So far, the big message from the Glasgow climate conference is the role of finance in decarbonising the global economy. But economic experts have warned that it is a dangerous development in some respects. In his speech to COP 26 last week, the Chancellor, Rishi Sunak, pledged action to ‘rewire the entire financial system for Net Zero.’ Finance has taken centre, stage in large part because of inadequate government policies. According to the United Nations Environment Programme, around two-thirds of global emissions are linked to private household activity. Reducing them requires major changes in people’s lifestyles, UNEP says. What is missing in the march to net zero and ESG (environmental, social and government) investing is beneficiaries. Commentators have cautioned that a financial system wholly geared to financing net zero isn’t one focused on savers and investors. Pension funds exist to generate secure incomes for pensions; insurers need to be solvent to pay out against insurance claims. Neglecting the beneficiary, some say, is a formula for financial ruin. Carney puts the net zero financing requirement at around $100 trillion (£75 trillion). ‘If there’s a revenue stream, then the funding is infinite,’ Bank of America chief executive Brian Moynihan told the Wall Street Journal. These revenue streams don’t currently exist, but one way or another, they will be created – supported by governments and multilateral aid agencies such as the World Bank. On the other side of the ledger, returns on investment in the production of hydrocarbon energy needed to keep the lights on and economies moving are to be suppressed, pushing up their cost. The day Sunak spoke, low wind speeds necessitated paying coal-fired power stations thousands of pounds per megawatt hour to help keep the lights on. Historian Adam Tooze calls the energy transition a ‘historic experiment.’ The climate crisis enters a new, dangerous phase as finance ministers, central bankers, and financial leaders all look to save the planet – with other people’s money.
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