Where’s the money?

The more riveting drama to watch with COP27 just days before it actually opens involves who will go and who will not. Celebrated Swedish climate activist Greta Thunberg will not, same with King Charles II upon advice of former UK Prime Minister Liz Truss. Another former UK prime minister, Boris Johnson will attend, triggered supposedly a rethink by current UK Prime Minister Rishi Sunak who earlier said he was not attending.

Lost in these people dramas is the real issue behind the urgent reason for the 27th Climate Change Conference (official name for Conference of Parties or COP): the slow progress to the 2015 Paris agreement.

The urgency, in the words of UN Secretary-General Antonio Guterres during a pre-COP meeting, has become more apparent: “A third of Pakistan is flooded. Europe’s hottest summer in 500 years. The Philippines hammered. The whole of Cuba in black-out.”

In the latest report by the UN Intergovernmental Panel on Climate Change issued last April, the world is inching more dangerously to the 1.5C threshold of global warming, and the concerted effort by everyone on planet Earth is far from preventing this to happen. In fact, the planet is getting closer to being warmer by 3.2C.

Since COP21 in 2015 when the Paris Agreement was signed legally binding its 196 members to commit to keeping global warming under 1.5C above pre-industrial levels, not enough is being done. In fact, the Climate Action Tracker still sees Earth steadily moving towards 2.4C.

Loss and damage fund

Meanwhile, the last couple of years has seen more climate disasters, of increasing magnitude and scope, and consequently, loss and damage. The cry for climate justice has grown louder, especially by countries like the Philippines that have become more vulnerable.

Every year, Filipinos are truly experiencing typhoons of greater intensity that costs lives and damage to homes, crops, and livelihoods. Many of those affected are pushed back into poverty, making it more difficult for them to regain their momentum to a better life.

Climate justice is aptly described by Denmark’s development minister Fleming Møller Mortensen: “It is grossly unfair that the world’s poorest should suffer the most from the consequences of climate change to which they have contributed the least.”

Denmark is the first country to have actually come up with “loss and damage” compensation for developing countries devastated by climate change. Its contribution of €13.4 million will go directly to chosen beneficiaries.

Member countries of the Climate Vulnerable Forum (CVF) as well as The V20 Group of Finance Ministers representing 55 of the world’s most climate-vulnerable economies have called for the establishment of a separate and dedicated international funding in line with pledges by wealthy nations during the Paris meeting.

The Philippines is a member of the CVF and the V20 (Vulnerable 20 consisting of the top 20 nations in the world most affected by catastrophes resulting from climate change).

Compounding socio-economic losses

The urgent need for an organized system of compensation is highlighted by the “Climate Vulnerable Economies Loss Report” issued in June, which listed the economic losses of members of the V20 and the CVF from 2000 to 2019.

It showed how climate change had already eliminated one-fifth of the wealth of these countries, estimated at $525 billion, during the two decades. “In other words, without climate change, our people would be 20 percent wealthier today,” according to the incoming V20 chair Kenneth Nana Yaw Ofori-Atta, Ghana’s Minister for Finance and Economic Planning.

For the most at-risk countries, economic losses due to extreme climate changes have been estimated to exceed 51 percent of all growth since 2000. The report notes that, “The world’s most at-risk countries would be twice as wealth today were it not for climate change.”

Further, economic losses have reduced GDP growth in the V20 by one full percent yearly, and the year-to-year reduction in GDP per capita growth attributable to climate change represents 25 percent of the actual average annual economic growth of the V20 economies in 2019.

More importantly, with global temperatures projected to exceed the 1.5C limits in the coming decades, economic losses are expected to further increase. Thus, adaptation measures will need to be accelerated at a “phenomenal rate” to offset a further rise in economic losses.

Debt distress

The compensation funding issue forms the basis for all adaptation measures that CVF nations must put in place, especially now that many of them are facing debt default possibilities after two years wrought by a pandemic and a world economic slowdown, as well as the effects of the Russian invasion of Ukraine early this year.

In a new policy brief issued in September, the V20 group’s total debt stock of $686.3 billion in external public debt is one-fifth of all developing country debt, both public and publicly guaranteed. Private creditors comprise the largest share of the debt stocks, at 36 percent, followed by the World Bank at 20 percent and other multilateral development banks at 20 percent.

The brief notes that external debt service payments payable to various creditors by V20 countries from 2022 to 2028 will reach almost $435.8 billion, with the 2024 payment schedule of $68.9 billion particularly most acute.

Countries with the highest outstanding dues are Columbia ($51 billion), Vietnam ($32.6 billion), Sri Lanka ($31 billion), Bangladesh ($30 billion), and the Philippines ($29.7 billion).

A comprehensive debt restructuring call is now gaining momentum again, a repudiation of case-by-case bilateral negotiations. Such moves reflect the direness of the situation. Unfortunately, this does not guarantee that COP27 will deliver the needed positive results.

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