High levels of national debt in parts of the Global South could hinder efforts to move away from fossil fuels, a new report warns, as more than 50 countries gather this week in Colombia for the First Conference on Transitioning Away from Fossil Fuels.
The report, published by the Fossil Fuel Treaty Initiative in the lead-up to the flagship conference, argues that the current debt architecture is trapping developing countries in a “feedback loop” in which fossil fuel revenues are needed to service debt, while fossil fuel expansion locks countries into borrowing even more.
The cycle, according to the report, leaves very little fiscal space for highly indebted countries to end their reliance on coal, oil and gas revenues, even when their leaders want to phase out fossil fuels. This is the case for some first-mover countries such as Colombia, which is hosting the conference in Santa Marta.
Amiera Sawas, one of the report’s authors and head of research and policy at the Fossil Fuel Treaty Initiative, said the conflict in the Middle East is making this “debt injustice and fossil fuel entrapment” even more evident.
“What we have to start understanding is that both fossil fuels and debt are actually extractions from the Global South,” Sawas told the report’s launch during the World Bank and International Monetary Fund (IMF) Spring Meetings in Washington DC this month. “Many countries are paying more in debt servicing than they are getting in climate finance.”
-
Solar surge kept fossil electricity flat in 2025 as China and India made ‘historic’ shift
Energy think tank Ember said fossil fuel electricity fell slightly in both countries simultaneously for the first time, tipping the global balance
Since 2010, low and middle-income countries (LIMCs) have more than doubled their external debt, reaching an all-time high of $8.9 trillion two years ago. They paid about $415 billion in interest on that debt in 2024 – 2.4 times higher than a decade earlier.
At the same time, in some cases like Colombia, Egypt and Jordan, austerity measures agreed as part of IMF and World Bank loan programmes restrict governments from investing in cleaner sources of revenue like renewable energy, the report says.
Leading countries constrained by debt
Colombia – one of the countries leading the global call for a transition away from fossil fuels – is facing precisely such financial barriers to achieving its transition, said Camilo Rodríguez, another of the report’s authors and a research analyst with Oil Change International.
The country has halted all new oil and gas licences and published an energy transition plan estimating transition costs at about 7-10% of its GDP. Yet the government depends on fossil fuel revenues to service its $265-billion public debt, meaning it must find an alternative source of income to cover debt payments.
Rodríguez said debt “is the main barrier nowadays to promote the energy transition and the industrialisation of the economy”.
The South American country has only grown more dependent on fossil fuels over time, as they represented 36% of exports in 2001 and now account for about 52%. Austerity policies still in place after IMF loans have left very little room for investing in Colombia’s energy transition plan, the report says.
Other countries have shown similar patterns. Jordan – despite its staggering public debt equivalent to 90% of GDP – became one of the fastest-growing markets for wind, solar and electric vehicles in the Middle East region. From 2014 to 2021, Jordan went from less than 1% of its electricity generation coming from renewables to 26%, benefiting from the significantly cheaper costs of installing wind and solar power compared with adding fossil fuel capacity.
But Jordan’s high reliance on fossil fuel revenues created an incentive for policymakers to opt for expanding gas projects over renewables, and the country ended up suspending new licences for many solar and wind projects. In 2024, about 40% of government revenues were used to service debt.
“This is not marginal – it is central to the fiscal system. It creates what I would describe as structural fiscal addiction,” said Ali Nasrallah, a policy and research manager at the Fossil Fuel Treaty Initiative. “The state depends on revenues from consumption that is economically, environmentally and socially harmful.”
Gas flaring soars in Niger Delta post-Shell, afflicting communities
Another report by the Fossil Fuel Treaty Initiative, published in March, argues that debt entrapment in Africa also exacerbates gender injustice. Social consequences from fossil fuel extraction and use – such as displacement of communities or health harm from pollution – can have a substantial effect on local women while, at the same time, states face constraints to increasing social spending to support them.
“African women are facing disproportionate impacts of the fossil fuel industry’s long-running legacy of violence and dispossession,” the report says. “But they are also leading the resistance to it,” it adds, with women-led coalitions in places like Uganda or the Niger Delta challenging major oil and gas projects.
Policy recommendations
As governments head to Santa Marta – where “gaps in the financial and investment system” are on the agenda – the Fossil Fuel Treaty Initiative recommends building international coalitions to address debt, reforming multilateral financial institutions and increasing funding commitments from donor nations.
The proposed policies include debt cancellation as a way of creating fiscal space in the Global South, ending all international finance for fossil fuel expansion, establishing a binding mechanism on debt resolution at the UN, and advancing green industrialisation to replace fossil fuel revenues.
“To dismantle carbon lock-in and debt at source, we need to recognise collectively that the escalating debt in the Global South is actually an injustice,” said Sawas of the Fossil Fuel Treaty Initiative. “We have to name the problem and be honest with ourselves – and that’s where the recommendation of debt cancellation is so critical.”
Comment: Broken debt system must be fixed to confront future climate shocks
As part of the new climate finance goal adopted at the COP29 climate summit in Baku, governments have already agreed to “remove barriers and address dis-enablers” faced by developing countries, including “limited fiscal space” and “unsustainable debt levels”.
