Climate debt news
Our campaign for climate justice
Whilst rich countries are responsible for most of the emissions pumped into the atmosphere it is the poorest communities in the world that are being hit the hardest by climate change. But rather than providing compensation for causing climate change rich countries are using it to trap the world’s poor into new and dangerous climate debt. WDM is campaigning for climate justice for developing countries.
We want to ensure that the UK pays its climate debt instead of locking poor countries into further unjust debt by providing loans to help deal with climate change.
This map shows examples from the World Bank's long history of funding projects that are destructive to the environment and undermine human rights.
View the map
Find out more about climate change and climate debt and how they are disastrous for the world's poor by reading our briefings and reports
The UK government has announced it will now contribute £10m towards the UN Adaptation Fund to help countries fight climate change.
Frequently asked questions about our climate debt campaign
- Why does the UK owe a climate debt?
- Why is the climate debt campaign important?
- How can the climate debt be paid?
- How is the UK Government using climate finance to reinforce existing inequalities?
- What is WDM calling for?
- What's so bad about the World Bank?
- Wouldn't it be easier to reform the World Bank rather than creating new institutions?
- Hasn't debt cancellation cleared 'Third World Debt'?
- In a time of cuts, where can this money come from?
- Aren't there problems with the UN too?
- Doesn't corruption in developing countries make paying our climate debt pointless?
- Why does the UK claim that 77p out of every £1 given through the World Banks PPCR is 'effectively grant finance'?
Rich countries like the UK have become wealthy by industrialising in a way that has pushed the world to the brink of catastrophic climate change, but it is the world’s poorest people who are paying the price. By following such a high carbon development path, rich countries have also used more than their fair share of the earth’s ability to safely absorb carbon, leaving the rest of the world unable to develop in the same way.
The UK is one of the world’s top emitters on a per person basis, both historically and currently. Our historical responsibility for climate change means we must now pay a massive climate debt to the world’s poorest people as compensation. This will help them cope with the impacts of climate change and transition to a cleaner development path.
Climate change is already killing 300,000 people per year
- Global Humanitarian Forum, led by the former UN secretary general Kofi Annan
The major injustice is that the people most affected by climate change are not responsible for causing it. Climate change is already having a disproportionate impact on the global south, threatening millions of people with famine, disease, drought, flooding and other weather related disasters. Despite promising large amounts of new climate finance at the Copenhagen UN talks in December 2009, the UK is continuing to fail the needs of poorer countries.
Not only is the UK failing to recognise its debt and pay adequate compensation, but by providing climate finance as loans through the Wold Bank it is actually increasing economic injustice and inequality. At the same time, the UK is continuing to emit more than its fair share, thereby continually increasing its climate debt.
WDM is campaigning with people around the world to get the UK to live up to its commitments.
Firstly, the UK must stop increasing its climate debt. Every day that the UK continues pumping carbon into the atmosphere, it is increasing its climate debt. This means the UK must take the lead in reducing emissions by phasing out the use of fossil fuels and switching to a way of living that moves beyond the idea of continued economic growth at the expense of all else.
Secondly, the UK must provide compensation to the people who are suffering the worst effects of climate change, to help them adapt to better cope with the devastating consequences of a changing climate.
Finally, the rich world also bears a responsibility to ensure that countries in the global south are able to access their right to develop economically without endangering the world’s climate. As rich countries have used more than their fair share of the earth’s ability to safely absorb carbon, countries from the global south cannot follow the same development path. These countries, which do not bear the responsibility for climate change, cannot be expected to sacrifice their right to development so that the rich world can continue living in an unsustainable way. Rich countries must finance and support countries in the global south in transitioning to a cleaner model of economic development.
The UK government promised a significant amount of new climate finance during the Copenhagen summit in December 2009. Instead it is taking money from its aid budget, intended to be used for vital services such as health and education, and channelling it as loans through the World Bank. These loans will lock countries into further poverty. Repaying the loans and interest on them will divert scarce government resources away from vital measures to tackle poverty such as expenditure on healthcare and education. Trying to pay compensation to countries in the global south with climate loans is like a loan shark burning down your house and then offering you a loan to rebuild it.
