The inequities of the global financial system have changed little for decades. What’s new, with the climate crisis, is the urgency of fixing them.
On 4 February 1975, Senegal’s then President Leopold Senghor declared to a meeting of the non-aligned states: “We in the third world have to use our natural resources to break the traditional patterns of world trade…This conference must above all define the objectives of the new economic order and adopt methods of realising these objectives.”
Nearly half a century later, at the UN General Assembly in September 2021, Senghor’s successor Macky Sall expressed a similar sentiment: “Our countries cannot achieve an energy transition and abandon the polluting patterns of the industrialised countries without a viable, fair and equitable alternative…Our countries, which are already shouldering the crushing weight of unequal trade, cannot bear the burden of an unfair energy transition.”
What happened between these speeches?
On one front, not very much. The imbalances of power associated with the extraction of natural resources remain largely unchanged. Decades on from Senghor’s speech, raw materials continue to be controlled and exploited in the Global South and exported to the Global North where they fuel industrial development.
On the other hand, we are living in a very different context to former president Senghor. Since his day, the extraction of natural resources has increased dramatically, with troubling ecological consequences. In 1975, Earth Overshoot Day – the date by which humanity uses up all the biological resources the Earth regenerates in a year – was 4 December. By 2021, it was 30 July. Today, we live in the midst of an escalating climate crisis.
This has made the uncorrected inequities of the global system even more urgent and concerning. As Prime Minister Mia Mottley of Barbados said in April 2023: “The world is running out of time to fix its international financial system that is broken, outdated, infested with short termism, and downright unfair. Too many countries are being prevented from fighting the climate crisis and from creating decent opportunities for billions of people – their citizens. If countries cannot access the finance they need at rates they can afford, the world will lose the battle, not simply the countries.”
Indeed, many countries in the Global South are both among the most vulnerable to climate change and the most disadvantaged by the international financial system. A report found that climate vulnerability has already raised the cost of debt for developing countries by tens of billions of dollars in extra interest payments. These are the same countries that have contributed the least to the climate crisis and continue to have the lowest emissions. It takes the average American just two and a half days to emit the same amount of CO2 as the average Ugandan emits in a year.
A viable, fair, and equitable energy transition to tackle climate change is impossible in an unequal and uneven international financial system. That is why, following the G77+China summit in Uganda this January, Debt for Climate Uganda organised a dialogue on Global South perspectives on climate change, debt, and the New International Economic Order. Experts from academia, policy circles, diplomatic corps, and climate activists discussed the role of the G77 – a group of 134 countries in the Global South – in calling for debt cancellation and shaping a new international economic order and global financial architecture.
Participants came up with three urgent calls for the G77 and international community:
1) Revive the New International Economic Order, proposed by the G77 in 1974, to address unsustainable debt burdens
As the Climate Vulnerable Forum (CVF), a coalition of 58 highly vulnerable countries, expressed in July 2023, the existing system “does not enable all countries in distress to receive treatment, does not compel all creditor classes to participate, and is not linked to climate and development goals, but appears to only focus on stabilisation”.
The result is that countries are unable to mobilise resources for development and positive climate action. Comprehensive and fair debt cancellation would free nations from the shackles of debt repayments and enable them to invest in sustainable development, climate resilience, and the well-being of their citizens.
2) End neo-colonialism and stop the unvirtuous cycle of indebtedness
According to the 2023 Financing for Sustainable Development Report, 52 developing economies – home to half the world’s population living in extreme poverty – are either in debt distress or at high risk of debt distress. As well as debt cancellation, this cycle can be stopped, and countries can be enabled to develop climate actions, by scaling up climate-for-debt swaps. These arrangements allow countries to reduce their debt obligations in exchange for a commitment to finance domestic climate projects with the freed-up financial resources.
3) End fossil fuel production and green colonialism through a just transition
Tackling climate change requires phasing out fossil fuels. Just Energy Transition Partnerships (JETPs) have been established for some coal-dependent emerging economies through which industrialised countries have agreed to support developing countries (e.g. South Africa) to move away from coal while addressing the consequences for affected workers and communities. However, these plans have two key shortfalls: the amount of money is very small; and it mainly comes in the form of loans, which simply adds to unvirtuous cycle of indebtedness.
We advocate for a reform of JETPs to significantly increase funding and shift from loans to grants. In addition, we call for a planned and fair global fossil fuel phase-out that addresses the inequalities between Global North and Global South with an initiation of a global registry of fossil fuel reserves as a starting point.
The urgency of climate action cannot be overstated. The Global South bears a disproportionate burden of the impacts of climate change, affecting livelihoods, ecosystems, and future generations. We call the international community and the G77 to take on these three urgent and essential actions.
Eriga Reagan Elijah is the Co-Founder of Debt For Climate Uganda. Dianey Mugalizi is the regional coordinator of Debt For Climate Africa. Vanessa Nakate is the founder of the Rise Up Movement and a UNICEF Goodwill Ambassador. Pierre Wokuri is a doctor in political science at the Rennes Institute of Political Studies, France.
