Global economic crisis strangling progress for poor, warns U.N. development chief

  • More money for clean energy, adjustment could prevent losses
  • Channeling new money requires a renewed financial system
  • Pain in poor nations to have global influence without action

SHARM EL-SHEIKH, Egypt, Nov 10 (Thomson Reuters Foundation) – Decades of development progress are at risk as economies are pushed back by climate change losses, economic downturns from COVID-19, a growing cost of living crisis and soaring debt and inflation, said the head of the UN for development at COP27 in Egypt.

“We are essentially documenting a regression – and a regression that is virtually universal throughout the world,” said Achim Steiner, who heads the United Nations Development Program (UNDP).

Progress towards the globally agreed Sustainable Development Goals – which include eradicating poverty and hunger and should be achieved by 2030 – is slipping, he said, and some countries are back to where they were in 2016.

Economic woes are making it difficult for many governments to find the funding needed to introduce clean energy and address climate change — something that would have been easier when interest rates were still low, Steiner said in an interview.

With 54 countries now in debt trouble — and approaching bankruptcy — “it’s going to be more expensive to jump in,” he added.

But mounting global crises, particularly the war in Ukraine, are also creating new incentives to replace fossil fuels with renewable energy, with opportunities for cheaper electricity bills and greater energy independence, he said.

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It’s also become clearer that the demands of environmental protection and economic progress “are no longer forces pulling in opposite directions,” especially as renewables like solar become the cheapest source of energy, Steiner said.

This means there are still great opportunities for the world to break away from using coal, oil and gas towards greener development, despite economic obstacles around the world, he said.

The problem – especially for poorer, debt-ridden countries – is finding the money to actually install clean energy, which has higher upfront costs but produces cheap energy for decades.

DROWN IN DEBT

One solution to boosting renewable energy more quickly — and reaping the development benefits that come with it — could be debt forgiveness, Steiner said.

“For many countries, this is an absolutely terrible moment,” he said. “They can’t go to the financial markets.”

Debt forgiveness — or a climate debt swap, in which money freed from canceled debt goes directly to climate projects — would be like “putting a scalpel on a festering wound,” painful but necessary, he added.

The drive to gather momentum at COP27 to reshape international financial institutions to facilitate the flow of money to where it is needed is also part of the puzzle, he said.

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“Our financial system … must evolve in line with the magnitude and nature of the challenge,” Steiner said. We need better institutions.

Barbados Prime Minister Mia Mottley has proposed a post-World War II revitalization of international financial systems, dubbed the “Bridgetown Agenda,” designed to boost climate finance flows and make it easier for debt-ridden countries to access.

The proposal received key support early on, including from French President Emmanuel Macron.

Sameh Shoukry, Egypt’s COP27 president, also called for new funding that is “sustainable and cheap.”

“Undoubtedly, this is an important gap in climate action,” he said.

ADJUSTMENT AND RISK

In addition to boosting investment in green energy, more money is needed to help countries adapt to the impacts of climate change that are already happening and to reduce risks to stop development efforts from collapsing, Steiner said.

The UN’s “Adaptation Holiday” report, released this month, said developing countries could need as much as $340 billion a year by 2030 to stay ahead of wild weather and rising sea levels.

Finding much-needed private investment for adaptation efforts is difficult because the returns are less clear and are often seen as having only a local effect, it noted.

But Steiner, whose agency is trying to create a series of adaptation projects to attract investment, said the lack of funding has much broader implications than many people realize.

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Flood-hit Pakistan, for example, is likely to hit exports of key commodities like cotton and rice, affecting international markets and commodity prices. Debt payments will also be more difficult with less income.

“When nations like Pakistan go through the deep shock that they just went through, when small island nations in the Caribbean worry every year that they’re going to lose a third or more of their GDP at 12 o’clock … you’ve created an economically impossible scenario,” Steiner said. .

This has direct implications for rich countries and the global economy – not just those nations hardest hit, he said.

“The wealth of many savers in many rich countries is inexplicably linked to the economies of the Global South,” he added.

Success at the COP27 talks in Sharm el-Sheikh, he said, will require leaving the talks feeling like they are pushing climate action forward “built on shared interests, transparency, mutual accountability and trust”.

“This is not a convention that passes laws,” he pointed out. “This is essentially negotiating an extraordinary transition in our economies, with 8 billion people sitting around the table.”

Originally published at: https://www.context.news/climate-justice/economic-crisis-hits-development-progress-in-poor-nations-un-says

Reporting by Laurie Goering @lauriegoering; Editing by Megan Rowling. The Thomson Reuters Foundation is the charitable arm of Thomson Reuters. Visit https://www.context.news/

Our Standards: The Thomson Reuters Trust Principles.

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