Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Barbados spearheads push on climate disaster financing

Barbados spearheads push on climate disaster financing

At the U.N. climate summit in Egypt, leaders of developing nations have repeatedly said it's not fair to expect them to cover the costs of rebuilding from devastating weather events in a warming world, plus invest in cleaner industry while they also pay much higher interest rates on loans than rich nations.
A plan put forward by Barbados Prime Minister Mia Mottley would overhaul the way much of development lending works. It is also giving voice to developing nations struggling under rising debt from climate damage.

“We were the ones whose blood, sweat, and tears financed the Industrial Revolution,” Mottley said in a scathing address. “Are we now to face double jeopardy by having to pay the cost as a result of those greenhouse gases from the Industrial Revolution?”

Debt has been growing in developing countries, sapping funds for education, health and clean energy. Much of the increase in debt in some Caribbean countries is related to extreme storms, Mottley said in a recent essay. The plan would make it easier for countries in the Caribbean, Latin America, Africa and Asia to get funds to beef up defenses against warming and put off debt payments when disasters strike.

Here's a look at the Barbados plan, dubbed the Bridgetown Initiative for the island nation's capital. Advocates say it could be a pathway to unlocking $1 trillion in climate financing.

THE BIG IDEA

The plan calls for special loan clauses that allow for suspending payments when a country is hit by a natural disaster or pandemic. That would immediately free up millions of dollars for governments to spend on relief and rebuilding. Barbados has been a pioneer in such clauses, last month issuing its first sovereign bond with a provision allowing for payments to creditors to be deferred for up to two years if the country experiences a “pre-defined natural disaster.”

The initiative includes a push to expand lending by international development banks such as the World Bank. The bank and its sister institution, the International Monetary Fund, were set up after the Second World War with the aim of financing reconstruction and reducing poverty. The power of rich countries such as the United States and Germany is built into the institutions. But the World Bank in particular has been criticized for being too risk averse in lending. The Barbados plan would change risk ratings, crucially lowering interest rates.

Another idea is setting up a Climate Mitigation Trust backed by $500 billion worth of Special Drawing Rights, dues that member countries pay in to the IMF that can be drawn in times of crisis. Much of it is held by countries that don't need it, said Avinash Persaud, Mottley's special envoy for climate. The trust could be used to borrow a further $500 billion from the private sector that could be lent out at low rates for investment in big climate mitigation infrastructure projects. Up to $5 trillion in private financing could be unlocked this way, the plan's architects say.

Other proposals include a levy on fossil fuel production or an international carbon border tax.

CREDITWORTHY

The Barbados Initiative takes aim at a central problem: Poorer nations face much steeper borrowing costs.

When most wealthy countries borrow money, they pay 1 to 4% in interest, while countries in the so-called Global South face rates of 12-14%, Mottley told reporters.

“You begin to see the disparity,” Mottley said. “The system is broken.”

Following World War II, she said, victorious Allied nations agreed to cap Germany’s debt costs so that it could rebuild. Britain refinanced its First World War debt, paying off the last of it only in 2014.

“We are simply saying in the developing world that we also need the space to be able to finance our development in the case of climate,” Mottley said. Wealthy nations account for four fifths of global greenhouse gas emissions.

Hanan Morsy, chief economist at the U.N. Economic Commission for Africa, told The Associated Press that a number of the Bridgetown Initiative’s ideas also have been advanced by African finance ministers. He pointed out another financial inequity: The green bond market which helps finance environmental projects has reached $500 billion, but only one percent reaches Africa.

RICH NATIONS

Mottley first unveiled her idea at the COP26 meeting a year ago in Glasgow, Scotland. Over the summer she and Persaud convened economists, other academics and civil society groups to work on it.

Now, she said, momentum for her ideas is gathering.

French president Emmanuel Macron was the first leader from a rich country to give his backing.

