Esther Diflo / Rich countries owe $500 billion a year in “moral debt” to poor countries

Rich countries are in debt $500 billion a year in “moral debt” to poor countries, estimates the Nobel laureate in economics Esther Diflowhich proposes to undertake the developed countries the responsibility for global warming through two taxes.

“This is what I call moral debt. That’s not the cost of adaptation, that’s not what it would cost to mitigate. This is what we owe”the economist said in an interview she granted to the Financial Times yesterday, relying mainly on the effects of global warming on mortality in poor countries.

“There will be enormous damage,” continued Diflo, who cited a 2020 study by the Global Impact Lab showing that the number of heat-related deaths risks soaring in poor countries by the end of the century.

“The damage will be concentrated in poor countries outside the Organization for Economic Co-operation and Development,” she added, pointing to the responsibility of rich countries in climate change.

The G7 countries (Germany, Canada, USA, France, Italy, Japan, Britain), ie 10% of the world’s populationemits approx 25% of carbon dioxide connected to the global energy system, according to the International Energy Agency.

Esther Diflo relies on the work of the American economist Michael Greenstone who, based on a given monetary value for a year of life and the effect of global warming on the increase in mortality, calculates the cost of a ton of coal at $37. Multiplying this by the amount of annual emissions attributed to Europe and the US, equivalent to 14 billion tonnes of CO2, the price of “moral debt” amounts to 518 billionargues Diflo.

In order to finance it, he proposes to increase the minimum tax rate on multinationals and tax large assets, two mechanisms that would allow, according to her, to cover the annual fund.

Climate finance owed by rich countries to developing countries is currently set at 100 billion dollars a year. COP29, in November in Baku, is expected to determine the new amount beyond 2025.

The future target, critical to renewing trust between North and South, will remain well below needs: developing countries (excluding China) need $2.4 trillion a year by 2030 to finance their transition and adapt to climate change, according to calculations by UN experts.

At the same time, numerous scenarios are at the center of international negotiations to find out how to fill the gap, including the debt relief for poor countries the financial innovations through new international taxes.