Communities hit by the climate crisis need money to rebuild from disasters such as typhoons that are occurring more frequently and more severely as a result of greenhouse gas emissions.
Communities on the frontline of the climate crisis need money to prepare for emergencies, rebuild from disasters and access renewable energy – but they don't have enough of it.
This doesn't have to be the case. By properly taxing polluters profiting from driving the climate crisis, cancelling debts for countries impacted by the crisis and reforming international financial institutions, we could ensure that communities hardest hit by the climate emergency have the 'climate finance' they need to tackle it.
Rather than paying the price for a crisis they have done least to cause, the countries most vulnerable to the climate emergency would have the money they need to build flood defences, install early-warning systems and provide renewable energy to communities living without access to electricity.
This discussion paper sets out three ‘innovative sources’ of finance needed to unlock the huge amounts of climate finance: reforms to the global tax architecture, debt infrastructure, and international financial institutions.
Climate change is laying waste to the world around us. Whether it’s more severe natural disasters, famines, water scarcity, decreasing biodiversity, or people being forcibly displaced from their homes, the climate crisis impacts everyone, everyday – though not to an equal extent.
Heeding the calls of our partners in climate-vulnerable countries (CVCs) and drawing on Catholic Social Teaching, we put forward several changes to the global economic architecture. These are aimed at increasing the resources available to, and autonomy of, these countries, enabling them to tackle the challenges the climate crisis has created.
To mitigate and adapt to climate change, CVCs will need enormous resources. The Intergovernmental Panel on Climate Change, the UN's top climate science body, has calculated that the sum of money ‘developing countries’ will need could be up to $5.9 trillion before 2030.
The reforms that are needed to unlock this finance go beyond aid alone, and should align with the moral imperative that it is public and grant-based money from high-income, large, and historically polluting countries that must make up the vast majority of global climate finance.
Indeed, the three themes we identify supplement, rather than replace, public, new and additional, and grant-based investment: they would not, and should not, provide all the money that is needed. But they would ensure major polluters pay their fair share towards the climate clean-up; tackle the injustice of CVCs paying five times more on debt interest payments than on climate action; and move us towards international financial institutions that are more representative of CVCs.
Our discussion paper sets out three innovative sources of finance to tackle climate change:
Fix the broken tax architecture:
Major polluter companies and countries, not the average taxpayer, must be the ones who pay for the damage they have caused – through progressive measures like fossil fuel and wealth taxes and by closing tax haven loopholes.
Resolve the new global sovereign debt crisis:
Extortionate interest rates on private sector loans are severely limiting the ability of climate-vulnerable countries to spend on climate action without risking default. The UK government must introduce robust legislation to compel private creditors to take part in debt resolution frameworks on equal terms to other lenders.
Reform international financial institutions:
Power within the World Bank and the International Monetary Fund in particular must be rebalanced to better represent CVCs in order to prevent the climate finance channelled through them from perpetuating existing injustices. This requires ending the outdated ‘gentleman’s agreement’ (which sees the heads of the IMF and World Bank always coming from Europe and the US respectively) and fairer allocation of voting rights.
