Image copyright Getty Images Image caption COP21 pledged to leave 80% of carbon emissions in the ground by 2100
New research suggests some nations could sue the UK for their massive share of the £1.25tn worth of fossil fuel investments.
Only a quarter of fossil fuel investments are used to address climate change, leaving two-thirds sitting in a carbon bubble, says the Law School at the University of Leeds.
“Bargaining chips”, such as avoided climate damage, could be used to secure compensation.
Just 23 of the world’s 50 richest countries have a meaningful target to curb climate change, says the study.
Debt and equity, the academics argue, could be key to securing them.
“If governments fail to allocate infrastructure budgets in line with their mitigation objectives, then rich countries will face debt and equity pressures as they are unable to use public finances to finance climate action, thus driving private investments out of the sector,” said lead author Martin Friend.
Mr Friend, a professor in environmental law, and colleague Edward Rees, a law school pro-vice chancellor, analysed the historical record of all bilateral climate finance transfers to the world’s poorest countries from the World Bank, the UN and donor countries, including the UK.
They found that most of the money was funded through fossil fuel investments and that they “long-term” institutional investors, such as pension funds, were equally likely to direct funds into fossil fuel assets.
“Every dollar invested in a clean energy sector displaces a dollar spent in fossil fuel infrastructure,” said Prof Friend.
Dr Timothy Sebastian, a research economist at the Institute for Economic Affairs, said: “This is typical of the fashionable left-wing critique that challenges the effectiveness of free market capitalism and glorifies government intervention, but in this case it is a claim that simply does not stand up to scrutiny.”
The study, to be published on Wednesday, also raises concerns about the “two most important” remaining blocks to resolving the global climate challenge:
International banks unwilling to invest in low-carbon infrastructure
Political resistance to climate finance
Prof Friend and Dr Sebastian look at the potential outcomes of a string of legal actions that have been launched in Europe and the US, including a climate change lawsuit against the UK, started by former Vice President Al Gore.
They conclude: “The potential for future litigation suggests that, while the formal legal structures to achieve climate goals may not yet be in place, governments will increasingly face forced action if their climate actions are not to trigger huge compensation claims.”
Nearly 30 countries, including India, South Africa and Canada, are currently considering either implementing a target for funding international climate change projects and/or regulating private investment in fossil fuels.
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The study analysed every country’s climate finance commitments between 1990 and 2015, and rated them according to their commitment levels.
But Prof Friend and Dr Sebastian wrote that few of the targets were used to fund global warming mitigation or adaptation.
Only 23 of the 50 richest countries that were given a country score were able to fulfil their pledges; half of them scored below 50%, with the lowest being Denmark, where only a third of the target is being met.
The international polluter, Japan, scored just over 50%, with no sign of progress despite reaffirmation of the country’s promise to cut emissions.
Image copyright Getty Images Image caption Carbon dioxide is blamed for causing the current climate change
“Our research shows that finance for climate change mitigation is falling short in many wealthy countries,” Prof Friend told the BBC.
“Decision-makers are failing to ensure that there is a financial mechanism in place to achieve their targets. This threatens the plans of many countries to decarbonise their economies over the next 30 years.”
Developing countries were less successful, with only 9% of commitments met and many, such as Burundi, were missing entirely.
The authors suggested changes to international finance could include transparency on the use of public finance, the introduction of a global floor price on carbon, and the introduction of patent laws in some markets to push up global carbon prices.
The paper is one of a string of challenges to free-market policies surrounding climate change.
James Magnusson of Friends of the Earth, said: “There is a very dangerous and damaging precedent being set by the current crop of politicians, which has no basis in science and is to be avoided at all costs.”
“It’s great that rich countries like the UK are showing significant leadership but we must keep up the fight to protect the people of the world.”
Meanwhile, the UK government has “unequivocally” rejected any suggestion that “the funding of climate change mitigation programmes can potentially constitute a state debt, let alone a claim for reparations”, said a spokesman.
And the government statement went on to say that “being a central player in our