Behind the billionaire climate tax
One economist explains why taxing the rich and paying the poor actually has a chance of becoming a reality.
The climate crisis is extremely unaffordable. That’s the conclusion of a new study published in Nature last week, which found that global warming will cost $38 trillion every year by 2050. For comparison, the entire global economy is about $100 trillion per year.
But one economist has a novel idea about how to pay for at least part of the bill. At a meeting of the world’s wealthiest countries and banks last week, Esther Duflo proposed that the richest people should compensate poor people for the climate damages they disproportionately caused. That money would be raised through a climate tax on billionaires and large corporations.
Duflo is the youngest person and second woman to win the Nobel Prize in Economics. She is currently the president of the Paris School of Economics, and the co-founder and co-director of MIT’s Abdul Latif Jameel Poverty Action Lab. Duflo’s work on poverty pioneered using field experiments to test how well economic policies work in real life.
I spoke with Duflo about why she proposed these specific climate taxes; how the richest nations in the world reacted to them; and why she thinks they might actually have a shot of becoming a reality.
This interview has been edited for length and clarity.
Arielle Samuelson: Why should billionaires and large corporations be the ones to pay a climate tax?
Esther Duflo: First of all, they have the money. The taxes that are being proposed—the 2 percent tax on billionaires and increasing the minimum tax on corporations from 15 to 20 percent—are not things that are going to be very painful to them.
The second reason is that rich people and rich corporations are making their income in a very global way. They are making their income from selling their products everywhere in the world, including in poor countries. And consuming their products is a great contributor to climate change. So it is also logical, to the extent we can, to tax this revenue a bit more.
AS: In your proposal, you cite data that shows that by 2100, 6 million people a year will die from global warming. Is this fund technically to compensate poor countries for those deaths?
ED: Exactly. The moral framing is to literally compensate poor countries and poor people for those deaths. Obviously you cannot compensate people for being dead. The use of this fund is to prevent as many of these deaths as possible.
But the moral framing is literally how I arrive at the number. I started from the emissions of Europe and the U.S. This is our moral debt towards poor countries and poor people in poor countries, who are the ones who are going to make up this 6 million number.
AS: How much is the moral debt?
ED: $518 billion is the need. But the tax on the super rich can raise about $250 billion, and increasing the minimum tax on corporations from 15 to 20 percent can raise another $200 billion. So that leaves you with $450 billion. That’s the easy money that I can see.
AS: You also say people should be compensated, not by going through the World Bank or their governments, but by sending money directly to them via cash transfers. People are often dubious about giving individuals money directly. Why should we directly give money to poor people who are the most vulnerable to climate change, as opposed to going through a more circuitous route?
ED: A lot of different researchers, and not just me, have looked at the impact of cash transfers and absolutely uniformly found that people who are getting direct cash transfers are making very good use of their money. They use it to buy food, and to invest in their house, and to protect themselves against climate change.
For example, this happened in Bangladesh, where they gave money in anticipation of a flood that was predicted to happen. People who got the money in advance were able to protect their animals and move themselves safely out of harm's way.
So one can have simple rules to agree on what triggers a cash transfer. For example, it could be a certain number of hot days in a region, and then everyone in the region gets a transfer.
AS: It’s very tempting to have a fund of $400 billion. What argument would you make to rich countries that they should send this money to poorer people in other countries, instead of using the tax money to help themselves?
ED: Low income countries and middle income countries are getting increasingly impatient about the fact that we are sharing problems, and not sharing solutions. This is payback for lack of leadership during COVID, the debt crisis, and the inflation crisis, where nobody really came to help them, either with money or with vaccines.
And other than it’s your moral duty, you're going to get something out of it. People are very worried about climate migration. But most people don't really want to migrate, and they only do it in the worst of crisis situations. So if you can prevent people from hitting those desperate states, then you also prevent them from migrating. The reality is people would like to stay home if they could.
AS: It sounds like the funds from these taxes would essentially replace the Loss and Damage fund that came out at COP27. What is problematic about that fund?
ED: The biggest problem is that right now it is empty. There is $700 million in it. And why is it empty? Because the rich countries, specifically the U.S., were against having open-ended liability. They don't want commitment, because you never know the size of the commitment. They don't want to be forced to put money in the fund.
At the same time, when you ask for voluntary budgeting, it's very difficult in the current fiscal space for governments to go back to their citizens and say, “Hey, we are going to put a few hundred million or $1 billion in the budget for poor countries.” It wouldn't sell. So that's why you need to have an in-between.
AS: How did you come up with these specific tax proposals on billionaires and corporations?
[I thought of] increasing the minimum tax on international corporations from 15 to 20 percent because that tax was already ratified. We already have the framework. It's really just a matter of increasing the percentage a little bit.
That gave me about half of what was needed. And then when I saw the EU tax proposal for the wealth tax that came out in October, I said, great, that's my other half.
[Editor’s note: In 2021, 136 countries signed a historic deal to tax international corporations at least 15 percent. ]
AS: And you're presenting these taxes to the G20 finance ministers and central bank presidents. How was your proposal received?
ED: Nobody objected to it. So that's a good first step in building a consensus that happens progressively over the next month. Because Brazil and France are already behind the tax on billionaires. The Brazilian president is devoted to fighting poverty and Brazil was one of the pioneers of cash transfers for the poor to Bolsa Família, in Lula's first presidency.
