Low-income countries forced into debt to tackle climate crisis

Today, Oxfam reveals that several rich countries have reported giving more in climate finance than they actually have.

Climate change is making extreme weather more common and in 2019, Rahela and her family had their house partially destroyed by Cyclone Bulbul, which hit Bangladesh. "We have not been able to repair the damage. First of all, we need to make sure we have food on the table," she says.

Rahela from Bangladesh. Photo: Fabeha Monir

The financial contribution paid by rich countries to low-income countries to help them tackle the climate crisis, known as climate finance, may in reality be as little as a third of what the countries themselves have declared. "A scandal" according to Oxfam's climate advisor Tracy Carty.

"Climate finance is a lifeline for low-income countries facing extreme heatwaves, hurricanes and floods"

Tracy Carty

The Climate Finance Shadow Report 2020 shows that the vast majority of what has been reported as climate finance in recent years has not been grants but has in fact consisted largely of loans. Moreover, around half of the loans have been offered on unfavorable terms. Actual climate finance in 2017 and 2018 is therefore between USD 19 and 22.5 billion per year, rather than the USD 59.5 billion reported.

At the same time, there are major differences in how different countries have chosen to structure their climate finance. For example, 97% of France's bilateral climate finance was made up of loans and other forms of investment. Sweden, Denmark and the United Kingdom, on the other hand, provided the majority of their climate finance in the form of grants.

Poor countries are the hardest hit by climate change, but are also the least responsible for the climate crisis.

"So now they're having to deal with a climate crisis they didn't help create," says Carty.

At the COP26 climate summit in Glasgow next year, negotiations will start to agree on one or more new climate finance targets to apply from 2025 when the current agreement expires.