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Finance & Innovation

Rich Nations Hit by COVID-19 Urged to Keep Climate-Finance Promises to Poor

By Megan Rowling

BARCELONA, April 30 (Thomson Reuters Foundation) — Jamaica, like many other Caribbean islands, finds itself now facing a "triple jeopardy," according to its finance minister: limited resources to equip its health system for a coronavirus outbreak, high levels of debt, and significant exposure to climate threats.

The island country has worked hard to reduce its national debt level from 145% to 90% of gross domestic product (GDP), while building up an array of financial tools to deal with disasters, including insurance and catastrophe bonds, said Nigel Clarke.

But a few weeks before the start of the hurricane season in June, global financial markets have dried up, making issuing bonds impossible, he noted.

"At the time of the greatest economic crisis since the Great Depression, we are going to face the 2020 hurricane season without the deeper disaster-risk financial protection we sought, at the very time when we actually need it," he said in an international online discussion this week.

"To have a pandemic risk and a natural disaster risk is an unfortunate position to be in," Clarke told an event on financing climate action in the context of the COVID-19 crisis.

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Many small island nations also face the collapse of income from their tourism industries due to the pandemic, posing an "existential challenge" in some places where it is the top economic activity, accounting for 30% of GDP, he added.

At the 30-nation Petersberg Climate Dialogue on Tuesday, German Chancellor Angela Merkel urged governments not to reduce their international contributions to help vulnerable countries tackle climate change.

The money was needed, as the world faces a sharp economic downturn due to coronavirus lockdowns, so that "we have a global success in climate protection," she said in a video address.

Germany would deliver on its own promise to provide 4 billion euros ($4.4 billion) in climate finance for developing nations this year, she noted.

German Environment State Secretary Jochen Flasbarth said in Wednesday's related event that economic stimulus after the pandemic eases — likely to reach $10 trillion to $15 trillion worldwide — should be shaped to achieve the targets of the Paris agreement on climate change as well as global development goals.

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"In addition, we must ensure that the countries of the Global South with high debt burdens remain capable of [climate] action despite the COVID-19 pandemic. This makes discussion of debt relief programs necessary as well," he added.

Britain, which will host the postponed COP26 UN climate conference next year, also reaffirmed a commitment to double its climate finance to 11.6 billion pounds ($14.6 billion) in the coming five-year period.

Building Trust

Jan Kowalzig, a climate policy adviser with aid group Oxfam in Germany, welcomed the climate finance confirmations from the two big donor nations, amid wider fears that economic woes from coronavirus could cause some rich countries to trim pledges.

He urged wealthy governments to step forward this year with proof they are meeting a longstanding promise to raise $100 billion per year from 2020 to help poorer countries develop in a clean way and adapt to wilder weather and rising seas.

Many developing nations are relying on that money to be able to boost their national targets to curb planet-warming emissions in stronger climate action plans also due this year, he added.

"The trust-building is so important — that all countries get the feeling everyone is moving ahead," Kowalzig told the Thomson Reuters Foundation.

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Yannick Glemarec, executive director of the Green Climate Fund (GCF), told the finance discussion that his organization, set up to channel some of that annual $100 billion, was in a good position to smooth the way for private investment in climate-resilient, low-emissions development.

From energy-efficient buildings and renewable power storage to improved water management and farming methods, public money should be used to reduce the risks of investing in such projects in emerging markets — an area in which the fund has expertise and partnerships, he added.

The GCF was now planning to help developing-country governments — many of which already have major debt stress — to craft and finance green stimulus measures, and also was looking for priority initiatives to back in the coming months, he said.

"Time is of the essence," he added.

London School of Economics professor Nicholas Stern said international development banks would be key in providing low-cost financing and debt repayment standstills or relief so poorer nations could grow on a clean path despite pandemic pressures.

The banks' coffers should be topped up by member governments to increase their "firepower" to provide that support, he added.

"We must act in a way that boosts growth across the world — the big investment here will be in emerging markets and developing countries, and we have to work hard to get that investment moving," he said.

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($1 = 0.9137 euros) ($1 = 0.7935 pounds)

(Reporting by Megan Rowling @meganrowling; editing by Laurie Goering. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org/climate)