“We need a huge financial shock of concessional financing," Macron said in a speech at the opening of COP27. “We must change the rules, the rules of our major international banks, the development banks, the IMF and the World Bank,” he said. “We can’t wait for the next COP.”

To support Mottley's plan, “a group of wise minds at the highest level" has been set up, tasked with drawing up climate financing solutions by spring 2023, when the World Bank and the International Monetary Fund hold their annual meetings, Macron said.

As climate-amped disasters ratchet up the suffering, the staid international system for finance designed for an earlier age may be on the brink of change, driven by those on the front lines.

Germany, the World Bank's fourth largest shareholder, has been among those pushing for “fundamental reform," including “climate lending on better terms." Federal Reserve chief Janet Yellen said multilateral development banks need to “evolve" moving beyond their traditional work of poverty reduction to tackle climate and other global challenges.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
Western Europe Records Hottest June on Record
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
China’s Central Bank Consults European Peers on Low-Rate Strategies
France Requests Airlines to Cut Flights at Paris Airports Amid Planned Air Traffic Controller Strike
Poland Implements Border Checks Amid Growing Migration Tensions
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
Amazon Reaches Major Automation Milestone with Over One Million Robots
Extreme Heat Wave Sweeps Across Europe, Hitting Record Temperatures
Meta Announces Formation of Ambitious AI Unit, Meta Superintelligence Labs
Robots Compete in Football Tournament in China Amid Injuries
China Unveils Miniature Insect-Like Surveillance Drone
Marc Marquez Claims Victory at Dutch Grand Prix Amidst Family Misfortune
Germany Votes to Suspend Family Reunification for Asylum Seekers
Budapest Pride Parade Draws 200,000 Participants Amid Government Ban
Southern Europe Experiences Extreme Heat
Xiaomi's YU7 SUV Launch Garners Record Pre-Orders Amid Market Challenges
Jeff Bezos and Lauren Sanchez's Lavish Wedding in Venice
Russia Launches Largest Air Assault on Ukraine Since Invasion
Massive Anti-Government Protests Erupt in Belgrade
Iran Executes Alleged Israeli Spies and Arrests Hundreds Amid Post-War Crackdown
Hungary's Prime Minister Criticizes NATO's Role in Ukraine
EU TO HUNGARY: LET THEM PRIDE OR PREP FOR SHADE. ORBÁN TO EU: STAY IN YOUR LANE AND FIX YOUR OWN MESS.
Hungarian Scientist to Conduct 30 Research Experiments on the International Space Station
NATO Members Agree to 5% Defense Spending Target by 2035
NATO Leaders Endorse Plan for Increased Defence Spending
U.S. Crude Oil Prices Drop Below $65 Amid Market Volatility
International Astronaut Team Launched to Space Station
Macron and Merz: Europe must arm itself in an unstable world
Germany and Italy Under Pressure to Repatriate $245bn of Gold from US Vaults
Iran Intensifies Crackdown on Alleged Mossad Operatives After Sabotage Claims
Trump Praises Iran’s ‘Very Weak’ Response After U.S. Strikes and Presses Israel to Pursue Peace
Oil Prices Set to Surge After US Strikes Iran
BA and Singapore Airlines Cancel Dubai Flights Amid Middle East Tensions
Trump Faces Backlash from MAGA Base Over Iran Strikes
Meta Bets $14 B on Alexandr Wang to Drive AI Ambitions
FedEx Founder Fred Smith, ‘Heart and Soul’ of the Company, Dies at 80
Chinese Factories Shift Away from U.S. Amid Trump‑Era Tariffs
Pimco Seizes Opportunity in Japan’s Dislocated Bond Market
Labubu Doll Drives Pop Mart to Status as China’s Most Valuable Toy Maker
Global Coal Demand Defies Paris Accord Goals
United States Conducts Precision Strikes on Iran’s Nuclear Sites
US strikes Iran nuclear sites, Trump says
Telegram Founder: I Will Leave My Fortune to Over 100 of My Children
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
×