The Intergovernmental Panel on Climate Change (IPCC) issued a warning to humanity in its latest report: unless we halve greenhouse gas emissions by 2030, we will not be able to limit the rise in global temperatures to 1.5 degrees Celsius above pre-industrial levels. Reaching that goal is an extraordinary challenge, but it is doable and also affordable…if we make sure the world’s richest pay their fair share.
Inequality has skyrocketed in recent years. During the pandemic, while more than 160 million people fell into poverty, the 10 richest people in the world doubled their fortunes. The richest 10% of the population currently pocket 52% of the world income and own 77% of the wealth; the poorest 50% only have 8 and 2% left, respectively.
The gap continues to grow. Billions of people suffer from rising costs of living and stagnant wages, and with the recession looming, prospects for further prosperity are bleak. The world has never been so wealthy, yet most people suffer from chronic financial insecurity. This is the recipe for deeply polarized and dysfunctional societies, contributing to the decline of democracy, and a dangerously unstable world.
Economic inequality is reflected in climate inequality. As the IPCC points out, the 10% of households that cause the most emissions per capita —that is, the richest in the world— generate up to 45% of greenhouse gas (GHG) emissions from household consumption. The 50% that generate the least (4 billion people, many of whom suffer from severe energy insecurity) only produce between 13 and 15%.
In this case, too, the gap continues to widen: the richest 1% (the 63 million people who earn at least €100,000 a year) are responsible, by far, for the largest growth in carbon emissions. And this comes at a time when the world burns more than 1% of the available carbon budget each month to limit global warming to 1.5 degrees.
The world has never been so wealthy, yet most people suffer from chronic financial insecurity.
But the emissions discrepancy is only part of the story. As the new IPCC report highlights, there is overwhelming scientific evidence showing that an equitable approach to climate action—in which the benefits and costs of the necessary transformation are distributed fairly—is vital to building social trust, without the that it will be impossible to achieve the 2030 goal.
This agrees with the evaluation we made in [el colectivo de expertos medioambientales] Earth4All. We predicted that, unless concerted action is taken, inequality will continue to rise throughout this century, producing social tensions and unrest, making it much more difficult to deal with existential crises like climate change.
The concentration of wealth leads to the concentration of power, with the richest actors having disproportionate influence in elections and public policy. This undermines confidence in democracy and makes it more difficult for governments to make long-term decisions for the common good. Countries that are more egalitarian tend to have higher levels of trust in government, as well as better outcomes in terms of education, health and longevity, obesity, infant mortality, crime, and the environment.
The IPCC report makes it clear that avoiding the worst effects of climate change will require a profound economic transformation in the next decade, but that transformation can only succeed with broad public support and based on a new social contract that ensures fair distribution. fairer of wealth and income.
Specifically, Earth4All proposes that, by 2030, the richest 10% of the population in each country receive less than 40% of the national income, and that that share follow a downward trajectory thereafter. Experience shows that progressive taxes on the income and wealth of individuals and corporations would be an effective way to achieve this.
This means affecting the assets of the extremely wealthy, regardless of where they are – including in tax havens – and developing and sharing national asset registries in their various forms. Governments should also increase taxes on luxury consumption that drives GHG emissions, such as the use of private jets.
In addition, we recommend the implementation of a minimum universal corporate tax close to the world average of 25%, well above the 15% rate agreed by the G20 in 2021. Multinational corporations should pay the same tax rates as local companies, with a unitary tax system for worldwide profits based on the proportion of sales, employment and assets in each country.
The concentration of wealth leads to the concentration of power, with the richest actors having disproportionate influence in elections and public policy.
We also propose taxes on extraordinary profits in sectors such as energy. Fossil fuel companies should not have raked in hundreds of billions of dollars in profits while the world faced an energy crisis over the Ukraine war. Similarly, governments must definitively eliminate tax loopholes and excessive subsidies for fossil fuels – which currently exceed one trillion dollars a year. The IPCC estimates that removing subsidies could lead to a reduction in GHG emissions of up to 10% by 2030.
In broader terms, governments should use progressive taxes to discourage share buyback schemes. At a time when the world needs innovation to facilitate economic transformation, shareholder returns should not be inflated instead of investing in research and development.
It is critical that the additional revenue generated by progressive wealth and income taxes is used to protect the most vulnerable groups, assist those forced to move by the green transformation, advance gender equity, and overhaul systems energy and food.
By easing social tensions and improving well-being, progress to reduce inequality will increase the stability and resilience of democracies, enabling them to respond more effectively to shocks and make rational long-term decisions for the common good, especially on issues related to the climate change. But, as the IPCC made clear, time is running out.
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