Climate change is causing measurable global damage, but at the international level, a quantitative definition and a precise framework for linking specific emissions to quantified financial losses and damages (Loss and Damage) have so far been lacking. A group of researchers recently developed a new model, which can link historical and future emissions from specific sources to monetized damages in specific locations. The results of this research fundamentally change the view of who should pay for the climate debt and how much.

The Iceberg Effect: Future Damage from Past Emissions

The most shocking finding is the fact that future damage caused by past emissions is at least one order of magnitude greater than the historical damage that these emissions have already caused. For example, one ton of CO2 released into the atmosphere in 1990 caused global damage of approximately $180 by 2020. However, by 2100, that same ton will cause additional damage of up to $1,840. This means that even if countries and companies were to settle their debts for past damage today, it would not be nearly enough to cover the true bill for their emissions to date. We can think of greenhouse gas emissions as creating an asset that gradually generates negative value (a liability), and interest is accrued for this delayed payment.

The price of convenience and corporate responsibility

This approach allows us to calculate the climate debt not only at the level of countries, but also of individuals and companies. For example, if an ordinary person had added to their schedule over the past decade one long-haul flight per year would generate global damages of approximately $25,000 by 2100. On the other hand, if he switched to a vegetarian diet or installed a heat pump, it would bring global economic benefits (harm reduction) worth about $6,000.

An extreme example is celebrity emissions. Calculations show that Private jet flights taken by Bill Gates, Jeff Bezos, Taylor Swift, and Elon Musk in 2022 will generate more than $1 million in damages for each of them by the end of the century..

As for corporations, the so-called Carbon Majors have gigantic financial liabilities. It is estimated that the emissions of the state-owned oil company Saudi Aramco from 1988 to 2015 caused $3 trillion in damage by 2020, but will cause losses of an astronomical $64 trillion by 2100. ExxonMobil’s emissions created $1.6 trillion in damage by 2020 (equivalent to about 5 years of its revenue), and this figure will rise to $29 trillion by 2100.

Global Inequality: Who Pays the Bill?

The impacts of pollution are distributed extremely unevenly. Countries in the tropics and mid-latitudes suffer the worst consequences. For example United States emissions alone have caused $500 billion in damage in India and $330 billion in Brazil since 1990.. Globally, US emissions from this period are responsible for $10.2 trillion in damage, followed by China ($8.7 trillion) and the European Union ($6.42 trillion).

The social costs of carbon and the possibility of remediation

The study estimates the so-called social cost of carbon (SC-CO2) at up to $1,013 per tonne at a 2% discount rate. This amount is many times higher than recent estimates from government agencies. More importantly, it is worth noting that these figures only capture the damage reflected in the gross domestic product (GDP) and do not include other huge tragedies at all, such as impacts on human health, ecosystem failure, loss of cultural lands due to rising sea levels, or destructive cyclones.

In addition to direct financial compensation, active carbon dioxide removal (CDR) from the atmosphere could be a possible solution. However, be careful: the effectiveness of the rescue depends on time. If we could eliminate emissions, but did so with a 25-year delay, we would only prevent about half of the projected damage.

The real carbon bill is only just beginning to take shape, and it is becoming clear that the climate crisis carries financial consequences for which our current economy and legislation are not at all prepared. JRi&CO2AI