Who should bear the costs of global warming? The consumer or industry?

The regularity and costs of natural and human made disasters has only grown in the 21st century. Disasters come with economic and human costs. While human costs in the terms of lives lost, number of people injured or affected are difficult to calculate, fact remains that this has a bearing even in terms of economic costs. As economic costs have now exceeded the abilities of insurance companies, individual homeowners, businesses and communities to pay, humankind now grapples with how to bear the costs. While natural and humanmade disasters affect lives alike, the sad reality is that the poorest countries on the planet will be first hit by the climate crisis. In the last decade alone, poor countries like Myanmar, Honduras, Nicaragua, Thailand and Bangladesh have been most battered by the climate storm. The top five greenhouse gas emitting countries have collectively caused about $ 6 trillion in global economic losses between 1990 and 2014, and the losses have been felt disparately.

The top five greenhouse gas emitting countries in 2024 are China, the United States (US), India, Russia and Japan. The noticed trend is that wealthier countries burned and continue burning more fossil fuels to drive economic growth, while low income countries, which are already less able to adapt to a changing climate, bear the brunt of the losses. The US as an example helps elucidate in this context. Emissions from the US which is at higher altitudes, have enabled gross domestic product (GDP) gains because of increased economic activity, related to factors such as longer growing seasons and milder winters. However, tropical regions, which tend to include more low-income countries, have seen losses as it becomes too hot to work outside or to grow crops. Most low-income countries still rely on agriculture as a key prong to income generation and development. At COP26, held in Glasgow, the United Kingdom, a coalition of more than 130 developing countries, representing over 80% of the world's population, proposed to include a text in the final statement, calling on parties to establish a facility that would provide new financial support to developing countries for addressing loss and damage. The proposal was pushed back by developed countries like the US which questioned the need for a new institution. The European Union and Japan also pushed back against the proposal and held that they did not have the mandate to agree to such a facility.

In the geographic region of South Asia alone, sea level rises, river erosion, cyclones and salty water moving inland has and can continue to force millions of people to leave their homes and to become climate refugees. This, in turn, will add to further forms of conflict within the geographic sub region. The question that arises in this backdrop is who should bear the cost burden of the rising heat? Should it be the State, the industry or the consumers?

In a 2024 poll, by the University of Chicago, on who bears the responsibility for climate change, respondents answered that companies, first and foremost are responsible. 62% of the respondents in the survey stated that industry bears significant responsibility in cutting emissions. That was followed closely by 59% who stated the same about the government. In the tussle behind who causes climate damaging products and conditions--suppliers or demand creators, it is often believed that consumers care only about the price of products, not the impacts their production have on climate. While it is true that price remains the top concern for most consumers, it does not necessarily imply that they do not care about the climate crisis at all. However, they might not feel it is their responsibility to address it. Another survey, conducted in 2024 by the consulting firm EY found that two-thirds of American consumers think that they have already done enough to address climate change and that energy companies should now take the lead in reducing energy consumption.

However, this would also lead to the consumer bearing more economic costs. Companies can offer more climate friendly products in a range of industries, but these would be high-end products, unless there is massive technological breakthrough keeping the production of such products low. These costs would ultimately hit consumers in one way or the other. In several surveys conducted on the impact of increasing costs to taxpayers or consumers, respondents were united against bearing the increased or increasing costs.

Treading the choices between costs of production and sustainability is not easy, particularly not for developing countries. However, it is something that is increasingly necessary. Consumers will have to move away from climate damaging products and practices, while companies will have to produce more eco-friendly products, causing less emissions, while the state will have to ensure costs on both consumers and companies for indulging in climate unfriendly practices. All three stakeholders have equal responsibilities, because natural and human made disasters induced by global warming affect humankind alike.

This article is authored by Sriparna Pathak, associate professor, Chinese Studies and International Relations, Jindal School of International Affairs, OP Jindal Global University, Sonipat.