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debt relief
The Global South Needs Fair, Equitable, and Enduring Climate Finance
While the developed world is rapidly changing its relationship with the rest of the world, the price of not providing climate finance will be economic losses, health impacts, increased disaster costs, food insecurity, biodiversity loss, and infrastructural damage.
Feb 17, 2025
The global commitment to fair climate finance is at a crossroads. COP29 concluded with a disappointing New Collective Quantified Goal on Climate Finance, or NCQG, leaving developing nations at risk of being left behind. With the U.S. withdrawing from the Paris agreement and slashing development aid, prospects for more ambitious fair climate finance are disappearing out of sight. Decisions like these not only threaten global cooperation on climate change but will also fail to meet its core purpose in supporting the most affected communities in adapting to and mitigating climate change. Now, more than ever, fair and equitable climate finance—such as increased grant-based funding and debt relief—is critical.
In Africa, the impacts of climate change are stark and undeniable. Extreme weather events on the continent surged from 85 in the 1970s to over 540 between 2010 and 2019, causing over 730,000 deaths and $38.5 billion in damages. The increasing frequency and severity of floods, droughts, and storms are threatening food security, displacing populations, and putting immense stress on water resources. According to the World Bank, climate change could push up to 118 million extremely poor people in Africa into abject poverty by 2030 as drought, floods, and extreme heat intensify. A stark reality that underscores the urgent need for robust climate finance to implement adaptation and mitigation strategies to safeguard and secure the continent's future.
Without stronger commitments to public grants and additional funding, developing countries risk falling into a cycle of debt that hinders climate action.
At the same time, climate response remains critically underfunded in Africa. From the figures released by the Climate Policy Initiative, the continent will need approximately $2.8 trillion between 2020 and 2030 to implement its Nationally Determined Contributions (NDCs) under the Paris agreement. However, current annual climate finance flows to Africa are only $30 billion, exposing a significant funding gap for climate adaptation and mitigation strategies.
Climate Finance at COP29
COP29's main objective was to deliver on a finance goal that would see the world off the tipping point. However, after two weeks of nearly failed climate diplomacy, negotiators agreed to a disappointing $300 billion annually by 2035. This amount falls short of the $1.3 trillion per year figure, supported by the Needs Determinant Report, that many developing countries had advocated for.
Nevertheless, the Baku to Belem Roadmap has been developed to address the climate finance gap. This framework, set to be finalized at COP30 in Brazil, offers a crucial opportunity to refine finance mechanisms to effectively and equitably meet the needs of developing countries.
Why the Finance Outcome of COP29 Could Leave Developing Countries Behind
Beyond the insufficient funding, the NCQG lacks a strong commitment to equity, a key principle of the Paris agreement. The principle of Common but Differentiated Responsibilities (CBDR) emphasizes that developed countries should bear a greater share of the financial burden. However, the NCQG merely states that developed nations would "take the lead" in mobilizing $300 billion, reflecting a lack of firm commitment.
A major concern is the climate debt trap for developing nations. Much of the climate finance provided is in the form of loans rather than grants, worsening existing debt burdens and limiting investments in sustainable development. Without stronger commitments to public grants and additional funding, developing countries risk falling into a cycle of debt that hinders climate action.
Moving Forward: Shaping Conditions for Fair, Equitable, and Enduring Climate Finance
To ensure COP29's finance outcomes do not leave the Global South behind, several actions are needed.
Firstly, debt relief is crucial. Approximately 60% of low-income countries are already in or near debt distress. Between 2016 and 2020, 72% of climate finance to developing nations was in loans, while only 26% was in grants. Reducing debt burdens would allow developing countries to allocate more resources to climate projects, improve fiscal stability, and attract additional investments.
Similarly, given the mounting climate finance debts in low-income developing countries, increased grant-based financing for climate action is needed. In 2022, developed countries provided around $115.9 billion in climate finance to developing countries, but a significant portion was in the form of loans. Heavy reliance on debt-based financing exacerbates financial burdens on these nations. Grant-based finance, on the other hand, aligns with equity principles and ensures that funding effectively supports adaptation and mitigation.
Another potential path is leveraging private sector investment. The private sector plays an essential role in climate finance. However, its involvement often prioritizes profit over genuine climate benefits. Strategies must ensure that private investments align with climate justice principles. To address this, approaches are needed such as those used by Bill and Melinda Gates.
Lastly, implementing robust governance and transparent mechanisms is critical. This includes developing detailed reporting templates, public participation in decision-making, and clear monitoring systems to track climate finance flows and prevent double counting.
While the developed world is rapidly changing its relationship with the rest of the world from aid to trade, the price of not providing equitable, grant-based, public climate finance will be economic losses, health impacts, increased disaster costs, food insecurity, biodiversity loss, and infrastructural damage. Quite simply, taking the equity conditions into account is the way forward if we are to ensure that the outcomes of COP29 leave no low-income developing nation in the Global South behind.
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$4 Trillion Funding Gap for Global South Keeping Green Transition Out of Reach: UN
"A green transition will remain out of reach if the world doesn't help developing countries attract more investment in clean energy."
Jul 05, 2023
Wealthier nations must do much more—including implementing debt relief—to bridge a $4 trillion annual gap in funding needed to meet the United Nations' sustainable development goals, the world body's agency in charge of promoting Global South trade interests said in a report published on Wednesday.
