printer printer Click on the green icon on the right
Isn’t the cancellation of Southern debt a solution to the climate crisis?
by Scandola Graziani
10 November 2022

Financial compensation allows the countries of the South to finance their fight against global warming. But this makes their deficit deeper. At the time of the COP27, some of them insist on cancelling their debt.

Sea level rise, wildfires, cyclones, floods, desertification, land made unfit for cultivation... Who will pay the bill? This is the burning issue of COP27 [1], which was included for the first time on the official negotiation agenda on November 6 under the heading of “loss and damage.” This is a small victory for the southern states, which are bearing the brunt of the consequences of climate change. 189 million people a year are affected by extreme weather in developing countries, according to a report entitled “The Cost of Delay” by the Loss and Damage Collaboration, an international group of more than 100 researchers, activists, and policymakers, which was taken up by the NGO Oxfam. In 2022, in Pakistan, more than 1,700 people died in floods.

These disasters are the result of a climate crisis that the countries of the South have done little to cause, unlike the developed countries, which are responsible for the majority of greenhouse gas emissions and the plundering of natural resources. Faced with what they consider to be an “ecological debt” of the countries of the North, the countries of the South are therefore demanding a financial compensation mechanism from those responsible. A specific aid that would cover both the brutal climatic phenomena (floods, cyclones, etc.) and the long-term effects of climate change.

For now, however, this type of climate aid has not been tested and remains open to scrutiny. In the reportClimate finance short-changed”, Oxfam denounces the flaws of the “climate finance” scheme launched in 2009 at the Copenhagen COP, the Green Fund, an annual aid of 100 billion euros paid by the richest countries (including France) to developing countries from 2020 to help them cope with climate change.

"71% of this funding is in the form of loans”

According to Guillaume Compain, Oxfam’s climate and energy campaigner, this funding falls considerably short of the real needs of developing countries: “These countries will need between 160 and 340 billion dollars per year by 2030.” Above all, he condemns the perverse effect of this climate aid, which, mostly financed by loans, ultimately contributes to deepening the debt of southern countries: “In reality, 71% of this funding is loans, which is a problem. This means that they must be repaid, often with interest. Under the guise of helping them deal with the climate crisis, we are contributing to the indebtedness of countries in the South that are already burdened with sovereign debt.” Yet debt is the best ally of global warming: it forces developing countries to remain in the system of all-export, intensive agriculture, and extractivism in order to hope to repay their debts in dollars.

So why not cancel the debts of the countries of the South rather than providing them with financial compensation? This is the solution advocated by the Committee for the Abolition of Illegitimate Debt (CADTM). “Any solution that does not consist of cancelling the debt is to be rejected,” says Eric Toussaint, president of the CADTM and author of several books on debt. If we want to break with this destructive model, we must break with the debt cordon.

“A kind of extension of colonial dependence”

He openly critiques the so-called financial compensation system that keeps the countries of the South dependent on the North: “For years, we have been talking about compensation funds.” This was a common French policy toward its former colonies even under Jacques Chirac, and we can see that it didn’t work. In reality, it is a kind of extension of colonial dependence, as these compensations are often linked to the conditionalities of the countries that lend to the South, forcing the latter to buy goods and services from the former."

Given that they are often conditional, financial compensation only feeds the spiral of North-South dependence while maintaining the most vulnerable states in a productivist system based on fossil fuels.

So, what is the point of financing aid while maintaining debts? “These compensations will de facto return to the countries of the North in the form of debt repayment,” underlines Renaud Duterme, author of the book La dette cachée de l’économie (The hidden debt of the economy), who has also worked with the CADTM. According to him, the risk is “contracting loans to repay loans.” He therefore urges us to remain vigilant about the nature of the financial compensation negotiated during COP27 in Sharm el-Sheikh. For the moment, it is still unclear.

Source : Reporterre

Translated by Sushovan Dhar

Footnotes :

[1From November 6 to 18, in Sharm el-Sheikh, Egypt.

Scandola Graziani