Next month’s Cop26 talks could end in abject failure. Anybody who has monitored the tortuous attempts of the World Trade Organization to piece together a global free trade agreement knows how hard multilateral negotiations can be.
A breakthrough in Glasgow is possible but requires two things to happen: the world’s leading emitters of greenhouse gases need to accelerate their net zero carbon plans; and they have to recognise it is their own self-interest to help the less fortunate countries already struggling with the effects of global heating.
The case for some international solidarity is well made by a report from the United Nations’ trade and development arm UNCTAD, which highlights the fact that the impact of climate change is uneven. Put simply, the parts of the world most vulnerable to rising temperatures and extreme weather events are the least well equipped to cope.
Developing countries, according to UNCTAD, are already suffering economic losses three times as big as those in high-income countries as a result of climate-related disasters.
For years wealthy countries have promised that they will provide the necessary resources so that poorer countries can adapt to climate change, but have never delivered on the $100bn (GBP72bn) a year promised. Inaction has already proved costly, with UNCTAD estimating that adaptation costs have already doubled to $200bn a year, and will continue rising as temperatures increase: to $300bn a year by 2030 and $500bn by 2050.
This is exactly the same message as that delivered to the UK government by the independent Office for Budget Responsibility. Yes, meeting the challenge of climate change is expensive. Yes, governments are counting the economic cost of the pandemic. But doing nothing costs more – a lot more – in the end.
Testing times for Lagarde et al
Central banks are feeling the heat. Rising inflation has put their credibility on the line – and they know it. The European Central Bank’s Christine Lagarde became extremely animated as she flatly rejected the idea that borrowing costs in the eurozone would need to go up next year. Markets had got it wrong, Lagarde insisted.
There was a time when that would have been it because when the president of the ECB spoke the markets listened. These days central bankers receive a lot less reverence: the markets thumbed their nose at Lagarde and brought forward the moment when they expect interest rates to start rising.
To be honest, Lagarde might have anticipated that response given that she said only one thing had been on the mind of the ECB’s governing council. “We talked about inflation, inflation, inflation,” she said. Markets believe an almighty row is going on between hawks and doves at the ECB, and that eventually the hawks will win.
Lagarde’s point – and it’s a reasonable one – is that the current high level of inflation is a temporary phenomenon caused by the pressure on global supply chains from the ending of pandemic restrictions. Andrew Bailey, the governor of the Bank of England, has made a similar argument, as has Jerome Powell at the US Federal Reserve.
The latest US growth figures highlight the central bankers’ dilemma. A combination of rising infections, bottlenecks and less stimulus from the federal government in Washington led to a marked slowdown in the economy in the third quarter. While slower growth should eventually mean lower inflation, markets are determined to test the resolve of Lagarde et al. As Sir Alex Ferguson once said: it’s squeaky bum time.