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Global GDP, Debt and the Climate Crisis

Who will pay for the climate crisis and with what funds? This is a critical and crucial question to ask, perhaps even more critical than determining "what needs to be done" in terms of technology and infrastructure projects. Because without 'money', whatever we say in sustainability and social responsibility reports is empty words if the necessary funds are not available and invested in the task of reducing greenhouse gases.

Let's look at the numbers in brief. It is known that the annual output, the sum of all the GDPs of all the countries in 2021, was about 100 trillion dollars, 96.51 to be exact. At the same time, the global debt, that is, that of the governments of the Countries exceeded in 2022 300 trillion dollars, higher by 45 trillion compared to the period before the Covid-19 pandemic.

In a difficult macroeconomic environment, with rising sovereign debts and bankruptcies of private companies, we are facing the challenge of financing actions to tackle the Climate Crisis.

According to surveys by Deutsche Bank, Bank of America and Moody's, corporate defaults will peak around the end of 2024 (9% increase in defaults). By comparison, it is worth pointing out that the US insolvency rate in 2021 was 0.5% and 1.3% in 2022. More companies globally went bankrupt in Q1 2023 than in any quarter since late 2020 during the peak of government COVID restrictions. The surveys illustrate the risk that the impending recession will cause a significant problem in global credit markets, similar to the bursting of the dot-com bubble.

In this macroeconomic environment, we are called upon to address the financing issues of the "battle against climate crisis". We now know that the cost of tackling the Climate Crisis averages out at around $145 trillion. We say 'average' because estimates vary from 9 billion a year by 2050 to a rough estimate of 275 billion over the same period. From this figure alone, i.e. the Cost, it can be inferred that the battle to zero greenhouse gases requires huge funds that currently do NOT exist.

Economic crises are intertwined with human activity. Economic equilibrium, according to the theory, is a multifactorial process which is often disturbed. On the one hand, this creates problems, but on the other hand, it turns out that there are in fact balancing mechanisms that bring things back into order. We now need to find new mechanisms to find resources to channel into infrastructure projects and transform the way we live, move around and produce goods and services of all kinds. Are we about to issue special Climate Bonds?

In the European Union, at the end of last year, Ursula von den Lien announced a package of over 700 billion euros exclusively for the climate crisis. In this package, about €7 billion is allocated to Greece. In France, President Macron has committed €30 billion for the same purpose. All of the above for programmes up to 2030. Obviously there will be more funds until 2050. The US is announcing and committing funds of a similar amount.

In contrast to the above, we know that globally there is an incredible amount of liquidity in the hands of private investors.

(a) There is currently private capital of about $100 trillion, almost the equivalent of one year's global GDP. This is expected to act as a counterbalance to macroeconomic instability factors.

(b) The total contracts in financial derivative products are private investments estimated to amount to $1 quadrillion or 1000 trillion, 10 times world GDP. These will eventually be liquidated in cash.

Private capital (a) and (b) could possibly with appropriate policies be channelled towards Climate Contracts.

The stakes are on the determination to tackle the Climate Crisis and other unforeseen factors related to it, because not only the economic well-being of humanity is at stake but also its very existence.

However, apart from all this, our view is that the stakes are not hidden in the numbers, in the economic recession, in the debts of states and the bankruptcies of companies and where the resources will eventually be found to cover the costs of the "foreseeable" Climate Crisis.

The real problem of the current times lies in the additional hidden dangers for humanity from unpredictable and unforeseeable factors related to the Climate Crisis. For example, the emergence of a new pandemic due to conditions shaped by Climate Change that favour the expansion of viruses in areas that have not yet been present and are not prepared to deal with them, or the occurrence of a major volcanic eruption that will intensify the effects of Climate Change as has happened in historical times when there was no additional human interference in the Earth's climate. We have recently witnessed what happened with the smoke from the Canadian wildfires that engulfed North America and affected the lives of 75 million people.

All these must be taken seriously into account, in order to secure the funds to address the Climate Crisis while it is still time, because the challenges facing humanity today threaten not only its economic well-being but also its very survival on the planet.


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