Like charity, climate diplomacy should begin at home

This week, the UK’s new Foreign Secretary David Lammy made the welcome announcement that climate would be central to the UK’s foreign diplomacy going forward. Now it just needs to be financed – which is where the undertaxed sectors of shipping and aviation come in, says our Senior Director of Economics, James Meadway.

David Lammy’s decision to put the climate and nature crises at the centre of his first major speech as Foreign Secretary marks a striking break with typical, mainstream political discussions in the Global North.

We have grown used to framings of the crises as either impossibly big but reassuringly distant – “12 years to save the planet!” – or as the happy opportunity to do some things we’d like to do anyway: “when I hear climate, I hear jobs”. But this new framing gives the UK the opportunity to trial the new approach here in the UK at the International Maritime Organization (IMO) headquarters, where States from all across the globe will come together next week for climate negotiations.

Reframing the climate discussion

Lammy has instead stressed both the size and the immediacy of the crises, with few upsides. The “progressive realism” he previously claimed motivated his foreign policy approach here leads to bleak conclusions about the resulting instability of the world, and the overwhelming status of its troubles, far bigger than more traditional security concerns. “The threat may not feel as urgent as a terrorist or an imperialist autocrat. But it is more fundamental,” he said. “It is systemic. It’s pervasive. And accelerating towards us at pace.”

Most notably, and central to his argument, it is the very global character of the crises that creates the “fundamental alignment” between “demands for action from the world’s most vulnerable and the requirements for delivering security for British citizens.” This, it has to be said, is something of a political risk. The ongoing crisis in the Middle East, Ukraine and, though less urgent, working through the many issues that Brexit created in the UK’s dealings with the EU, clearly all loom large. Many will claim that this new direction might distract or undermine those discussions, but that is not the case.

Reframing a discussion is not easy. If Lammy sticks to his own arguments here, he will end up not only taking a new, but also realistic position on climate change: that its costs and risks are real, immediate and pervasive, and will need to focus where the UK can have real influence.

The UK’s track-run on climate diplomacy

Unsatisfyingly fluffy as it may sound, climate diplomacy is one of the few areas where Britain retained a degree of international leadership – leveraging an early (if somewhat accidental) lead in advanced economy decarbonisation. The Climate Change Act of 2008 established the first carbon budgets and paved the way for the country to play a leading role in negotiating the 2015 Paris Agreement. Britain became the first major economy to commit to a legally binding net zero target in 2019, and won praise for its “energetic” leadership of the 2021 COP26.

All of this goodwill was threatened by some bizarre decisions at the end of the last government, notably including the plan to open a new coal mine in Cumbria and restart oil and gas exploration in the North Sea. Both have been speedily reversed, and Ed Miliband, has hit the ground running, ending a ban on onshore windfarms and establishing GB Energy.

It amounts to an ambitious reorientation of policy, closely aligning domestic and international concerns with a clear-eyed view of Britain’s actual strengths and interests... a welcome reset that we will keep an eagle on.

Falling at the financing hurdle

But financing is where Lammy’s reorientation stumbles. The global financing demands not only of the transition out of fossil fuels, but, increasingly, of adaptation to climate change and of compensation payments for its consequences are enormous – and rising. Globally, $1.7 trillion was invested in clean energy in 2023, on International Energy Authority figures. This sum is double the previous 12 months, driven by China’s spectacular domestic decarbonisation programme. But the global sum is still less than the $6.2tr required every year between now and 2030 to meet the Paris Agreement targets.

Meanwhile, fossil fuel investment since the Paris Agreement, much of it flowing through UK-headquartered banks, has hit $3.6 trillion. And the US, for instance, is seeing a rapid growth in fossil fuel energy as demand for electricity soars, ironically driven in part by electric vehicles alongside the AI boom.

Step forward shipping and aviation

Luckily though, the UK has two large and untapped sources of finance for climate change: shipping and aviation. These sectors combined represent about 6% of all global emissions but are severely undertaxed. There are negotiations in the IMO starting next week, where a number of proposals for putting a price on shipping pollution are on the table. This includes an ambitious proposal for a greenhouse gas (GHG) levy put forward by a number of Pacific Small Island Developing States and with increasing support from the Caribbean, all of whom face existential risk due to the climate crisis. The UK can and should support these proposals clearly. As host nation to this United Nations body (indeed, the only one in the UK), the UK’s position can lead the way for other global north countries to follow.

Just this week a new report has shown the UK Treasury is missing out on £5.9 billion per year from not taxing jet fuel. As the Guardian reported, the “current system meant a teacher driving to school would pay more fuel duty than a private jet owner would to fly away on holiday”.

The centering of climate within UK diplomacy is essential to ensure that the climate crisis can be addressed. It will be a welcome reclaiming of the UK’s previous leadership in this area. But real money will have to support the rhetoric and luckily there are two sectors where those funds can come from: shipping and aviation. Both sectors are historically undertaxed but have a large contribution to international emissions, therefore ideally placed to contribute more to ensuring the climate vulnerable countries of the world get the support they need. There could be no better way for the new UK Foreign Secretary to demonstrate his real commitment than to focus on these two sectors.

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