CApe VerdeAlthough it is a volcanic archipelago off the west coast of Africa, it is not actually a cape and is especially beautiful only during the rainy season. It is vulnerable to rising sea levels, ocean acidification and extreme weather events, which may explain why it signed a climate debt deal with Portugal this year. Portugal will initially cancel 12 million euros ($13 million) of debt. The money saved will be invested in projects such as renewable energy and desalination plants. If all goes well, the full 140 million euros (about 6% of the total amount) will be paid. GDP) Cape Verde’s debts to its former colonies would be forgiven on similar terms.
The search for new funding is high on the agenda for African delegations gathering in the United Arab Emirates. police officer28, united nationsThe annual climate jamboree started on November 30th. Sub-Saharan Africa will have to spend 2.4% of it. GDP A year to adapt to a warming world, united nations think. But many countries are already burdened by debt and austerity. “Have we paid down our debts? Is there nothing left to invest in climate action?” asks Claver Gatete, a former Rwandan finance minister and current head of Rwanda’s government. united nations Economic Commission for Africa (UNESCO).
At Africa’s first African Climate Summit, held in Nairobi in September, leaders called for global financial reform and a “comprehensive and systematic response to the nascent debt crisis.” It also proposed a 10-year moratorium on interest payments to allow spending on adaptation measures even as global interest rates rise, and a moratorium on debt repayments in the event of natural disasters.
Another idea is to kill two birds with one stone by trading debt for climate action.of UNESCO It advises African countries on how to negotiate agreements. Portugal is not the only active creditor. This year, Germany signed debt relief deals worth €60 million and €54 million respectively with Kenya and Egypt in exchange for green investments. Although such bilateral swaps are simple, they tend to be small because only a quarter of Africa’s debt is owed to other governments.
More ambitious swaps involve third parties, such as environmental groups, raising money to buy back debt from private investors. “We don’t need to reinvent capitalism to make more of these transactions possible today,” says American conservationist Slav Gachev. NGO, designed deals to protect biodiversity (rather than climate itself). It recently helped Gabon refinance $500 million of its debt at lower interest rates, with the savings donated to the Marine Conservation Fund. The military junta overthrew the Gabonese government three weeks after the deal, but kept the initial payments for the project intact.
The International Institute for Environment and Development Research, a British research group, argues that swaps could be part of a debt relief program for countries in financial trouble, similar to debt cancellation in the early 2000s. These could potentially raise $73 billion for climate and nature in sub-Saharan Africa alone. Global power brokers are becoming more cautious.of IMF and the World Bank are interested in swaps, but climate policy is “not part of their plans” DNA” said Jean-Paul Adam, who was Seychelles’ finance minister when it finalized the $21.6 million natural debt deal in 2015. Credit rating agencies may consider swaps to be a form of default, depending on how they are structured.
Swaps are intuitively appealing, but they are a cumbersome way to invest in climate protection. Arrangements can take years and often require costly monitoring to ensure that promises are kept. Last year, the African Development Bank said swaps had cleared $3.7 billion in debt worldwide since Bolivia signed the first debt-to-nature agreement in 1987, but only about $1.5 billion had been directed toward the environment. It was reported that only Also, swaps are too small to make much of a difference in a debt crisis, and countries typically need to bring as many creditors to the table as possible.
Neither a tenant nor a polluter.
It would be easier to solve the problems one by one. First, arrange comprehensive debt relief for countries in need, then provide generous climate subsidies across the board. However, neither measure is planned. Debt negotiations are complicated by the demands of competing creditors. Climate finance promises by rich countries are slow to materialize. African leaders will continue to call for an overhaul of the global financial architecture. In the meantime, they’ll take what they can get. ■