The UK has also been instrumental in furthering the World Bank’s ambition to be the primary institution managing climate finance. This undemocratic institution has been completely discredited in the global south, and the use of it for channelling climate funds is opposed by developing countries (see ‘What’s so bad about the World Bank?’ below).
WDM is calling for climate adaptation funding to go through more democratic and accountable mechanisms like the UN Adaptation Fund, rather than the World Bank. The World Bank can use money to force economic and political conditions on countries and has a track record of failing to consult the people its projects affect.
We are calling for this money to come from new sources, such as a tax on shipping and aviation, a financial transactions tax (like the Robin Hood tax) and ensuring that corporations do not avoid payment of tax. These measures would not only provide new money, but could also be transformational in themselves. Finally, we are calling for none of this money to be given in the form of loans, but is instead given as grants.
The World Bank has a long history of pushing push policies which benefit rich countries and funding projects which have increased climate change. For example:
- World Bank lending in the 1970s and 1980s resulted in massive deforestation in Brazil and Indonesia, leading to an increase in carbon emissions.
- In the 1980s and 1990s irresponsible World Bank lending led to many poor countries getting trapped into debt.
The World Bank then used this debt to force poor countries to privatise infrastructure, liberalise trade policies and cut public spending on education and health care. These policies led to huge increases in poverty across the world’s poorest countries, whilst creating business opportunities for western corporations.
In April 2010 the World Bank agreed a £2 billion loan to South Africa for the completion of the world’s fourth largest coal-fired power station, adding billions to South Africa’s already high level of debt. The loan will benefit some of the biggest corporations in the world which receive subsidised electricity while ordinary South Africans pay around four times as much per unit. As the US treasury stated, the loan showed “incompatibility with the World Bank’s commitment to be a leader in climate change mitigation and adaptation”.
The World Bank has proven itself incapable of effectively dealing with development or climate issues in the global south. Its track record of imposing policy conditions and programmes on developing countries, and its undemocratic governance structures seriously discredit the institution.
WDM, along with many other groups around the world, has campaigned for many years for the radical reform of the World Bank. However, in 2006 we released our Out of Time report which argued that the World Bank needs to be replaced because efforts to reform it have been unsuccessful. The World Bank was set up to ensure that rich countries would always be in control of the money it dispersed and the policies it advocated. This is so fundamental to the way the World Bank is organised that we now believe that it is impossible to reform to the extent that is needed.
For instance, decisions are not made through democratic votes but are instead based on a complex formula of economic factors. As a result high income countries hold over 60 per cent of voting power while low income countries hold just 6 per cent. Yet developing countries represent over 80 per cent of the world’s population and Bank’s membership; are where almost all of the Bank’s activities take place; and, through loan repayments, are the main financial contributors to the Bank.
The World Bank has proven to be incredibly resistant to reform. Management of climate funds needs to be democratic, accountable and transparent. The UN Adaptation Fund is one example of an existing fund that meets these criteria.
Thanks to campaigners some debt cancellation has become a reality – but enormous debts still remain. Despite progress in recent years the poorest 48 countries have a debt totalling US$168 billion. In 2008, these countries paid over US$8.3 billion to the rich world in debt service – over US$23 million a day. For example, Bolivia was given debt cancellation through the Heavily Indebted Poor Countries (HIPC) initiative, resulting in nearly US$2 billion of Bolivia’s debt being cancelled. However, the Bolivian government’s external debt is still US$2.5 billion.
Rich countries have used this illegitimate financial debt to exercise control over developing countries. The World Bank and IMF have often acted as the vehicle for this control via policies such as structural adjustment programmes. For example in 2000 the World Bank forced Bolivia to privatise its water provision, handing it to US company Bechtel. This led to steep increases in price and left many people without access to water. Today climate change policies are forcing Bolivia to face the prospect of taking loans from the World Bank, thus pushing them deeper into debt.
There are a number of ways that the large sums which are required to repay the UK’s climate debt could be raised such as:
- International taxes on transport – international aviation and shipping pay no tax on their fuel. An international air passenger levy would generate £5 -13 billion per year in the first five years, and potentially more in the longer term. A maritime levy could generate £16 billion per year.
