What can governments and international institutions do to tackle the interlinkages between debt and climate crises?

Answer

In order to not only tackle the debt and climate emergencies, but also pursue a fair, feminist and sustainable recovery from the Covid-19 health and socio-economic crisis, here are some recommendations:

  • There must be the recognition of the existence of a climate debt that the global north owes to the global south, that leads to reparations, including delivery of climate finance obligations and debt cancellation, as well as ecological restoration, phasing out of fossil fuel subsidies, ending extractivism, and shifting to decarbonized modes of production, distribution and consumption.
  • Climate finance should be non-debt creating and without conditions. This means it should be primarily delivered in the form of grants. Highly concessional loans should be used only under certain conditions. Climate finance should also be public and disbursed for public and publicly accountable programs and projects rather than private for profit initiatives or public-private partnerships
  • Urgent delivery of new and additional climate finance beyond the unfulfilled $100 billion per year target, that is sufficient and responsive to the climate mitigation, adaptation and loss and damage needs of the peoples and communities of the global south. The priority given to mitigation in climate finance needs to be reversed, addressing and prioritising the needs that climate vulnerable communities have to adapt and address ever worsening losses and damages. Climate Finance delivery must have an inclusive process that will ensure the contributions are based on fair-shares and lead to equitable allocation and access, especially to the most vulnerable nations.
  • An automatic mechanism for debt payments suspension, debt cancellation and debt restructuring, covering public and private lenders, in the aftermath of extreme climatic events, in addition to immediate access to non-debt creating resources for loss and damage.
  • Lenders and IFIs should take immediate action to implement ambitious and unconditional cancellation of unsustainable and illegitimate debts, particularly those generated by funding fossil-fuel projects.
  • In addition to climate finance and debt cancellation, governments in the global north should provide sufficient additional non-debt creating resources to support developing countries to tackle the health, social and economic crises, favouring grants over loans. Any new lending and borrowing should be made following responsible lending and borrowing rules, including hurricane clauses and other state contingent clauses, so that debt cancellation is automatically granted in the case of climate, health and other emergencies.
  • Governments and international organisations should promote an open review of the approach to debt sustainability, with UN guidance and civil society participation. This will facilitate a move towards a debt sustainability concept that has at its core environmental and climate vulnerabilities, together with human rights and other social, gender and development considerations. Debt cannot be considered sustainable if its payment prevents a country from affording climate resilience plans.
  • Governments and international organisations should support and work towards the reform of the international financial architecture and the creation of a permanent and independent multilateral sovereign debt workout mechanism, under the auspices of the United Nations, that provides fair, transparent, comprehensive and timely debt resolution, considering the countries’ climate vulnerabilities, as well as human rights and gender inequality.
  • Governments and international organisations should focus on actions that address the root causes and historic responsibilities for the present debt and climate emergencies. Peoples´ right to participate in and control decision-making and the implementation of policies to ensure a just and inclusive transition must be guaranteed. There are a number of initiatives being discussed, such as debt-for-climate swaps, and market-based solutions like green bonds and nature performance bonds, that are unlikely to generate fair outcomes in this regard, and could actually add to the debt burden of climate vulnerable countries.