Building on this, any plan for a global roadmap for transitioning away from fossil fuels, such as the initiative proposed at COP30 by more than 80 governments, should address the debt crisis in the Global South, Sawas said. One alternative could be financing the rollout of renewables with more public grants rather than loans, she added.
“We need to start properly funding renewable energy and diversification,” she said. “Currently it’s almost impossible for a lot of countries in the Global South to actually make the energy transition, because there’s no support structure.”
The post To phase out fossil fuels, developing countries need exit route from “debt trap” appeared first on Climate Home News.
To phase out fossil fuels, developing countries need exit route from “debt trap”
Climate Change
Australia’s climate credibility tested at Pacific Pre-COP talks, as High Court fossil fuel ruling puts government on notice
NADI, FIJI Thursday 8 October 2026 — As the Pacific Pre-COP talks wrap up and Australia prepares to take the reins of COP31 Negotiations in Türkiye next month, Greenpeace Australia Pacific says the government is on notice over fossil fuel expansion and exports, and must accelerate action to align with a 1.5°C pathway.
Following yesterday’s landmark High Court ruling that the climate impacts of coal and gas exports must be considered by New South Wales planning authorities, Greenpeace Australia Pacific is calling on the Albanese government to find the “courage, leadership and grit” to chart a new course away from fossil fuels.
High res images and video from yesterday’s ‘Keep 1.5C Alive’ flotilla in Nadi can be found here
Speaking from Nadi, Shiva Gounden, Head of Pacific at Greenpeace Australia Pacific, said:
“The outcomes of this week’s talks are a drop in the ocean given the scale of need, and urgency of the crisis our communities are facing. It is like taking a glass of water to a burning house if we do not urgently act to address the root cause of the existential threat facing Tuvalu, Fiji and all Pacific countries: fossil fuel expansion.
“The Electrification Pledge must end fossil fuel dependence, not be an end in itself — its ultimate success depends on ensuring electricity comes from renewable sources that displace fossil fuels and align with a 1.5°C pathway. It must be underpinned by justice and backed by finance flowing from polluters to communities.
“Limiting global warming to 1.5°C is a non-negotiable survival line for humanity and Australia must act. The landmark climate advisory ruling from the ICJ is clear — 1.5°C is the moral, the scientific and the legal limit. Continuing down the fossil fuel path, and failing to align efforts with limiting warming to 1.5°C, is a breach of our international legal obligations, and risks making Australia liable for future reparations from climate-vulnerable nations.”
Also in Nadi, Dr Simon Bradshaw, COP31 Lead and climate expert at Greenpeace Australia Pacific, said: “The Pacific was never going to be a mere backdrop for Australia in its role as incoming chair of the COP31 climate talks, but where its credibility and commitment to climate leadership would be tested.
“Here we see communities fighting for their survival and doing everything possible to hold the line on returning warming to 1.5°C. When governments profess to take their concerns seriously, only to then throw more fuel on the fire, the pain and sadness is visceral.
“This week the High Court of Australia recognised what the Federal Government refuses to — that Australia is responsible for the climate damage of our fossil fuel exports and if governments don’t act, the courts will intervene. The message is simple: this is not someone else’s problem, it is ours.
“We must now follow other countries in developing a national roadmap away from fossil fuels that ensures a managed wind-down of fossil fuel production, including exports, in line with our legal obligation to help return warming to 1.5°C.”
ENDS
Media contact: Kate O’Callaghan in Nadi on +61 406 231 892 (Whatsapp/Signal)
A Dutch NGO has filed the first climate complaint under the European Union’s trade rules, arguing that New Zealand violated the environmental provisions of its free trade agreement with the bloc by weakening its climate regulations.
The case will test whether binding climate provisions in the EU’s free trade deals can be enforced to hold governments accountable to their climate obligations, experts told Climate Home News.
The EU-New Zealand free trade agreement, which came into force in 2024, was the first in the world to include legally-binding climate provisions and possible sanctions for violating them, as the EU seeks to use its trade partnerships to advance greater environmental protection.
Under the deal, both parties committed not to weaken their environmental law to promote trade or investment and to “refrain from any action or omission that materially defeats the object and purpose of the Paris Agreement”.
-
International trade linked to 20% of global emissions – but imports ignored
Researchers say governments should discuss how to tackle emissions linked to globally traded goods and services, especially in large importing countries
At the time the agreement was signed, EU Commission President Ursula von der Leyen said the agreement included “unprecedented social and climate commitments”. But experts warned it was unclear how the Paris Agreement provisions would be enforced.
The EU included a similar “trade and sustainable development” clause in 14 other bilateral trade deals in recent years, with several others, including with China, awaiting ratification or being negotiated.
Climate activists at the Dutch NGO Both ENDS argue that the New Zealand government breached these terms by reopening its waters to offshore oil and gas exploration, releasing a climate plan that barely requires any emissions reductions, and passing a law that prevents corporations from getting sued over climate damages.
