This CAFOD discussion paper calls for greater exploration of three ‘innovative sources’ of finance, which can help raise the huge amounts of money needed to tackle the climate crisis in a way that is both fair and effective. These sources are reforms to: the global tax architecture; the debt infrastructure; and international financial institutions (IFIs).
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 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 IFIs 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:
it must be major polluter companies and countries, not the average taxpayer, who pay for the damage they have caused – through progressive measures like fossil fuel and wealth taxes, and closing tax haven loopholes.
Resolve the new global sovereign debt crisis:
Extortionate interest rates on private sector loans are severely limiting the ability of CVCs to spend on climate action without risking default. The UK government must introduce robust private creditors legislation, and support debt repayment suspension/cancellation following natural disasters.
Reform International Financial Institutions:
Power within the World Bank and IMF in particular must be meaningfully rebalanced to better represent CVCs, to prevent the climate finance that is and will be 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.
