Larry Elliott: We Should Pay for the Developing World to go Green

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Larry Elliott, from the Guardian, discusses Gordon Brown’s notion that rich western banks should pay for the world to go green:

The response was predictable. No sooner had Gordon Brown expressed enthusiasm for a global transaction tax than the backlash began. Not something we like, said the Americans. We want lower not higher taxes, said the Canadians. Too hard to enforce, said the International Monetary Fund.

This is the last gasp of an ancien régime. The banks in 2009 are the Bourbons in 1789, the Romanovs in 1917. They existed in a bubble of privilege and took the public for a ride. They caused a financial crisis and triggered the biggest economic crash since the 1930s. They now expect the state to clear up the financial mess caused by this greed and stupidity through public spending cuts and higher taxes.

As the prime minister noted in St Andrews on Saturday, this is not on. “There must be a better economic and social contract between financial institutions and the public, based on trust and just distribution of risks and rewards,” Brown said. Amen to that. He is 100% right and he deserves support.

Finance ministries were initially dismissive about debt relief but were eventually won over. Angela Merkel and Nicolas Sarkozy have both backed the idea of a transaction tax; Brown’s intervention means there is now a powerful bloc challenging the status quo.

Tim Geithner, the US treasury secretary, was sniffy about Brown’s idea at the weekend, but Downing Street is encouraged by the Obama administration’s willingness to cooperate internationally in a clampdown on tax havens.

The political argument in favour of reform is strong. Firstly, policymakers want to put in place measures to reduce the risks of future financial crises. Secondly, financial institutions provide an easy source of revenue at a time when governments are counting every penny.

Poor countries did not cause the crisis yet have been badly hurt by it. They need money to develop low-carbon growth strategies. Without a willingness by the west to bankroll greener economic strategies in the developing world there will be no climate change deal. The portents are bad for next month’s climate change summit in Copenhagen. Indeed, the negotiations are starting to echo the global trade liberalisation talks, which began in Doha eight years ago this week and are still going nowhere.

Rich countries have found that the bigger developing nations are no longer prepared to be pushed around. In all previous rounds, the European Union and the United States have imposed a private deal on the rest of the WTO membership: the big change during the Doha talks has been the no-nonsense approach of Brazil, India and China. They have refused to roll over in the face of bullying tactics from Brussels and Washington, demanding that the developed world provide compensation to poor countries for the biased outcomes of previous rounds.

The stakes are much higher in Copenhagen. If the scientists are right, then the international community cannot afford a decade of delay in concluding a deal on climate change. Developing countries say – with some justification – that the west has been responsible for the lion’s share of greenhouse gases and that rich countries should therefore shoulder most of the burden when it comes to cutting emissions. India has more people without electricity than live in the EU.

Rich countries – particularly the US – argue that there can be no deal unless the larger developing countries participate. They, too, have a point. While the stock of greenhouse gases is certainly the responsibility of the developed world, the flow of new emissions will come from the fast-growing emerging countries, where demands for energy are increasing exponentially. Four-fifths of the growth in emissions between now and 2030 will come from those developing nations.

Please read the full article at: Guardian.co.uk