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.”
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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.”
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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”
In the thick of the COP29 climate summit in Azerbaijan in 2024, the UN climate talks were rattled by what can only be described as a major PR disaster. The BBC, Reuters and The Guardian all carried headlines, attributed to leading climate policy experts, that the COPs were “no longer fit for purpose”.
The articles outlined a series of reforms called for in an open letter signed by 22 eminent scientists and politicians, including a former UN secretary-general and previous UN climate chief, with a further 150 lending their support. The headlines shook confidence in the COP process, just as governments were wrestling over a new climate finance goal.
The Club of Rome – which handled the media relations for the letter – hurried to say that its “constructive, supportive ideas” had been “misinterpreted”. Negotiators kept calm(ish) and carried on, in the end landing the finance goal after some high-stakes drama on the final day.
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To my surprise, when I went back this week to read the letter again, I could not find the offending line about the COPs not being fit for purpose. The Club of Rome has yet to respond to my query about its disappearance.
Whatever happened to the wording, that sentiment has been widely shared. COPs have ballooned in size while the importance of their outcomes seems to have diminished since the 2015 Paris Agreement (with the exception of the 2023 COP in Dubai where countries agreed to transition away from fossil fuels in energy systems).
The same on the surface
Two years on from those painful headlines in Baku, has anything changed for the better? You might be forgiven for thinking not. Official decisions are still made by consensus rather than the majority voting some have called for to stop blockers.
Tens of thousands of officials, activists and business execs still scurry around the halls to an ever-growing list of side events, roundtables and dialogues, while deals still come down to rows, all-nighters and jargon-filled texts adopted to rounds of applause.
But it would not be true to say that COPs have completely failed to respond to the very real need to translate the words of the Paris Agreement into action in the outside world.
Global warming is projected to be around 1.3C lower this century than it would have been if the world had not committed to tackle the climate crisis under that accord. Developing countries have a valued space at COPs in which their voices have equal weight in decision-making, unlike in many other international fora. And most importantly, perhaps, there has been a subtle shift, tipping the balance away from negotiating towards doing.
Brazil branded last year’s summit in Belém as the “COP of Implementation”, corralling the sprawling Action Agenda into six axes. This was a bid to impose some structure on the mushrooming efforts between governments, UN agencies, cities, businesses and civil society to set targets and spur faster results on their pet issues, from methane emissions to health and adaptation in conflict zones. COP30 alone saw the launch of 120 “plans to accelerate solutions”.
COP30 roadmaps off the cuff
Meanwhile, as the formal negotiations drew to a close, it was clear that consensus decision-making was evolving into something a little more improvised.
With only around half of all countries on board with the idea of a roadmap to transition away from fossil fuels, COP30 President André Corrêa do Lago announced his team would put one together over the coming year, along with another on how to meet a global goal to halt deforestation by 2030. Those roadmaps will be launched next week, presented and discussed at COP31, though it’s still unclear whether or how they’ll be incorporated into the formal negotiating agenda.
Some leading policy-makers don’t think that matters too much. Speaking to journalists before the Antalya summit, COP30 CEO Ana Toni and Dutch climate minister Stientje van Veldhoven said “coalitions of the willing” can move ahead without needing consensus from the COPs. This, they said, was evident this year at the first global conference on TAFF, co-chaired by van Veldhoven and attended by 60 countries.
“Consensus or no-consensus in the general COP doesn’t make a difference for the choices I have to make in my country to get my country to phase out fossil fuels,” said the Dutch minister. The Netherlands recently became one of the first to publish a national TAFF plan.
COP31 banks on flagship voluntary initiatives
This thinking has permeated the management and expected outcomes of this year’s COP too. Earlier this year, Türkiye, supported by international energy agencies, floated the idea of a voluntary goal to boost electrification to 35% of the world’s final energy consumption by 2035 – and this is now being touted as one of the main results to be expected from Antalya.
Türkiye is also championing a pledge on AI and climate, while co-host Australia is pushing to ease access to climate finance for least developed countries and small island states.
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None of these needs consensus. But with a political cover decision already in the works, as trailed by the COP presidents, they – and perhaps the fossil fuel roadmap – may find a home in the official text if language acceptable to most can be found, giving them them additional weight.
UNFCCC reform process in the shadows
Formal reform is underway too, if quietly. UN climate chief Simon Stiell is leading a review informed by ongoing consultations with a group of 15 well-respected climate policy experts, three of whom signed the open letter in 2024.
Among them is leading Swedish climate and sustainability scientist Johan Rockström who has strong ideas about how to make COPs function better, including a switch to majority voting. He told the same press briefing nothing stands in the way of this, because the rules of procedure for making decisions at COPs have never been formally agreed.
Still, to get away from the default setting of consensus would require agreement on a new system that may be impossible to achieve given the rise in bullying tactics by fossil fuel heavyweights.
Comment: The UN climate process was built for negotiation – now it must support implementation
The deliberations with the high-level policy gurus, as reflected in a summary of June’s session in Bonn, largely echo what’s already happening organically, calling for stronger partnerships and accountability both in and between the Action Agenda and negotiations. It doesn’t mention voting.
A general overview of the reform exercise says that “improving and optimizing the [UN climate] process over the medium to long term… will be critical to fostering trust, enhancing collaboration, and catalyzing increased ambition”.
In the short term, don’t hold your breath for anything concrete on reform at COP31 but watch for signs in what ends up dominating the headlines from Türkiye.
The post Editor’s Desk: COP reform is happening quietly, behind the headlines appeared first on Climate Home News.
Editor’s Desk: COP reform is happening quietly, behind the headlines
With the COP31 climate summit in Turkey looming, all eyes are on China to see what the country will push for in the negotiations.
At COP30 last year, China helped to secure a “dialogue” on climate-related “unilateral trade measures”, as well as a two-year “work programme” concerning climate finance.
The nation also championed south-south cooperation throughout the conference and co-led a summit on methane, alongside Brazil and the UK.
In a recent press conference, China’s environment vice-minister Li Gao noted the need to “uphold multilateralism” and send a “clear political signal” that the global community is united around climate action.