To cool the planet, we need to "cool down" inequalities.

In the latest edition of Foreign AffairsJessica F. Green, Professor of Political Science at the University of Toronto and author of Existential Politics: Why Global Climate Institutions Are Failing and How to Fix Them (Existential Politics: Why Global Climate Institutions Are Failing and How to Fix Them), argues that current policies against climate change are "bankrupt".

The arguments are strong.

Although the Paris Agreement and the United Nations Framework Convention on Climate Change (UNFCCC) have made some progress in preventing global warming from reaching close to 3 degrees, the 1,5-degree target has already been missed, and the world faces the dire prospect of global warming reaching between 2 and 2,5 degrees Celsius in a few decades.

Green argues that the basic mechanism used by the Paris Agreement and the Climate Convention — carbon market management — is not working as it should.

According to the author, since the goal is to reduce greenhouse gas emissions, the policies adopted by countries in this area are geared towards measuring and trading units of these gas emissions, an approach she calls "tonnage management".

This approach allows governments to tailor climate policies to maximize efficiency and economic flexibility. But in practice, these policies don't work very well. They keep the biggest emitters in business while offering companies and governments convenient political cover to ignore the underlying problem: how national and international policies sustain the fossil fuel economy.

In other words, global climate policy is bankrupt because it focuses almost exclusively on managing carbon emissions ("tonnage management") — measuring, pricing, and offsetting emissions — instead of transforming the economic structures that underpin the world's dependence on fossil fuels.

Carbon offsetting (also called carbon credits) allows companies and countries to meet part of their emissions reduction targets by paying for activities that reduce emissions elsewhere — for example, buying carbon credits from Indonesia or Brazil to support the protection of their vast rainforests.

Carbon pricing works by requiring emitters to pay the government a tax per ton of carbon dioxide emitted, or by implementing an emissions cap-and-trade system, in which the government sets a maximum ceiling for aggregate emissions and companies buy and sell carbon emission allowances to stay within that limit.

None of these basic mechanisms are achieving the desired results. A recent meta-analysis of over 2.000 carbon offset projects found that less than 16% of carbon credits issued since 2005 corresponded to actual emission reductions.

Furthermore, carbon pricing, although it covers 28% of global emissions, would be very low. The average price is only US$5 per ton, far below the real economic and social cost of emissions, estimated between US$44,00 and US$525,00.

The author also emphasizes that effective funding to address climate change and promote the energy transition is extremely low. The target of US$100 billion annually, promised in 2009, was met late and without new resources. And the new commitment of US$300 billion annually until 2035 is far below the needs, estimated at US$1,3 trillion per year.

Jessica Green proposes shifting the focus of climate diplomacy—from emissions negotiations at the UNFCCC to global economic institutions capable of addressing the money, power, and structural incentives that underpin the “fossil fuel system.”

Therefore, other, more robust global policies would be needed to combat climate change.

First and foremost, international tax reform would be necessary.

The EU Tax Observatory, a research institute cited by the author, found that more than a third of multinational corporations' profits—totaling $1 trillion in 2022—are transferred abroad to avoid taxes. This transfer contributes to expanding the wealth—and therefore the influence—of large companies already established as owners of fossil fuel assets.

Furthermore, it is estimated that between US$7 trillion and US$32 trillion in corporate assets are held in offshore accounts, where they are subject to little or no taxation.

The money to combat climate change exists, but it's frozen by massive tax evasion.

The inequality itself, generated by the low taxation of these immense assets, contributes to the emissions.

A recent Oxfam report found that the richest 0,1% of the world's population produces more carbon pollution in a single day than the poorest 50% of the planet emits in an entire year.

Proposals like the "Zucman Tax" in France—named after the economist who proposed it, Gabriel Zucman—which failed to pass a parliamentary vote, could be useful in this regard. Such a tax would be a 2% levy on assets exceeding 100 million euros.

A second problem mentioned by Jessica Green is the legal protection of investments, which prioritizes private interests over public interests.

As the author mentions, since 1980, countries have signed more than 2.600 bilateral and multilateral investment treaties, which protect investors from national expropriation, trade discrimination, and “undue” regulatory burdens.

Alleged violations of these treaties are arbitrated through the Investor-State Dispute Settlement System (ISDS), which has proven to be a major advantage for fossil fuel asset owners.

Since 2013, approximately 20% of ISDS cases have been initiated by fossil fuel companies. These companies have won about 40% of the cases, with an average settlement of US$600 million. Eight of the 11 largest settlements awarded through ISDS—all exceeding US$1 billion—went to fossil fuel companies.

It should be emphasized that Brazil does not have this problem, because the PT, during the FHC governments, managed to reject bilateral investment protection agreements, modeled after OECD agreements, which created privileges for international investors and, ultimately, hindered the implementation of robust development policies in accordance with the public interest.

Then-Congressman Aloizio Mercadante, president of the Chamber of Deputies' Committee on Economy, Industry and Commerce, played a prominent role in this historic resistance, which to this day protects Brazil's interests on the world stage. Currently, the country has its own investment protection model, much less permissive and more aligned with the national interest.

Green, however, proposes excluding the fossil fuel sector from ISDS protections, so that countries can better control these companies and eventually counteract their interests without being forced to pay billions in compensation.

The redistribution of financial resources and the reduction of the legal and political power of corporations linked to the coal-based economy would limit the sphere of influence of these "fossil fuel firms" and generate sufficient funds for the energy transition.

The author does not advocate abolishing the UNFCCC, but rather restricting its role.

The Convention should serve more as a technical platform for data collection, technology sharing, and limited management of mitigation and adaptation funds.

However, structural decisions — tax, financial and investment decisions — should migrate to other international forums (OECD, G20 and new economic treaties focused on the social and environmental sustainability of development).

But the crux of the article's point is more profound.

Maintaining a carbon-based economy is strongly associated with the economic, social, and political inequality reproduced by that very economy, on a global level.

Climate change cannot be effectively addressed without combating the inequalities and privileges of large corporations and billionaires who, directly or indirectly, dictate the course of the global economy.

Peoples, states, and public interests must prevail in the strategic centers that truly decide the course of world affairs.

The immense inequalities are very harmful to the world order, to people, and to the planet.

To cool the planet, we need to "cool down" inequalities.