In its annual World Investment Report, the United Nations Conference on Trade and Development (UNCTAD) calls for "urgent support to developing countries to enable them to attract significantly more investment for their transition to clean energy."
"Developing countries need renewable energy investments of about $1.7 trillion annually but attracted foreign direct investment in clean energy worth only $544 billion in 2022," the report states. "Developing countries face an investment gap of $2 trillion annually for the energy transition, out of a $4 trillion annual funding gap for the sustainable development goals."
"Debt relief is urgent to give developing countries fiscal space to make the necessary investments for a clean energy transition and to attract international private investment by lowering country risk ratings," UNCTAD added.
The U.N.'s sustainable development goals (SDGs) form the core of the 2030 Agenda for Sustainable Development, which was adopted by all U.N. member states in 2015. The 17 sweeping goals include eradicating poverty and hunger, achieving gender equality, boosting education and public health, and taking urgent action on climate change.
The UNCTAD report showed that international investment in renewable energy production, including solar and wind, grew 8% in 2022, down from 50% growth reported in 2021, while battery manufacturing tripled to more than $100 billion last year.
"We are at least a decade late in our efforts to combat global warming," warned U.N. Secretary-General António Guterres in the report's introduction.
"Investments in energy infrastructure and efficiency still fall far short of what is needed."
"Investment in renewable energy in developing countries is therefore essential and often the most economical way to bridge the energy gap," the U.N. chief added. "But while the transition to renewable energy is a global priority, investments in energy infrastructure and efficiency still fall far short of what is needed."
UNCTAD Secretary-General Rebeca Grynspan said that "the scale of the challenge is enormous."
"So is the range of actions needed to boost investment in sustainable energy in developing countries," she added.
"The growth of green finance in global capital markets, with sustainable bonds growing fivefold in five years, shows that the appetite among private investors to fund climate change mitigation is there," Grynspan asserted. "The task is now to channel those funds to where they are most needed to support the transition and to provide affordable access to electricity for all."
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'Fighting for Their People,' Puerto Rico's Faith Leaders Condemn Austerity
The call goes beyond debt relief: 'We call for economies to serve people, not for people to serve economies.'
Aug 31, 2015
Denouncing new austerity plans and proposed "fiscal adjustments" that they say will adversely impact Puerto Rico's poor and needy people, the island's faith leaders on Monday called for debt relief and a resolution to the financial crisis that eschews further austerity.
With a working group restructuring plan due to be delivered to Gov. Alejandro Garcia Padilla on or before September 8, the letter from religious leaders (pdf) comes as the U.S. territory struggles to address crippling debt and double-digit unemployment.
Two recent reports suggest new austerity plans to pay off portions of the debt, one commissioned by a group of hedge funds that purchased the island's distressed debt and the other authorized by Puerto Rico's government. These plans include reducing the minimum wage and cutting education and healthcare programs.
Citing the Biblical concept of debt relief, or Jubilee, the letter's signatories express concern about "predatory hedge funds which seek to benefit from our distress and push our economy to the brink of collapse" while calling for full-scale debt restructuring "that invests in Puerto Rico's people."
"This debt crisis threatens to push more of our people into poverty and put people out of work," stated San Juan Archbishop Roberto Gonzalez Nieves, leader of Puerto Rico's mostly Catholic population. "The religious community stands with vulnerable people and we call for the crisis to be resolved in a way that protects the poor and grows our economy."
In resolving the financial crisis, the religious leaders call for policymakers to adhere to six principles:
- In any solution that is reached, there should be no more austerity policies affecting people and poor families and young people who are the most vulnerable.
- Any solution must create an investment in the Puerto Rican people and seek to grow our economy.
- We need enough debt relief to restore our total debt to sustainable levels.
- We encourage all solutions that enhance Puerto Rico's laws on budget transparency.
- We seek greater participation in resolving this crisis and working with the government on solutions that protect Puerto Rico's people.
- In addition to the participation of the religious sector, we call for multi-sectorial participation in which our people are well represented. A representation that also includes the poorest because they are always the most affected.
"Puerto Rico's religious leaders are fighting for the lives of their people," stated Eric LeCompte, the faith-based development coalition Jubilee USA Network executive director. LeCompte, who visited Puerto Rico in mid-August to advise religious and political leaders on solutions to the crisis, said: "We need to get Puerto Rico's debt back to sustainable levels and ensure that the island has a path for economic growth."
However, the letter acknowledges how Puerto Rico's complicated geopolitical standing makes finding solutions to the crisis more challenging:
We understand that some processes and options typically available to indebted governments are not available to ours. Because Puerto Rico is not a sovereign country, we can't receive low-interest loans or emergency financing from the International Monetary Fund. Because Puerto Rico is not a US state or city, we can't access US bankruptcy laws. In the absence of Congress extending bankruptcy protection to Puerto Rico, we must call for greater involvement from the Federal Reserve to act and to arbitrate our debt according to our six principles to protect the common good. The Federal Reserve has the power to act and should act. The Federal Reserve has the ability to restructure our debt in ways that limit austerity and ensure debt relief without harmful conditions.
It expresses solidarity with communities worldwide- such as Greece, Argentina, and some of Puerto Rico's Caribbean neighbors- that are also struggling against austerity politics in the face of high debt burdens and poverty.
"As we call for a Jubilee for Puerto Rico's people, we call for a Jubilee for all people," the letter reads. "We call for economies to serve people, not for people to serve economies."
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