“Here, we have a so-called gold standard for free trade agreements with sustainability provisions but we have a trading partner that is doing exactly the opposite: regressing, as all the evidence points to, away from the Paris Agreement,” said Marius Troost, a senior policy advisor at Both ENDS.
Can the EU enforce its climate trading rules?
The Dutch environmental group filed the complaint under the EU Commission’s Single Entry Point, a mechanism that allows civil society to request enforcement of the bloc’s trade commitments.
The EU-New Zealand trade deal includes the possibility of suspending beneficial trading arrangements between the two parties in response to serious violations of its climate provisions. This, Troost said, is a “unique” tool to enforce both parties’ obligations under the deal.
“This is an opportunity for the EU and New Zealand to show that they are actually serious about these commitments,” he told Climate Home News.
A spokesperson for New Zealand’s Ministry of Foreign Affairs and Trade denied any violations of the agreement and said the government hadn’t received formal notice of the complaint. The country, they said, “takes its commitments under the NZ-EU Free Trade Agreement seriously, including the agreement’s environment and climate-related provisions”.
An EU Commission spokesperson said it will start a preliminary assessment of the complaint and engage with NGO Both ENDS. “Sustainability is a central pillar of the EU-New Zealand relationship,” they added.
The EU is New Zealand’s second-largest trading partner after China, with about 14% of the country’s exports going to the European market. Agricultural products like meat, diary, fruit and vegetables are the country’s biggest exports to Europe.
New Zealand is ‘having its cake and eating it’
Eliza Prestidge-Oldfield, a senior legal researcher at the New Zealand-based Environmental Law Initiative, which is supporting Both ENDS’s claim, told Climate Home News that if the EU upholds the complaint, both parties would begin a negotiation process.
“The idea is to try and resolve this positively with the New Zealand government acknowledging areas where it needs to change its actions in order to comply with the agreement, and get that change in place as soon as possible,” she said.
But New Zealand’s right-wing coalition government said it won’t take any directives from foreign actors regarding its policies. Trade minister Todd McClay told local media that it was “not for overseas countries, organisations or lobby groups to tell New Zealand how to meet its obligations”.
-
Coal mines and hypocrisy must not be Australia’s COP31 legacy
Still without a coal phase-out plan, Australia must course-correct to earn the mantle it has been given and do right by the Pacific nations that backed its bid for COP’s co-presidency -
Pacific leaders rail at climate finance failures after pre-COP trip to Tuvalu
Island nations seek invest in their own Pacific Resilience Facility, as they struggle with the red-tape of international climate funds -
As COP31 co-host, Australia should make its polluters pay for climate damage
With UN climate funds running short on cash, now is the time to start taxing the companies whose emissions are driving harm in the Pacific and other vulnerable parts of the world
Prestidge-Oldfield argued the complaint isn’t about “Europe telling anyone what to do at all”, but rather stressing the conditions under which they are willing to import goods from New Zealand. “The New Zealand government is trying to have its cake and eat it too,” she said.
If New Zealand refuses to adjust its policies in line with the agreement, the complaint will be assessed by an independent panel, which can require the country to make changes. If those changes are not implemented, the panel could decide that New Zealand should lose its preferential EU market access.
A negotiated resolution is more likely, however, with no prior labour-related complaints to the EU having ever reached the panel stage.
Alexander Gillespie, a law professor at the University of Waikato in New Zealand, said sanctions would be a “last resort”. “This is a test case, which will generate considerable attention – as it is not just about climate change, but how free trade and environmental sustainability have been woven together,” he said in a statement.
Trade deals as tool for climate accountability
Experts said the case could set a precedent for how trade deals can be used to hold governments accountable on climate action. The EU has enacted similar “trade and sustainable development” clauses in its trade agreements with Canada, Japan and South Korea.
While still pending ratification, the EU’s 2024 trade agreement with Mercosur – which encompasses Argentina, Brazil, Paraguay and Uruguay – also includes climate provisions, including a commitment to “effectively implement” the Paris Agreement and promote low-carbon trade.
In addition, legal researcher Prestidge-Oldfield noted that last year’s landmark advisory opinion on climate change by the International Court of Justice (ICJ) laid out stronger climate obligations for developed countries like New Zealand and could strengthen allegations of violations of the terms of the trade deal.
“It will be an interesting area to watch how the EU free trade agreement is interpreted in the light of this advisory opinion,” she said.
The post New Zealand accused of breaching EU trade deal over climate rollbacks appeared first on Climate Home News.
New Zealand accused of breaching EU trade deal over climate rollbacks
Australia and Türkiye have agreed to take forward a “presidency-led decision for COP31” after consulting with different countries and groups, Australia’s climate change and energy minister said on Wednesday at the pre-COP meeting in Fiji.
The announcement that November’s climate conference will produce what is known among negotiators as a “cover decision” lays to rest the annual speculation over how the main outcomes of the UN climate conference will be presented this year.
Unlike other formal decision texts at COP, cover decisions are not negotiated word by word between governments. They are often summaries crafted during the proceedings by the presidency, although they still need to be adopted by consensus. Cover texts bring together key elements and initiatives emerging from the discussions at the two-week UN clim