Global South countries 'trapped' in fossil fuel production to repay debts, study finds

22nd August 2023

Countries in the Global South are trapped in relying on fossil fuel production to repay debts, a new report from the charity Debt Justice claims.

It also reveals that these countries are currently spending five times more on repaying debts than they are on addressing climate change, with external debt payments increasing by 150% between 2011 and 2023, and reaching their highest levels in 25 years.

Nations including Argentina, Uganda and Mozambique may find it impossible to phase out fossil fuels and transition to renewable, sustainable energy sources, unless this “debt-fossil fuel trap” is addressed, according to the authors.

Argentina, for example, is committing to fracking in an oil and gas field in Northern Patagonia as a way to solve the country’s debt crisis and wider economic problems, backed by the International Monetary Fund (IMF).

The IMF and World Bank also overestimate anticipated revenues from fossil fuel projects, leaving countries at risk of further debt while remaining locked in climate-harmful activities, according to the report.

It suggests that there are 54 countries in a debt crisis, and highlights how the situation could get much worse as interest rates rise, markets destabilise and the war in Ukraine pushes up food and energy prices.

“High debt levels are a major barrier to phasing out fossil fuels for many Global South countries,” said Tess Woolfenden, senior policy officer at Debt Justice.

“Many countries are trapped exploiting fossil fuels to generate revenue to repay debt, while at the same time, fossil fuel projects often do not generate the revenues expected and can leave countries further indebted than when they started. This toxic trap must end.”

In 2009, Global North governments committed to providing $100bn (£79bn) in climate finance every year to Global South countries by 2020, but continuously failed to meet this commitment, which itself is thought to be well below what is needed for climate adaptation and mitigation.

However, debt levels within many Global South countries also act as a major barrier to these nations accessing the finance they require to transition away from fossil fuels.

To remove high debt burdens as a significant barrier to fossil fuel phase-out and the transition to clean energy, the report calls on wealthy governments and institutions to:

• Implement ambitious debt cancellation for all countries that need it, across all creditors, free from economic conditions

• Recognise debts accrued from fossil fuel projects as illegitimate and ensure they are cancelled

• Significantly scale up grant-based, new and additional public climate finance, as a form of reparations in light of the climate and ecological debt owed by the Global North to the Global South

• Bilateral and multilateral finance should be aligned with a 1.5 °C warming scenario and fair shares calculations, and not be used to finance fossil fuels.

Arthur Larok, secretary general of ActionAid International, commented: “Countries on the front lines of the climate crisis urgently need funds to cope with impacts and to scale up green technologies.

“But climate disasters are pushing vulnerable countries deeper into debt, trapping them in a vicious cycle that perversely drives investment in the fossil fuels that further accelerate the crisis.

“When it comes to climate solutions, debt cancellation is a low-hanging fruit that can restrain expansion of climate-harming industries, and free up much-needed finance in vulnerable countries.”

Image credit: Shutterstock


Subscribe to IEMA's newsletters to receive timely articles, expert opinions, event announcements, and much more, directly in your inbox.

Transform articles

Weather damage insurance claims hit record high

Weather-related damage to homes and businesses saw insurance claims hit a record high in the UK last year following a succession of storms.

18th April 2024

Read more

The Scottish government has today conceded that its goal to reduce carbon emissions by 75% by 2030 is now “out of reach” following analysis by the Climate Change Committee (CCC).

18th April 2024

Read more

The Science Based Targets initiative (SBTi) has issued a statement clarifying that no changes have been made to its stance on offsetting scope 3 emissions following a backlash.

16th April 2024

Read more

While there is no silver bullet for tackling climate change and social injustice, there is one controversial solution: the abolition of the super-rich. Chris Seekings explains more

4th April 2024

Read more

One of the world’s most influential management thinkers, Andrew Winston sees many reasons for hope as pessimism looms large in sustainability. Huw Morris reports

4th April 2024

Read more

Alex Veitch from the British Chambers of Commerce and IEMA’s Ben Goodwin discuss with Chris Seekings how to unlock the potential of UK businesses

4th April 2024

Read more

Regulatory gaps between the EU and UK are beginning to appear, warns Neil Howe in this edition’s environmental legislation round-up

4th April 2024

Read more

Five of the latest books on the environment and sustainability

3rd April 2024

Read more

Media enquires

Looking for an expert to speak at an event or comment on an item in the news?

Find an expert

IEMA Cookie Notice

Clicking the ‘Accept all’ button means you are accepting analytics and third-party cookies. Our website uses necessary cookies which are required in order to make our website work. In addition to these, we use analytics and third-party cookies to optimise site functionality and give you the best possible experience. To control which cookies are set, click ‘Settings’. To learn more about cookies, how we use them on our website and how to change your cookie settings please view our cookie policy.

Manage cookie settings

Our use of cookies

You can learn more detailed information in our cookie policy.

Some cookies are essential, but non-essential cookies help us to improve the experience on our site by providing insights into how the site is being used. To maintain privacy management, this relies on cookie identifiers. Resetting or deleting your browser cookies will reset these preferences.

Essential cookies

These are cookies that are required for the operation of our website. They include, for example, cookies that enable you to log into secure areas of our website.

Analytics cookies

These cookies allow us to recognise and count the number of visitors to our website and to see how visitors move around our website when they are using it. This helps us to improve the way our website works.

Advertising cookies

These cookies allow us to tailor advertising to you based on your interests. If you do not accept these cookies, you will still see adverts, but these will be more generic.

Save and close