## Settling the Climate Debt by Clements, Gupta and Liu

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**Canonical URL:** [Settling the Climate Debt by Clements, Gupta and Liu](https://www.imf.org/en/publications/fandd/issues/2023/09/settling-the-climate-debt-clements-gupta-liu)

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## Bibliographic details
- Authors: BENEDICT CLEMENTS, SANJEEV GUPTA, JIANHONG LIU
- Published: September 1, 2023
- DOI: https://doi.org/10.5547/2160-5890.12.1.bcle

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### Overview and definition
- Climate debt: the sum of emission damages, defined as the cumulative negative effects of carbon dioxide emissions whose costs are imposed on the globe without compensation.
- Study coverage: estimates of climate debt for 131 countries based on both historical and projected carbon emissions.
- Policy relevance: estimates inform each country’s fair contribution toward slowing emissions and potential compensation to developing economies.

### Scale and distribution of climate debt
- Total estimated climate debt over 1959–2018: $59 trillion.
- Projected additional accumulation during 2019–35: $80 trillion.
- Major contributors as of 2018:
  - United States: $14 trillion
  - China: $10 trillion
  - Russia: $5 trillion
- Shift in composition: beginning in 2018, developing economies will account for a larger share of climate debt due to relatively higher economic growth.
- Per capita comparisons (1959–2018):
  - Climate debt per capita is highest in the United States — some 6 times higher than in China and 25 times as high as in India.
- Per capita projections for 2019–35:
  - Climate debt per capita remains highest in the United States and will rise in China, exceeding the expected level in the European Union.
- Relative to fiscal metrics:
  - Climate debt in G20 countries: about 81 percent of GDP.
  - Average general government debt in G20 countries in 2020: 88 percent of GDP.
  - Projected net present value of public spending on health and pensions in G20 countries during 2020–35: average 25 percent of GDP.

### Scenarios and impacts of climate policy commitments
- Scenario 1 — Full implementation of countries’ NDCs (assumes gradual annual emissions reductions to meet 2030 targets):
  - Reduction in accumulation of climate debt by $9.6 trillion (24 percent).
  - Despite reductions, sizable contributors through 2019–35 would still include China and the United States, contributing $12.9 billion and $5.4 billion, respectively.
  - Conclusion: NDC implementation alone is insufficient for fair burden sharing.
- Scenario 2 — Additional reductions to achieve the 1.5°C goal:
  - A proposal: ask countries for additional reductions based on their share of total emissions for that year.
  - If each G20 country reduced emissions beyond its NDC, projected climate debt would fall by an additional $6.4 trillion.
  - Equity concern: even with these reductions, climate debt per capita in advanced economies would remain much higher than in G20 developing economies.
- Feasibility insight:
  - Between now and 2030, reducing emissions in a way perceived as fair is likely infeasible given the shrinking share of advanced economies in global emissions.
  - Advanced economies may need to either reduce emissions over a longer period or compensate developing economies through more generous climate financing.

### Fiscal policy options and constraints
- Fiscal tools recommended:
  - Higher taxation of energy, including carbon taxes, to reduce emissions and fund additional spending.
  - Subsidies for clean energy (noted as used in the US and Europe).
  - Complementary fiscal policies to offset short-term adverse effects of carbon taxation on low-income households.
- Constraints and considerations:
  - Pandemic-induced increases in public debt limit fiscal space, especially for developing economies.
  - Subsidy approaches are less feasible for developing economies due to limited fiscal space.
  - Ethical questions: intergenerational burden sharing; urgency because damage from emissions rises over time; phased adjustments for developing economies as per capita incomes rise.

### Policy implications and pragmatic recommendations
- Principle: countries with high climate debt because of historical and current emissions have a moral claim to compensate countries that caused less damage.
- Practical burden-sharing approach:
  - Given political and practical limits to equalized emissions cuts by 2030, advanced economies should ramp up assistance to developing economies.
  - Climate finance instruments: grants and concessional loans to pay for mitigation and adaptation.
  - IMF contribution: the IMF’s new Resilience and Sustainability Facility is extending concessional financing for climate transition and pandemic preparedness to developing economies.
- Financing gap:
  - Current climate finance has not yet reached the goal of $100 billion a year and is inadequate relative to the large climate debt of advanced economies.

*Source: Settling the Climate Debt by Benedict Clements, Sanjeev Gupta, and Jianhong Liu (F&D Magazine).*

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## Content in this bundle

- **Settling the Climate Debt**
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_Source: https://www.imf.org/en/publications/fandd/issues/2023/09/settling-the-climate-debt-clements-gupta-liu_