Nobel laureate: Rich countries owe poor countries $500 billion a year in ‘moral debt’

Rich countries owe poor countries a “moral debt” of $500 billion a year, according to Nobel Prize-winning economist Esther Duflo, who is proposing that developed countries take responsibility for global warming through two taxes, according to AFP.

“This is what I call a moral duty. It is not about adaptation or mitigation costs. It’s what we owe,” the economist detailed in an interview with the Financial Times on Monday, citing the effect of global warming on mortality in poor countries.

“There will be enormous damage,” Ms. Duflo continued, citing a 2020 Global Impact Lab study that showed heat-related deaths could skyrocket in poor countries between now and the end of the century.

“This damage will be concentrated in poor countries outside the OECD,” she adds, stressing the responsibility of rich countries for climate change.

The G7 countries (Canada, France, Germany, Italy, Japan, Great Britain and the United States), which represent 10% of the world’s population, emit about 25% of CO2 related to the world’s energy system, according to the IEA.

Esther Duflo draws on the work of American economist Michael Greenstone, who, starting from a certain monetary value for a year of life and the effect of global warming on increased mortality, estimates the cost of a ton of carbon at $37.

Multiplied by the amount of annual emissions attributed to Europe and the United States, 14 billion tons of CO2 equivalent, the price of the “moral debt” rises to 518 billion, Duflo claims.

To finance it, she proposes increasing the minimum tax rate of multinationals and taxing the rich, two mechanisms that, in her opinion, would allow covering the annual budget.

Climate change aid owed by rich countries to developing countries is currently set at $100 billion a year. COP29, to be held in Baku in November, is to set the new amount after 2025.

Developing countries (excluding China) need $2.4 trillion a year between now and 2030 to finance their transition and adapt to climate change, according to a calculation by UN experts.

At the same time, several avenues are being explored in international negotiations to find ways to close this gap, including debt relief for poor countries and financial innovations through new international taxes.