The curtains were drawn on COP28 yesterday as negotiations came to an end a day later than expected. Despite some progress on acknowledging the need to transition away from fossil fuels, the outcomes have not met the needs of communities around the world and leave global south countries without the resources they urgently require to fund climate action.
For many of us working to address global south debt, COP is a key moment each year to sound the alarm on the need to deliver debt justice for climate justice. This includes ensuring that high debt burdens are recognised as a major barrier to climate action and that efforts to finance climate action do not lead to more debt.
So, what are some of the key outcomes of COP28 and what does it mean for efforts towards debt justice?
- Global south governments, activists and organisations raised the importance of addressing debt during the conference, including in a statement signed by over 550+ individuals and groups, actions, side events and interventions. Development Finance International also launched new analysis showing that lower income countries are spending over 12 times more on debt payments than they are on adapting to the climate crisis.
- Yet the debt crisis was not adequately considered in the COP28 agreements. In the Global Stocktake, which informs countries’ climate action moving forward, debt is only referenced once, in relation to the need to scale up grant-based, non-debt creating climate finance (whereas previous versions had multiple sentences on this point). Despite referencing grant-based climate finance, there were no tangible commitments to secure this. While various texts mentioned the need for “fiscal space”, the impacts of the debt crisis and debt relief were not explicitly acknowledged, unlike the “Sharm el-Sheikh Implementation Plan” from COP27.
- A new taskforce was established by the Colombian, Kenyan and French governments to conduct an expert review on debt, nature and climate. The review is expected to take 9-12 months and will examine necessary reforms to remove debt as a barrier to climate and nature action in the global south. Although the Colombian and Kenyan representatives of the taskforce made clear they did not want to pre-empt the outcomes of the review at the COP28 press conference launching the event, it is concerning that the French representative pointed to de-risking private finance and debt-for-nature swaps, suggesting an agenda to guide the taskforce towards harmful approaches.
- There was a problematic focus on inadequate solutions to the debt crisis: the UK, France and the World Bank announced debt pause clauses in loan contracts, and multilateral development banks and others launched a new taskforce to boost debt-for-nature swaps in lower income countries.
- COP28 has failed to ensure adequate, grant-based climate finance for global south countries so that they can fund their transition away from fossil fuels and respond to the climate crisis. Many will have little choice but to borrow more to cover these costs.
- But there were some positives. The Loss and Damage Fund was finally operationalised after decades of struggle by global south governments, civil society and grassroots activists. However, it remains inadequate. There are no obligations for rich countries to pay into the Fund (what was pledged at COP28 was a drop in the ocean compared to what is needed), no financial targets, the funds pledged are not new and additional, and it will be hosted under the World Bank for at least the first 4 years, despite the World Bank’s problematic practice of providing loans to global south countries to finance fossil fuel projects. The decision text also opens the door for finance to be provided as loans, although notes the need to factor in debt-sustainability.
- There were no substantive outcomes on the post-2025 new climate finance goal. The focus remained largely on process again this year, with a commitment to finalise the new goal in 2024. During the negotiations, global south countries continued to raise the importance on finance being public, non-debt creating and, in the trillions, not billions.
- The decision text on Long Term Climate Finance reiterated the failure of rich countries to meet the $100 billion a year climate finance target and urged parties to deliver on this promise through to 2025, placing emphasis on the role of public finance. During the negotiations, some rich countries pointed to estimates by the OECD suggesting that the $100bn per year goal might have been reached in 2022. But even if this is the case, it does not factor in that the pledge was for $100bn every year between 2020-25 – there was no discussion on making up for missed years.
- Adaptation finance pledges at COP28 also fell dramatically short of what was needed, and the outcome text did little to ensure rich countries pay up. Earlier references to the need to factor in debt sustainability were removed in the final text.
- The growing emphasis on greater private sector and multilateral development bank involvement in the delivery of climate finance was reflected during the conference, despite the risks of this increasing loans to global south countries. The Global Stocktake decision text called for multilateral development banks to scale up the provision of climate finance and strengthen incentives for the private sector to reach the scale of investment required. The World Bank announced that it will aim to increase the share of annual financing to climate-related projects from 35% to 45%. Several initiatives were announced to use public money to ‘unlock’ or incentivise private sector investment in climate-related projects, including in the global south. This includes a new initiative launched by the UK and the World Bank, the Investment Mobilization Collaboration Arrangement (IMCA) launched by Nordic countries and the US, and the UAE’s new private climate finance vehicle, ALTERRA, which is a for-profit scheme that aims to use $30 billion of public money to mobilise $250 billion of private-sector investment by 2030.
Debt justice for climate justice
Just like the climate crisis, acting on debt is a matter of justice, not charity. For decades rich countries, institutions and corporations have profited from high interest rates charged on loans and used debt to control global south countries and communities. In the short run, we need urgent debt cancellation, across all creditors and for all countries that need it, free from economic conditions. Current processes are failing largely because private creditors have been allowed to stall and block progress, but legislative reform in the UK and New York (key jurisdictions for global south external debt contracts) could put a stop to this and get debt relief moving. In the longer run, we need to introduce a sovereign debt workout mechanism that would incentivise responsible lending and balance power in the debt system.
Rich countries also must pay their climate debt as adequate, grant-based, public, new and additional climate finance.
Lastly, we must not allow ourselves to be distracted with shiny new instruments and initiatives which claim to address the debt crisis and/or a lack of climate finance. Many of these proposals are inadequate at best, or at the worst, will exacerbate the debt crisis so that it continues to remain a significant blocker to climate action. Our attention must remain firmly planted on solutions that will work.