Can developing countries avoid a 'climate debt trap'?

The average American is responsible for the emission of as much CO2 every year as 581 Burundians, the country with the smallest carbon footprint globally – which also tops the list of the world’s most food insecure. 

As the United Nations Climate Change Conference (COP26) in Glasgow nears, low-income countries are calling on rich nations - which have amassed their wealth through unrestricted CO2 emissions - to step up their commitments towards the world’s poorest, who are often on the frontlines of climate change. 

So far, rich nations have fallen short of an existing pledge to deliver US$100 billion a year in climate finance by 2020. On top of that, as the Least Developed Country (LDC) negotiating group noted in a joint statement ahead of COP26, most of the money has been disbursed as loans rather than grants. The fear is that climate finance may further entrap the world’s poorest in debt, particularly as countries are still grappling with the Covid-19 pandemic and its economic consequences.

“This climate crisis is adding further to the debt burden of low-income countries,” professor Mizan R. Khan, Deputy Director of the International Centre for Climate Change & Development at Bangladesh's Independent University, and the country’s chief climate finance negotiator at the UN, told TRT World.

“Low-income countries have received that finance more in the form of loans rather than grants and we are fighting against that,” Khan explained. “Our argument is that adaptation finance is creating a new debt trap for developing countries.” 

Bangladesh is a low-lying country where devastating storms and floods have wrought havoc, costing millions in damages in the last few years. Parts of the country are affected by drought and shortages of water for drinking and irrigation, leaving millions with no choice but to migrate.

According to the 2015 Climate Change Vulnerability Index, Bangladesh’s economy is more at risk from climate change than that of any other country. It has invested more than $10 billion in climate change-related projects including adapting farming systems, or securing homes and river embankments, earning international praise for some of its adaptation practices such as its floating agricultural gardens. 

The Climate Vulnerable Forum (CVF), a lobbying partnership of 48 countries in Asia, Africa, Latin America and the Middle East that are particularly affected by climate change, has been calling for a reassessment of developing countries’ debt in light of major natural disasters that have sent public spending through the roof. Collectively, these countries are responsible for five percent of global emissions. G20 nations account for around 75 percent.

Earlier this year, the Intergovernmental Panel on Climate Change (IPCC), the UN agency responsible for assessing climate change science, issued its starkest warning yet and said that some of the changes the planet is undergoing due to human activity are now irreversible. Many in the developing world saw it as yet another confirmation that the world’s big polluters should take historical responsibility for the consequences of a warming planet. 

“It is unjust of the world to expect climate-vulnerable countries to pay such a heavy price for the emissions of others,” Sheikh Hasina, the Prime Minister of Bangladesh, which currently chairs the CVF, wrote in response to the report, calling on international financial institutions, loan providers and donors to support efforts to restructure their debt burden.

“With COVID-19 gutting our economies that were already in difficult debt positions,  and the expectation of worsening impacts now that warming is locked into the climate system, small island developing states are facing a financial tsunami,” said Belize Ambassador Janine Felson, lead negotiator on finance at the Alliance of Small Island States (AOSIS), which represents 39 small island developing countries in the UN climate process.

Khan argues that one solution could be considering “debt-for-adaptation” swaps. The basic idea behind it is to offer debt relief to countries that would then invest the freed funds in national adaptation programmes.

“This is a win-win for all. It does not involve new money for the donors, and the recipients will also benefit,” Khan says.

Climate negotiations, however, tend to focus on what countries around the world can do to cut their emissions, rather than on how to address the damage already done. Even on that front, the international community is falling short. 2030 emission reduction targets presented as part of the UN process by G20 countries this year would lead, combined, to 2.4°C warming by the end of the century.

“There is not just one solution. There are many,” Felson told TRT World. “Debt cancellation is an immediate, tested and tried, option.”

“Other initiatives to simplify processes and expand eligibility to access grant-based and concessionary finance also present other opportunities to right the wrong for the most vulnerable, least contributor [countries], paying for others to continue business as usual.”

‘Climate justice’ and historical responsibility

In some parts of the world, adapting to climate change is no longer an option. Communities in Pacific Island nations like Fiji are facing displacement, while Kiribati has bought land elsewhere to face the prospect of the country drowning due to rising sea levels. The only way for farmers in sub-Saharan Africa to adapt to desertification is to migrate.

Developing countries have long argued rich nations should pay up for climate harm through a dedicated “loss and damage” mechanism, as it is known in climate diplomacy.

“Our people are suffering in a variety of ways as a result of a crisis that they did little to cause. It is now time to discuss how the international community can fairly address the loss and the damage manifesting in developing countries because of climate change,” Sonam P. Wangdi, Bhutan’s foreign minister and current chair of the Least Developed Country (LDC) negotiating group said ahead of COP26.

However, there has been no international consensus or agreement about what loss and damage might involve. The principle that rich countries are morally responsible for climate change was accepted at the 2013 climate negotiations in Warsaw, but it is not legally binding.

Professor Khan believes that mounting pressure, as well as increasing evidence, will eventually lead to “some dedicated financing for loss and damage,” in the next few years.

"The LDCs and Small Island Developing States are calling for urgent action on loss and damage at this COP," said Clare Shakya, director of climate change at the International Institute for Environment and Development (IIED).

Shakya told TRT World that debt swaps, as well as grants and contingency finance to respond to emergencies would be needed to protect lives and livelihoods on the frontlines of climate change.

"And we need to see some form of polluter penalty," Shakta continued. "Either the providers of fossil fuels ie the oil and gas industry, or the biggest emitting industries ... paying in some way towards the costs of action." 

"The latter is important for climate justice, but is politically the hardest."