The International Monetary Fund (IMF) has released the World Economic Outlook, October 2017: Seeking Sustainable Growth: Short-Term Recovery, Long-Term Challenges. The report, released on October 10, has dedicated an entire chapter to the impact of weather shocks and climate change on global economic activity. It warns that rising global temperatures could wreak havoc in parts of the world, particularly those with hotter climates, and calls on the global community to limit carbon emissions to levels consistent with an acceptable increase in temperature, one of the “fundamental challenges” of the 21st century.

The report says that advanced and emerging market economies have contributed the lion’s share to actual and projected climate change, compared to low-income countries that have contributed little to the increase in greenhouse gas concentrations. It says rising temperatures will have vastly unequal effects across the globe, with the brunt of adverse consequences being borne by low-income countries that have meager resources. It warns that “substantial migration flows, potentially spilling across country borders, could arise if climate change leads to a significant rise in sea levels.” It calls on richer countries to help poor economies to adapt to rapidly increasing temperatures, which is “both a humanitarian imperative and sound global economic policy.”

What is impeding global action to tackle climate change and why is climate change denial supported?

In fact, the views presented by the IMF are nothing new. However, climate change denial is on the rise in the West, as evidenced by the Trump administration’s decision to withdraw the United States from the Paris Agreement in June and continued financial support for fossil fuel companies. What is impeding global action to tackle climate change and why is climate change denial supported?

Climate crisis is aggravated by neoliberal ideology

The perpetual quest for economic growth results in and depends on continued disposal, implying that environmental destruction is an inevitable element of the growth process. Keynesian economics treats perpetual growth on a finite planet as a process that could lead to collapse. However, the peculiar contribution of neoliberalism rejects regulations to combat climate change and remains indifferent to the climate calamity. According to Milton Friedman, one of the architects of neoliberal ideology, as long as environmental goods are correctly priced, any attempt by governments or citizens to intervene is unwarranted and misguided. According to Alan Greenspan, the former chairman of the Federal Reserve, the market is meant to be inherently self-regulating and self-correcting, so neither regulation nor action is required. Introduced by Ronald Reagan and Margaret Thatcher in the  late 1970s, neoliberalism, representing market-based ideas and policies, is still the supreme politico-economic doctrine in the West, under which US President Donald Trump and his administration are waging a war on evidence-based environmental science.

Hurricane Katrina in New Orleans in 2005, Sandy in New York City in 2012, and Harvey and Irma in Texas and Florida this summer show that markets (capitalism) on their own are incapable of protecting societies, and preventing the deaths of so many Americans and billions of dollars in damage to homes and businesses. While scientists are still not sure whether climate change can be blamed for the occurrence of any hurricane, it is clear that the lives and livelihoods of millions of Americans will be at risk and a bursting of the property bubble caused by climate breakdown could spread through banks, insurers and other parts of the economy, if the Trump administration continues to deny the existence of climate change.

Climate change is a negative global externality of potentially catastrophic proportions. As with financial crises, there is a need for imperative collective action and multilateral cooperation to effectively address its causes and consequences. It requires effective government investments and strong regulations to ensure positive outcomes.

Climate denial is backed by Big Carbon

While most governments signed the Paris Agreement in 2015, signaling their determination to address the climate crisis, political processes to fulfill their mitigation commitments have been hijacked by Big Carbon or “dark money,” including hydrocarbon billionaires and their allies, a lot like Big Tobacco when it denied the health dangers of smoking.

Big Carbon entities tend to favor protection of the status quo industrial capitalist order that has historically made them rich. They have for years been funding massive and sophisticated campaigns to mislead voters about the environmental harm caused by carbon pollution. As the globe slides into a warmer climate, they have made handsome fossil-fuel profits at the expense of the world’s poor, global taxpayers and future generations. They have so much influence now to subvert all reason and fact in collective decision making. One of US President Donald Trump’s first actions after taking office was to remove all mentions of climate change from federal websites; subsequently, donations to climate denial groups from large oil and gas companies such as ExxonMobil rolled in. Within 24 hours of taking office, UK Prime Minister Theresa May closed the Department of Energy and Climate Change, and donations from oil and gas companies to the Conservative party soon followed. It’s clear that Big Carbon is trying to cripple our ability to respond to this existential threat.

It is no less ironic that Big Carbon entities continue to receive financial support from advanced countries and major international development banks who are speaking out of both sides of their mouths. To keep the global temperature under the internationally agreed 2C limit, scientists in 2015 called for a major shift of investment to clean energy from fossil fuel reserves.

Before the G20 meeting in July 2017, a report, entitled “Talk is cheap: How G20 governments are financing climate disaster,” which was produced by a coalition of NGOs, accused the bloc’s member states of hypocrisy because they talked tough on global warming while providing more public finances for fossil fuels than for renewables. More specifically, it found that the G20 countries provided an average of $71.8bn of public money for fossil fuels per year between 2013-2015, but just $18.7bn for renewables. Japan provided the most at $16.5bn per year, six times more than it allocated for renewables. Germany, seen as a climate leader, provided $3.5bn of public finance for fossil fuels, but $2.4bn for renewables.

The Oil Change International recently estimated that, by analyzing the lending by six major international development banks (World Bank, EBRD, the African Development Bank, Asian Development Bank, European Investment Bank and the Inter-American Development Bank), at least $5bn of public money went to new fossil fuel projects run by these development banks in the year after the Paris Agreement was reached. Leading the pack, the Asian Development Bank enjoyed a fivefold increase in public funding.

In summary, tackling climate change demands a new approach to economics, politics and ethics. The alarming climate crisis should be a wake-up call for societies and governments, which need to make a profound shift in the way they produce, distribute and consume energy, and react to the environmental crises. Big Carbon and development banks should be held accountable for the effects of climate change. Governments should ensure that the Paris Agreement is irreversible and that their commitments will be redoubled.