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human activity and the destruction of the planet


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Climate Change and Debt

September 30th 2018

This weekend, I attended a conference organised by the Jubilee Debt Campaign (JDC): “Breaking the Chains: from 1998 to the present day”.  JDC was set up in the 1990s to pressure Governments to act to cancel the unpayable debts that many developing countries held.  The situation was likened to the Biblical principle of “Jubilee” or restitution, in which debts would be cancelled every 50 years, to give an opportunity for everybody to start again at square one; not to be over-burdened with debt hanging over them.  A man called Martin Dent, a university professor raised the challenge about whether we could set the millennium as a date when the debts of developing countries could be cancelled. In 1998, in response to his, and others, Jubilee2000 campaign, 70,000 people came to Birmingham, where the G8 summit was being held, and they formed a human chain around the city to protest that so many poor countries were being held to ransom by the banks. As a result of this pressure and many thousands of signatures to petitions and postcards that were sent, $130 billion of debts was cancelled.

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The human chain around Birmingham in 1998

For the full story of this, see: 

https://jubileedebt.org.uk/blog/we-still-need-a-debt-jubilee-20-years-on-from-the-birmingham-human-chain

However, things did not go back to square one, as hoped. Due to the 2008 recession and the low-interest rates that were introduced in developed countries, to help them recover from the recession, banks looked again to the poorer countries to make money; they offered new loans to them with higher interest rates. Now, 31 of these countries are in debt again, unable to pay the high interest rates the banks have imposed, with another 82 countries on the brink of going into debt.  Some developing countries, such as Jamaica and Pakistan, never had their loans cancelled anyway, so are in double the difficulty.

In 1998, JDC had proposed the introduction of better controls over banks, to prevent them from offering loans to people who were unlikely to be able to repay them. Unfortunately, these controls were not introduced,  and so a similar situation has arisen again 20 years later.

Some relevant United Nations history:

At the 2009 UN Summit (COP 15), held in Copenhagen, it was recognised that some of the poorer countries were more vulnerable to climate change, as they did not have the resources to carry out preventative measures and some, such as island nations, were more prone to the disastrous effects of more devastating hurricanes, typhoons, as well as sea level rise.  So, it was agreed at the UN to set up a fund to help those countries which are vulnerable to climate change. It was called the Green Climate Fund (GCF) in 2010 and the world’s richest countries were asked to make $100 billion available to the fund.  It was acknowledged that, as the richer countries were the ones who had caused climate change (through industrialisation and the use of fossil fuels), they had an obligation to help those countries who were suffering most from the effects of it, yet who had done nothing to bring it about.  Further details of this fund can be found at:

https://unfccc.int/process/bodies/funds-and-financial-entities/green-climate-fund

Yet by 2018, this fund has been largely ineffectual.  There have been complaints that there have been too many hoops to jump through to access the money, that the grants were too small, with loans (yet again) being preferred to grants. There is also further criticism of the embattled GCF, which has struggled with management dramas, including the resignation of its executive director and the collapse of a crucial board meeting over the summer. Rich and poor countries on the board are divided over framing new processes to raise funds, and donors have expressed private frustration at the slowness of its processes.  Now it would seem that recent applications to the GCF include applications for megadams and, from Bahrain (an oil-rich country) to clean up waste water from its oil and gas industry. Are these within the guidelines originally set up for the GCF?

In another blog, I have described the Climate Vulnerable Forum of 48 countries, which has been vocal in stating that the GCF is not doing what was promised.  Some of these countries also threatened to pull out of the 2015 Paris Agreement unless there were more assurances on finance, technology and compensation (see page 184 in my book).

How is debt linked to climate change?

At the JDC conference last weekend, there was a workshop on Climate Debt led by Clare Waldon (JDC) and Leon Sealey-Huggins from Warwick University, the latter having carried out studies on Climate Change in the Caribbean.

https://novaramedia.com/2017/09/11/3-ways-inequality-is-at-the-heart-of-hurricane-irmas-destruction/

Also, in another blog on this site, “Why climate change puts the poorest most at risk”, I cite an article by Martin Wolf in The Financial Times. in which he provides data to show that the economic impact of weather extremes is felt most strongly in tropical countries, nearly all of which are low-income countries.

In his workshop last weekend, Leon Sealey-Huggins gave evidence that the GCF is not working and is not being used to help countries adapt to climate change. As well as this, with last year (2017) seeing several powerful hurricanes in succession in the Caribbean, some countries fell into the situation of not receiving help from the GCF to repair damage but were expected to continue to pay off the debts they already held.

In contrast, €16 billion were given to The Netherlands by the EU to help them to build flood defences. And some Caribbean islands are Dutch protectorates but they received nothing.

stmaartenhurricaneirmanewscred

Damage done in St. Maarten by Hurricane Irma in 2017

This situation is unjust and requires urgent action.  The world must see how the banks are exploiting these islands who are the victims of climate change not the perpetrators.

Yet, it would appear that the IMF is resisting a moratorium on debt repayments from Caribbean islands.  Instead they are asking for them to take out climate-risk insurance.  In other words, they are being asked to insure their debts, so that the banks still get their money if there is a disaster.

Sealey-Huggins introduced the idea of “debt swaps”, in which debt repayments could be used to finance local climate change projects.

Others are calling Western countries to make reparations for slavery, as it is felt that most of the developed countries’ wealth is rooted in the slave trade.

As regards reparation, the Jubilee Debt Campaign is demanding debt relief for hurricane-hit islands.  And new initiatives are being developed to raise the profile of what has been happening.



19.10.18

Push for all Lenders to Take Responsibility

Tim Jones, of the Jubilee Debt Campaign wrote, in response to a letter in the Financial Times:

Zeng Rong ( Letters, October 17) may have got her decimal points in the wrong place when saying that China accounts for 1.8 per cent of Africa’s foreign debts, and 1.5 per cent of Ghana’s. Our recent analysis suggests that China is responsible for 20 per cent of African governments’ foreign debt, and 9 per cent of Ghana’s. 
Ms Zeng is, of course, correct to point out that there are lots of lenders to African governments, and the private sector lends at higher interest rates. Anyone concerned about preventing debt crises needs to push for responsibility from all lenders, whether governments, multilateral institutions or the private sector. 
 A key first step by lenders is a commitment to publicly disclose details on loans to governments in one place, alongside regulations to ensure all lenders comply. People across the world have the right to know about the debt being taken out in their name. 
 Tim Jones Economist, Jubilee Debt Campaign”