Problems that the annual UN climate conference intends to tackle this year In a way, it’s straightforward. Developing countries need to have hope of meeting their commitments to halt global warming. At least 1 trillion dollars per year in raising external funds According to the assessment of economists Failure to meet these commitments will result in global climate chaos. Everyone agrees on this.
But after two weeks of exhausting and demoralizing negotiations, The two assembled 198 parties agreed to the weak deal in the most generous terms. The agreement commits to spending $300 billion annually by 2035 to fund climate action in developing countries. This is three times the current target. But it is less than a third of that trillion-plus target.
These negotiations were conducted on the assumption that this important sum of money would come from wealthy countries. Because where else would it come from? A limited number of locations include the United States, Canada, Australia, New Zealand, Japan, Israel, and Europe as sources. 92 percent of excess carbon emissions since industrialization Countries facing severe climate change largely do not emit the carbon emissions that cause it. And the richest countries have failed to even close to the level of financial performance required. “They are really finding ways to avoid responsibility,” Navkote Dabi, Oxfam International’s climate change policy lead, told me.
Even agreed-upon climate financing isn’t just about handing out cash. The previous agreement had promised $100 billion a year. which is the goal that the world claims to have Finally got it. In 2022, but approximately 70 percent of financing comes in the form of loans. Most of the money in this deal is likely to be structured as debt as well. And it will add to the global debt crisis that the International Monetary Fund estimates has 35 countries in Dire financial straits This year, Dabi explains that debt Both the country’s existing national debt and climate finance take the form of new debt. It’s the elephant in the room at COP, though: developing countries are worried about rising debt burdens from funds promised at the conference. They also worry that discussions on debt forgiveness will derail already fragile negotiations.
But both national debt and new climate debt pose obstacles to the COP’s stated goals. Rising national debt is hampering countries’ ability to meet their goals. On investing in climate restoration: some 3.3 billion people Live in a country where more is spent on debt interest payments than on education or health. Not to mention climate adaptation. And with climate change causing hurricanes, droughts, and other disasters. In response, the country must take on more debt. African countries in particular are struggling. last year Kenya’s Chief Economic Adviser to the President tweeted: “Salary or default? Take your pick.” The country’s economy is collapsing under the weight of debt payments. Kenya is struggling between drought and floods. And while climate funding might help build irrigation systems for drought-stricken farmers, or provide funding for renewable energy infrastructure. But it can also deepen the economic crisis if it arrives in the form of debt, increasing the burden, making people much less able to deal with the challenges of climate change.
Pakistan is perhaps the clearest example of how debt and climate risks can send a country into a downward spiral. It is one of the countries with the most foreign debt. Most of it is owed about $100 billion to the Asian Development Bank, IMF and World Bank. and a few rich countries such as China, Japan, and the United States. And disasters worsened by climate change only add to the difficulties. For example, in 2022 flood damage will account for Loss of $30 billion– Pakistan is unable to pay its debts. And natural disasters will push Pakistan up.
Significantly reducing Pakistan’s debt could trigger recognition that the country is suffering under a climate that it is not responsible for creating. and will struggle to respond otherwise. Mark Brown, Prime Minister of the Cook Islands I called. For countries on the frontline of climate change that received national debt forgiveness and the president of Nigeria. just wrote Offering climate financing to African countries without debt restructuring would be like “Ride your bike harder when you have a flat tire.”
There is a precedent for large-scale debt forgiveness: in the 1990s and early 2000s, the IMF led an initiative for highly indebted poor countries to restructure their debt. I managed to cut it out. 64 percent of the average national debt. Kevin Gallagher, Director of Boston University’s Center for Global Development Policy and climate finance experts Tell me he would like to see new projects like this. But there’s one thing he intends to argue with many private bondholders who have entered the bond market since then. He says the companies are likely unwilling to ease the nation’s debt. Charge very high interest rates It means compensating for losses in the event that a country defaults on its debt. “They have already set the price,” he told me. Now, China and other major debt holders They are cautious about offering debt relief. Knowing that debtor countries are more likely to use financial channels to settle private sector bond markets
China, the single largest creditor of any country in the world, is actually a more progressive lender than private bondholders. experts say– China may be unwilling to restructure countries’ debts. When those countries are at risk of defaulting on their debts But it also lends at lower interest rates than private bondholders, said Jason Braganza, a Kenyan economist and executive director of the African Debt and Development Forum and Network, and other creditor countries. Any other Few countries are also willing to reduce debt as part of their climate recovery strategies. If major debt restructuring initiatives can draw China Other creditor countries such as the United States, private sector bond markets and global development banks Come join the table. That could change the fate of the world. Even though all the poorest indebted countries They can default on their debt without having a major impact on the global financial system. The financial strain of defaulting on their debt and entering austerity will drag down the global economy, Gallagher said. “If these countries cannot repay their international debt, They simply cannot invest in climate restoration. Mitigation and development for sure.”
Debt relief poses similar challenges to the climate finance question, which the COP has failed miserably to address: solving any one crisis requires collective will, and for which the COP has the agencies responsible. Too few are willing, and even though the NCPO can agreed not to issue new forms of climate finance in the form of debt; A multilateral agreement on debt forgiveness will not occur at the COP, which does not include non-state actors.
Still, last week in Brazil President Joe Biden called G20 countries provide debt relief assistance to countries. who need help quickly They called for a faster debt restructuring process. Many analysts say that rich countries have a clear interest in preventing defaults in developing countries: the impact of the debt problem is Unrestricted To the border of a distressed country Debt breeds austerity. And if different countries unable to protect themselves from the effects of climate change and can change from fossil fuels The crisis will escalate into a global security problem. Emissions increase as well as displacement If the world thought differently about debt Perhaps the next round of climate negotiations, scheduled for November 2025 in Brazil, will be different too.
