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

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


Transform articles

Information overload: the difficulty with data

The huge quantities of data we generate online every day is having an increasingly negative impact on the environment. Chris Seekings examines what is being done to tackle the problem

30th November 2023

Read more

The Labour Party’s climate policy team took part in a panel discussion with IEMA representatives at Westminster this morning, outlining what they plan to do should they win the next general election.

29th November 2023

Read more

The UK’s renewables industry is being used to extend the life of the sector that is driving us towards climate breakdown. Tom Pashby reports

28th November 2023

Read more

The UK government will introduce a new bill requiring the North Sea Transition Authority to run oil and gas licensing rounds every year, the King’s Speech confirmed today.

7th November 2023

Read more

A vastly different energy system is set to emerge by the end of this decade, with almost 10 times as many electric cars on roads, and solar panels generating more electricity than the entire US power system does today.

24th October 2023

Read more

IEMA CEO Sarah Mukherjee MBE talks to Rachel Kyte about diplomacy, women’s leadership, diversity and transforming energy systems

28th September 2023

Read more

Rick Gould looks at the options for decarbonising cement

28th September 2023

Read more

The North Sea Transition Authority (NSTA) has this week granted permission for drilling at the controversial Rosebank oil and gas field located 80 miles north-west of Shetland.

28th September 2023

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