Debt cannot be allowed to derail the fight against climate change

Children play in the dried up Shatt al Mashkhab river, in Najaf city, Iraq. Emerging and developing economies are more vulnerable to the dangers posed by global warming. Many also struggle to fund decisive action on climate change. ReutersShow less

Fifty heads of state and government, as well as representatives from more than 100 countries, met in Paris yesterday for a summit to tackle the thorny issues of international debt and green finance. They did so amid a backdrop of worrying – and deadly – climatic developments.

In India, close to 100 people lost their lives this week in sweltering, unusually high temperatures. One district hospital in Uttar Pradesh, where temperatures rose to 43°C – five degrees above the normal range for the month – admitted at least 400 people. Of them, 54 died from suspected heart attacks, strokes and diarrhoea, officials said.

In Iraq, climate change collided with viral disease. Congo fever, passed to humans through ticks or direct contact with the blood or bodily fluids of infected animals, claimed 32 lives amid hundreds of infections. The wave of disease is being blamed on drought and water scarcity that has led to rural displacement and an increase in tick density and animal infestation, according to Dr Ahmed Zouiten, the World Health Organisation's representative in Iraq.

When calamities like these hit emerging and developing economies, the consequences can be devastating. Such nations are often the most vulnerable to the effects of climate change, a phenomenon that has largely been fuelled by the industrialised world. Finding and effectively implementing technical solutions to mitigate global warming – such a greener forms of energy production – are complex enough. Funding whole-scale changes to countries’ economic development and resource use, even more so.

The Bridgetown Initiative, championed by Barbados's Prime Minister Mia Mottley, above, includes a $100 billion plan to drive more climate and development investment using currency guarantees from the International Monetary Fund and banks. Bloomberg

Fighting climate change by adapting nations’ economic growth and energy production costs money, and heavily indebted nations are hamstrung from the start. Saddled with debt and vulnerable to interest rate changes, they are the last who are able to fund decisive climate action.

Suggested solutions have been put forward. Among them is the Bridgetown Initiative championed by Barbados's Prime Minister Mia Mottley. This includes a $100 billion plan to drive more climate and development investment using currency guarantees from the International Monetary Fund and other multilateral development banks. Another proposal are debt-for-nature or debt-for-climate swaps, explored by countries including Cape Verde and Zambia. This is where debt is restructured to allow funds to be freed up for investment in conservation and clean energy.

However, some climate campaigners say this does not go far enough and claim that richer countries are reluctant to support essential governance reform in international financial institutions.

Although the results of the Paris summit have yet to be seen, it is welcome to witness the issue of debt and green finance being put at the heart of the climate debate. There is some reason for optimism. Rachel Kyte, dean of the Fletcher School at Tufts University in the US believes there is now a “broad coming together around the fact that debt has to be dealt with in a serious way”.

“You can't take a highly indebted country and have it grow greener,” she added. “That lies right at the very heart of this.”

French officials see progress in Paris as promising for further, more comprehensive deals at Cop28 later this year in the UAE. On one hand, the Paris talks may continue the momentum from Cop27 in Egypt when countries eventually agreed to create of a specific fund for climate-linked loss and damage experienced by poorer nations. The summit in the French capital also comes as World Bank President Ajay Banga seeks to expand the bank’s role in fighting climate change, pandemics and other crises.

The private sector has a crucial role to play in leveraging finance, too. Earlier this month, Dr Sultan Al Jaber, UAE Minister of Industry and Advanced Technology and Cop28 President-designate, told talks in Bonn that climate finance is critical, and made clear his commitment to reform global financial institutions, to unlock more concessional finance and to attract much more private capital.

But building wide-ranging consensus on issues like debt relief, governance and green funding will be difficult. What is certain however, is that the voices of what’s often called the global south need to be listened to and their policy suggestions taken seriously. It is only five months until Cop28 begins, and although dialogue is to be welcomed, the time to resolve the finance conundrum is now.