One never knows, but I think there’s a good chance that the two proposals—raising the money and how to spend it—get joined at the hip and continue.
And don't get me wrong, I don't think it's a substitute at all for trying to reduce emissions. But it’s actually easier in some sense. And it makes such a huge difference in the very short term, while we are trying to figure out the rest.
AS: What about the billionaires who would be taxed? Take Jeff Bezos. He says he cares about climate change and has a charitable climate fund of $10 billion. So do you really think that he's going to say, ‘yes, 2 percent tax, I'm okay with that?’
ED: I don't know, but think about it. He has an Earth Fund. He bought The Washington Post. It's not that he doesn't understand the concept of public good. That's also why I think it's actually helpful to say what the money could be used for. As opposed to it's a tax that’s going to go back into general government coffers.
I think in general, for taxes, it's true that they become more popular if there is actually a precise need in front of it. When people are polled on what they think of a tax, even on millionaires, 69% of Americans and 84% of Europeans think it's a good idea.
But think of the billionaires. A 2 percent tax on their wealth corresponds to about a 33 percent tax on their income from their wealth. That's less than you pay. So we are not talking about extortion. We are talking about paying your fair share.
And then it's going to help the absolute poorest people in the world in the [most dire] circumstances to survive. I would hope that at least some billionaire would endorse that.
[Editor’s note: A 2 percent wealth tax on Jeff Bezos alone would raise about $3 billion a year for climate adaptation. The Bezos Earth Fund currently allocates an average of $1 billion a year.]
AS: So who do you need to get on board to make this proposal happen? Are there a certain number of countries who need to agree to make it a reality?
ED: It doesn't have to be everyone. For example, if you look at the minimum tax on corporations today, there are only about 35 countries that are actually implementing it. And it's already working. So you need a minimum number of countries to get behind it to build a movement, and then progressively get more and more countries to get to a good critical mass. Then it can be launched.
AS: You said you see this as a marathon. Does that mean it could take many years before this climate tax is implemented?
ED: The minimum tax on corporations took about ten years between the moment it was first introduced and the moment it was ratified and became reality. I would hope this goes faster because in a sense this is easier, both technically and politically.
I think there will be a lot of work in the next few months leading to the next G20 meeting in July, hopefully leading up to a declaration that will continue on to the South African G20 presidency. But I think the fact that Brazil kind of stuck their neck out and put it on the agenda at the G20 is pretty transformational.
Catch of the day: Taku (aka Henry) is 15 years old and wiser than any creature reader Nola has ever met.
As much as Taku loves the sun, he’s very worried about leaving her behind on a warming planet.
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The strong case for climate change alarmism being a hoax!!!
This is an extract from a newspaper in Canada… expect more of the truth on climate change to be exposed as we pursue reality in our national politics.
A brief filed with the court of appeals in The Hague in November by three eminent, American climate-related academics, Richard Lindzen of MIT, William Happer of Princeton, and Steven Koonin of New York University, the Hoover Institute, and former climate adviser to President Obama, challenged the finding of a lower court and held that scientific analysis, as opposed to an aggregation of “government opinion, consensus, peer review, and cherry-picked or falsified data,” shows that “Fossil fuels and CO2 will NOT cause dangerous climate change, there will be disastrous consequences for people worldwide if fossil fuels in CO2 emissions are reduced to net zero, including mass starvation.”
They assert that the poor, future generations, and the entire West will suffer profoundly from any such policy. which “will undermine human rights and cripple the realization of the first three UN sustainable development goals — no poverty, zero hunger, and good health and well-being.”
The three experts warn against equating “the state of climate science with the reports of the Inter governmental Panel on Climate Change,” which “have no value as science, because the IPCC is government-controlled and represents only government opinions, not science.” It also denounced the lower court verdict that “dangerous climate change and extreme weather are caused by CO2 emissions from fossil fuels ... We demonstrate that these conclusions are contradicted by the scientific method, and only supported by the unscientific methods mentioned.
Hundreds of research papers confirm the highly beneficial effects of the increased concentration of atmospheric CO2, especially in dry farming areas.”
They go on to represent the CO2 as essential to food, and thus to life on earth, and that the more there is of CO2, the more food there will be, especially in drought-stricken areas. They also make the case that greenhouse gases prevent us from freezing to death, that there are “enormous social benefits to fossil fuels and that net zero will expand human starvation by eliminating nitrogen fertilizer.”
This highly recondite and meticulously documented paper states that “600 million years of carbon dioxide in temperature data contradict the theory of catastrophic global warming being caused by high levels of CO2, and that the atmospheric CO2 is now heavily saturated, which means that more will have little warming effect.” Up until recently, the zealots pretended that such opinions are held only by the uninformed, or the paid lobbyists of the oil industry, but they are not going to be able to get away with this much longer. The ranks of the critics are swelling every week with aggrieved members of the voting public distressed by completely unnecessary skyrocketing costs generated by the fearmongering climate zealots.
With any luck, the tide of logical evidence will wash away the climate lunatics of this country before the damage becomes irreparable.
Extract from National post Conrad Black 27 Apr 2024
The response paper submitted to the court…
PDF Render | Friends of Science
https://friendsofscience.org/pdf-render.html?page=2954
I like how, when asked why billionaires and large corporations should pay a climate tax, Duflo said simply, "First of all, they have the money." We're in a crisis. They should at least be paying their fair share.