Comment: The Spring Meetings of the World Bank and IMF are a chance to transform outstanding debts for fossil fuel projects into grants for renewable energy systems
Lidy Nacpil is coordinator of the Asian Peoples’ Movement on Debt and Development (APMDD).
Many countries in the Global South are burdened with huge public debts. These rising debts are a drain on public resources that are urgently needed for sustainable development programmes, and further pressure Southern governments to prioritise debt service over climate actions.
Global South countries allocate more funds for debt service – 65% in lower- income countries and 14% in lower-middle-income countries – than their combined budgetary spending for education, health and social protection.
Included among the public debts of Global South countries are those from projects tainted with fraud and whose negative impacts on people, economies and the planet far outweigh the benefits, if any. Furthermore, many debts arose from projects that did not involve democratic consultations nor the free, prior and informed consent of affected communities including indigenous peoples. Prime examples of these debts are those arising from or related to fossil fuel projects. These debts should be seen and treated as illegitimate.
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For several decades, international financial institutions and public finance institutions have lent hundreds of billions of dollars to Southern governments to support fossil-fuel energy projects. Many of the loans extended by the World Bank, Asian Development Bank (ADB), and other public finance institutions such as the Japan Bank for International Cooperation (JBIC), remain part of the current outstanding public debts.
There is already a clear consensus among governments and many public financial institutions that fossil fuel energy – from its extraction, production and consumption – is the main driver of climate change.
This is evidenced by outcomes from the Conference of Parties (COPs) summits of the UN Framework Convention on Climate Change, calling for the phase-out or transition away from fossil fuels, as well as outcomes from G7 and G20 summits committing to the phase-out of fossil fuel subsidies. Individual governments including China and Korea, have announced decisions to stop their financing of overseas coal projects. Further evidence is in the decisions made by public financial institutions to stop or phase out financing of coal and fossil fuels.
These decisions, commitments and policy shifts should be taken as acknowledgement of their co-responsibility in the promotion of fossil fuels and the harms fossil fuel projects have caused to people, communities, the environment and climate systems.
Owning up to their co-responsibility for fossil fuel projects and their impacts, and consistent with their avowed commitments to combat climate change, governments and public financial institutions, including international financial institutions, should cancel all outstanding public debts that arose from fossil fuel projects. These outstanding debts may be transformed into grants for renewable energy systems.
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The same can be said for private banks, financial and investment institutions and corporations that have lent money to governments for fossil fuel projects.