- Financial transaction tax (Robin Hood tax) – this could raise £250 billion per year if implemented globally.
- Stopping corporate tax evasion and avoidance could raise billions more. It is estimated that in the UK alone nearly £100 billion is lost through tax avoidance and tax evasion.
Innovative financing sources such as the ones above could also have other benefits, helping our transition to a more just world. For example, air passenger and maritime levies would reduce unnecessary flights by making it more expensive for airlines to continue inefficient flights, as well as making corporations pay the true cost of producing their goods.
A financial transactions tax, if set at a high enough level, would help limit the currency and commodity speculation that forces millions into poverty. This tax could help transform the global economy by making it more expensive for bankers to gamble on the markets. Speculators would have less power over the value of other countries’ currencies and be less able to recklessly push up the price of food in speculative bubbles, which creates hunger for even more of the world’s poorest people.
There certainly are problems with the UN. The failure of the UN climate talks to reach a meaningful deal on tackling climate change for the period after 2012 when the Kyoto Protocol is due to expire is one of the clearest examples of the problems with the UN process.
In 2010 the World Bank approved a US$3.75bn loan to help build the Eskom coal power power plant in South Africa. It will be one of world’s largest, raising further questions about the World Bank’s commitment to solving climate change.
However, as long as there are efforts to reach a global deal on climate change, the best place for it to happen is through the UN because it is a forum where all countries in principle have an equal voice. That said, at the 2010 climate talks Cancún consensus was declared even while Bolivia was still objecting to the proposed weak deal being agreed.
While problems exist within the UN climate negotiations, the UN Adaptation Fund has proven itself to be an effective body. Because of a representative governance made up of countries of the global north and global south, rich countries have not been as able to impose their interests. The UN Adaptation Fund has given out 50 times more money than the World Bank’s fund for adaptation (the PPCR), in spite of the fact it has received less than 10 per cent of the financial contributions the PPCR has received.
No. Corruption is and has been a problem for many countries in the global south; however this doesn’t undermine the effects of providing finance to developing countries.
For example, repeated studies have shown that money from debt cancellation does go where it is needed. One study of ten African countries found a 40 per cent increase in education spending and a 70 per cent increase in health spending after just four years of debt relief.
Contrary to common perception, corruption is not just due to corrupt politicians and officials in developing countries, it also takes place in rich countries and is perpetrated by multinational companies based in the global north. Recent research has highlighted how open carbon trading systems are to abuse. Due to the undue influence of vested interests, the allocation of carbon permits in the European carbon trading system led to windfall profits of £5-7 billion for some of Europe’s largest polluters. Tax evasion by multinational companies is also a huge problem, estimated to cost developing countries as much as £100 billion a year.
Corruption is often used as an excuse for rich donor countries to try and increase their power and influence over poorer country governments. However, many of the free trade and market liberalisation policies pushed by these same rich countries through institutions such as the IMF, World Bank and WTO have been responsible for growth in corruption.
The fact that corruption exists in both the global north and the global south is not a reason not to pay our climate debt. Instead we need to promote genuine solutions that can help to tackle the problem. To ensure that climate finance is delivered effectively, WDM is campaigning for it to be fully transparent (something which is a major problem with some of the finance currently managed by the World Bank).
The use of climate finance must also be accountable to those in the countries affected by climate change, rather than the demands of donor country governments. WDM also supports direct access to climate finance whereby non-governmental organisations can access finance directly, meaning that money is not provided solely through national governments.
Why does the UK government claim that 77 pence out of every £1 given through the World Bank’s PPCR is ‘effectively grant finance’?
It is based on the fact that the loans are concessional. This means that the loans are cheaper than if the recipient countries had taken them out at commercial rates.
Although the UK government announced in Durban that it would give £70 million to the PPCR as grants, £15 million will still be given as loans. This money is provided to the PPCR as ‘capital’ which means that it can only be leant to recipient countries. Grants involve a direct financial transfer for which no repayment is required. Given that loans from the PPCR must be repaid in full with interest it is highly misleading to claim that any part of these loans are “effectively grant finance”.
Signup to emails
Get the latest campaign actions, events and news direct to your inbox.