Climate Change, Environment, and Security: It’s Not Necessary and Needs for Adequate Action by Development Banks in Developed Countries
Not enough is being spent to cut the pollution that’s heating the planet or on things that could help people adapt to a hotter world, like flood defenses and infrastructure that’s built for more extreme weather. Poor countries are at risk of suffering large losses and damages if temperatures rise as a result of climate change.
That is not the entire amount that is needed. A report commissioned recently by the Group of 20 nations said multilateral development banks need to help raise an additional $1.8 trillion per year of climate investments in developing countries by 2030.
The finance will be put under a lot of pressure at the congress. Going forward, action has to be the focus. That action costs money.
Climate Finance is in Short Supply. So some want to rework the financial system. The United States is the largest historical contributor to greenhouse gas emissions
The United States is an example of a country that built their wealth using fossil fuels. The U.S. is the largest historical contributor of greenhouse gas emissions. Developing nations from Peru to the Philippines have contributed far less pollution, but they’re suffering disproportionate harm because of their smaller economies and geographic locations.
The latest assessment by the Organisation for Economic Co-operation and Development (OECD) found developing nations received $89.6 billion from public and private sources in 2021, an increase of almost 8% from the year before, but still short of the $100 billion annual goal. The data is preliminary and does not have a conclusive answer, but the data shows that rich countries have met their funding targets.
The cost of underinvestment is becoming clear. At least 1,700 people died and $30 billion was lost in Pakistan as a result of floods caused by climate change in the summer of 2022. That’s more than the $21.3 billion of public funding that all developing countries combined received in 2021 to help them adapt to the impacts of global warming, according to the United Nations. International donors pledged more than $9 billion to help recover Pakistan.
Developing nations are in a bind. They need help, but whatever money is promised for the future, it is likely to fall short of what’s needed. And they’ll be relying on wealthier countries that failed to deliver in the past.
“It’s important to keep that going with a new goal that reflects the climate risks that poor countries face,” says Rishikesh Rambabu, assistant director.
However, Bhandary says efforts to boost climate finance have moved beyond national pledges from big historical polluters and are now focused instead on something even larger: overhauling the global financial system to better channel money to vulnerable nations.
Officials from the World Bank and IMF say they are meeting regularly to coordinate their climate programs. Private investment in emerging markets is a topic the World Bank is working on. The African Development bank is working with it to try to lend more money to the developing countries.
“Climate change is a threat to global peace, security, economic stability, and development,” the heads of the World Bank and IMF said in a joint statement in September.
The vicious cycle of debt burdens: Helping developing countries to halt debt payments after a climate crisis by lending more money to the World Bank
The World Bank said in October it could boost the banks’ lending ability by $400 billion over the next 10 years because of measures that had already been implemented.
“The finance needs are huge,” says Aki Kachi, a senior climate policy analyst at the NewClimate Institute, a German nonprofit that advocates for more aggressive action on climate change. “We’re talking about rebuilding, basically, the whole global economic system, the energy systems, our transport systems, the way we heat our buildings, the way we cook, the way we farm, how we source our supplies.”
Easing countries’ foreign debt burdens is increasingly seen as a critical way to free up money that developing countries could use to prepare for climate change.
Some countries simply borrowed too much money and spent it on things that didn’t help their economies, and others are victims of factors outside their control, such as swings in commodity prices, soaring interest rates and natural disaster shocks related to climate change.
Nigeria is one of the countries under serious debt pressure. An estimated 96% of government revenue went to paying the interest on its loans in 2022. And the country faces “major challenges” meeting most of its goals for sustainable development. Those goals include making cities and communities more resilient to extreme weather and ensuring people have access to clean and affordable energy. Nigeria was hit by intense rain and deadly flooding in 2022 that was made worse by climate change.
“Often, they are hit by a disaster, they do still have to pay their old debt, and then a lot of the disaster help that comes to them is actually in the form of more loans,” which puts them deeper in debt, says Lara Merling, a senior research fellow at the Center for Economic and Policy Research. “That’s kind of the vicious cycle.”
Desperate nations have sought debt relief when disaster strikes. Grenada was able to secure a “hurricane clause” in its bonds as part of a debt restructuring in 2015. The provision gives the Caribbean country the right to stop making payments if there’s a natural disaster. The idea has caught on. The World Bank has a policy that allows certain countries to pause debt repayments in the event of a crisis. Countries should be able to “focus on meeting the urgent needs of their people instead of on loan repayments,” the World Bank said.
Kenya suspended salary payments to thousands of government workers earlier in 2023 to keep from defaulting on its loans. The adviser said a default would force the country into restructuring talks with its lenders. In October, he had $1 billion in loans from China.
Climate Change as a Ponzi Scheme: The Challenge of Adapting Financial Systems to the Problems of the World’s Most Expensive Countries
It “becomes sort of like a Ponzi scheme,” Merling adds. You just keep making interest payments on your old debt, and if things don’t work out you can’t pay anything anymore.
The challenge is trying to adjust how global financial systems and organizations operate when countries are already suffering the impacts of climate change.
“I think it’s very clear that it’s not changing fast enough,” says Kachi of the NewClimate Institute. “And we really need to accelerate that pace of change drastically.”