
The debt-fossil fuel trap: Why debt is a barrier to fossil fuel phase-out and what we can do about it
This paper explores the links between indebtedness and fossil fuel exploitation in developing countries. The briefing concludes with recommendations for achieving debt justice, preserving the environment, and tackling climate change.
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OVERVIEW
Setting the context
It provides context to show how global south countries are struggling because of wealthier polluters taking up more than their fair share of atmospheric space. Global south countries need to rely on fossil fuels to repay debt, and this dependence creates a trap that makes the transition to clean energy difficult.
The links between debt and fossil fuels
The debt-fossil fuel production trap is identified as a major challenge for global south countries. The report attributes the dependence of states on fossil fuels to repay debts to overinflated revenues of the commodity that requires massive investments. The paper also indicates that reliance on commodity exports leads to economic instability and leaves states vulnerable to market shocks.
Solutions
The paper’s recommendations include scaling up grants for new clean energy infrastructure development and withdrawal of subsidies for fossil fuels and coal projects. The report maintains that Global North countries should take responsibility for climate change impacts on the Global South and provide new additional climate financing. This would enable countries dependent on commodity exports to uphold citizen needs and boost the transition to clean energy. The financing must match the scale of the harm caused by climate change and the ecological debt owed to the Global South.
Conclusion
The report concludes that the global south countries must be freed from unsustainable debt cycles. A movement away from relying on fossil fuel revenue will require investment in new infrastructure, job creation other than from the fossil fuel sector, and assurance of financial access for transitioning. It also requires reduction in global north emissions and transformative North-to-South monetary flows that should secure climate justice and the transition to clean energy.
The report is vital for investors and professionals interested in climate financing as it offers guidance for policies that can promote a sustainable transition to clean energy Sources cited in the report offer evidence of the detrimental economic and health effects of relying on fossil fuels for economic growth. The Debt-Fossil Fuel Trap is a comprehensive analysis of the financial and environmental risks of debt and fossil fuel production in the Global South and practical recommendations for future actions.