Extreme weather events are the new normal — that much has been clear for quite some time.
Between "unusually intense" tropical storms, heatwaves, out-of-control wildfires, and more, 2023 has been filled with reports of how climate change is impacting our daily lives. But depending on where you live in the world, you may notice some disparities when it comes to how long it takes your country to recover.
In Pakistan, for example, last year’s monsoon season affected all four of the country’s provinces, killing over 1,700 people, displacing millions, and causing $14.9 billion in damages. Eight months later, the country is still struggling to recover.
In Madagascar, communities are continuing to rebuild after Tropical Cyclones Batsirai and Emnati barrelled down on the island country in February 2022. These efforts have been further hampered by Cyclone Freddy, which touched down almost exactly a year later.
Meanwhile, there are around 770 million people worldwide — mostly in Africa and Asia — who are living without electricity; and who need access, specifically to clean energy.
While the 2015 Paris Climate Agreement marked incredible progress toward acknowledging the causes of climate change and setting goals to prevent the worst effects from taking place, world leaders have been too slow to act.
Developing nations need support to deal with the consequences of climate change NOW. That means there need to be new agreements, new strategies, and new funding commitments made to deliver climate financing to the countries that need it most.
To tackle this issue head on, government leaders from the Global North and South will meet in Paris on June 22 and 23 for the Summit for a New Global Financial Pact. Hosted by French President Emmanuel Macron, the Paris Summit will strive to develop new strategies to respond to climate change and extreme poverty, with an emphasis on how to increase climate financing.
One of the most talked-about proposals in the lead up to the Paris Summit is the Bridgetown Initiative, led by the Prime Minister of Barbados Mia Mottley. A three-step proposal, the Bridgetown Initiative seeks to transform the global financial system to unlock climate cash for developing countries and encourage investment from the private sector.
The first step of the proposal calls for multilateral development banks — which lend money to developing nations — to provide more cash to countries in need. They could do this through actions like suspending interest payments (learn more about how debt pause clauses work here) and redistributing unused Special Drawing Rights (SDRs) from the International Monetary Fund (IMF). Step two calls for an increase in lending so developing nations can build climate resilience in the long term.
The third step of the Bridgetown Initiative calls for the creation of a Global Climate Mitigation Trust to accelerate investments from the private sector, backed by low-interest instruments like SDRs. The idea is that, by alleviating some of the risk associated with investing in developing countries, it can make investment in developing countries more attractive and result in unlocking more climate cash.
To learn more about this final step of the Bridgetown Initiative, and how high the stakes are at the Paris Summit, Global Citizen spoke with economist Michael Jacobs, professor of political economy at the University of Sheffield and a visiting senior fellow at the Overseas Development Institute (ODI).
Here, he walks us through the biggest issues facing developing nations in the climate fight today, how the Bridgetown Initiative aims to reduce investment risk, and why the Paris Summit could be just what the world needs to spur meaningful action.
GC: What are some of the biggest climate change-related problems that developing nations are facing?
Michael Jacobs: For most low and middle income countries (LMICs), the primary problems that arise from climate change are how to adapt to it, including how to pay for the losses and damages that extreme weather events are now causing.
If you’ve experienced a hurricane, a lot of your buildings and essential infrastructure might be damaged or destroyed. That’s a terrible cost, and those costs are rising in countries where extreme weather events are becoming more frequent.
In terms of adaptation, these countries may also require funding to support the building of agricultural systems that are better able to adapt to higher temperatures or use less water, or coastal defenses that can protect against storm surges.
The problem is that most of the money that developing nations have received has been for mitigation, or cutting emissions. LMICs don’t produce many greenhouse gas emissions and historically have not been the cause of climate change, so this isn’t their biggest concern.
There was a breakthrough last year at COP27 in Egypt, where many world leaders agreed there should be an international fund for countries experiencing these consequences of climate change. Unfortunately, there haven’t been any updates on when or how wealthy countries will provide these funds. This is one of the biggest issues sure to come up at the Paris Summit.
How will the Bridgetown Initiative address some of these issues, and particularly with mitigating investment risk?
The proposal from Barbados responds to a longstanding and difficult problem faced by developing countries, which is that it is very expensive for them to borrow money. One of the reasons for that is because of currency devaluation.
Most developing countries have fragile currencies, which means they are more susceptible to shocks to the global economy. If interest rates in the United States rise, for example, then the dollar will rise and the local currency in a developing country will fall.
If you’re an overseas investor from the private sector, you’re likely concerned about currency devaluation because any returns on your investment will be worth less. And that risk prevents a lot of investors from putting money into developing nations.
The Barbados Initiative is seeking to mitigate some of the risk faced by overseas investors by [setting up a trust that uses] SDRs as a form of cheaper collateral to lend out. That way, overseas investors can pay a bit more to guarantee that they’ll see a return on their investment, which would make it more profitable for them to invest in a developing nation.
The clever thing about the Bridgetown Initiative is that it does not solely rely on international aid budgets from wealthier nations to fund climate projects. There are quite a lot of investors who are keen to invest in renewable energy streams in developing countries, such as wind, solar, and geothermal projects.
Are you feeling optimistic about the possibility of new actions being taken at the Paris Summit?
Yes! There’s a lot of impetus behind this Paris agenda now, and an emphasis on getting the private sector involved, particularly through this new facility to guarantee foreign exchange currency.
We’ve seen a number of disappointing situations play out in the last few years, especially concerning COVID-19. The developed world was not very generous with COVID-19 vaccines, and international aid budgets have been cut.
But now, I’m getting the sense that there is a renewed willingness to do better. There’s a general agreement that we need a new start; more money is needed to combat climate change and new mechanisms to guarantee climate financing are needed. That’s why the French have called this upcoming summit a “new pact.”
We’re definitely at the beginning of the process, and it could be a year or two before we see any agreements take place. But it feels like there are some exciting opportunities ahead, and that does give me hope.
Responses have been lightly edited and condensed for clarity.