Climate change is once again under the microscope at COP22 this month and one point in particular will be a review of the previously established Warsaw International Mechanism for Loss and Damage and whether developed countries would be able to fulfil their commitment to provide a total of $100bn a year of financial aid by 2020.
PAL’s view is that the loss and damage attributable to climate change in 2016 is around the $800bn mark, increasing to $1 trillion in 2021. In carbon pricing – or rather carbon cost – terms this equates to about $22 per tonne today, rising to $26 per tonne in 2021. Around 20% of global weather related losses are attributed to climate change, and this figure is increasing at around 0.5% a year.
Moreover we put the case that a 40% share of the funding ($320bn) should go towards adaptation projects. Adaptation is one of the four funding categories in AIMS – Adaptation ($320bn), Insurance ($240bn), Mitigation ($200bn) and Social Impact ($40bn) as explained in Richard Clarke’s recent book ‘Predicting the Price of Carbon: How to crack the climate change code for good’.
Figure 1 – AIMS – adaptation, insurance, mitigation and social fund – a possible protocol for allocating carbon-tax revenues.(© Predict Ability Ltd.)
Put simply, the COP pledge of $100bn is a long way short of the $800bn expected cost of damage being caused by climate change. In fact it covers a little over 12% of the total funds that we believe are needed. The current pledges are simply not enough.
PAL’s new climate financing mechanism Carbon Pay, a marketplace bringing together enterprise (business, city corporation, regional and national governments) and AIMS projects, is designed to address this. Contact us if you would like to find out more.
Author: Edward Coe
Edward Coe is Managing Director and co-founder of PAL. He has extensive experience of systems development and implementation for advanced derivative trading systems utilising a broad range of technologies supporting in house, bespoke and third party software. Edward developed the software behind PAL Carbon.