remains short on target, reaching $83.3 billion in 2020 – still short by $16.7 billion. Fulfilling this commitment by investing in green energy, R&D and technology transfers will help developing/poor countries keep their end of the bargain. But the overall global scenario is the beak. For example, in 2020, about $5.9 trillion was spent on subsidising the fossil fuel industry, while the global requirement to reach net-zero emissions by 2050 is an investment of about $4 trillion a year in renewable energy until 2030 (including investments in technology and infrastructure), as per a UN climate action report.

The COP27 achieved another milestone when it committed to setting up a “loss and damage fund” – to compensate countries suffering from climate-related loss and damage – which was being demanded for several years. This time, developing countries like India and China, which are big emitters of greenhouse gases, may end up contributing to this fund. But the COP27 failed to add fossil fuels (oil and gas) to coal in the list for phasing out as oil-rich Gulf countries and Russia strongly objected to.

The climate crisis is getting worse by the day and needs stronger commitments, particularly from the rich and powerful. In May this year, the UNFCC warned that the “continued global temperature rise will continue” with “an even chance (50:50) that one of the years between 2022 and 2026 will exceed 1.5 °C above pre-industrial levels” – which COP21 (Paris) committed to preventing.

Recall, in October 2022, while warning the world about recession looming large in 2022 and 2023, IMF Director Kristalina Georgieva listed “climate disaster on all continents” as the third big factor – after the pandemic and Russia-Ukraine war.

COP27

COP27: Fighting climate crisis against carbon billionaires