Costs of climate change: debt, climate crisis

A new Report warns that Virtually unnoticed developing countries from slipping into the debt trap. Also because damage to the climate blow up the budget. Not

Costs of climate change: debt, climate crisis

A new Report warns that Virtually unnoticed developing countries from slipping into the debt trap. Also because damage to the climate blow up the budget.

Not only a humanitarian, but also a financial disaster: hurricane "Idai" in Mozambique photo: Zohra Bensemra/reuters

On 7. In September 2004, hurricane "Ivan devastated" the Caribbean island of Grenada. The storm killed 39 people, destroyed 90 percent of the homes and the forests, he damaged roads and schools and robbed the cultivation of the already poor country for a decade, the economic basis of tourism, and nutmeg. The damage was twice as large as the entire economic performance. For the next few years, Grenada's past was always close to the state of bankruptcy.

"Ivan" was one of the strongest and most expensive hurricanes of its time in the Atlantic. But his damage is not based only on high wind speeds, which were likely to climate change. They also resulted from the poverty of Grenada and the effects the storm had on the economy and the financial system of the country. Grenada is a sign for a development, which has become 15 years later, a realistic scenario was that the climate can make change, particularly vulnerable countries so hard, that a new debt crisis developed. And that impoverished countries against the effects of the climate crisis hardly can defend.

This concern is in the case of States, development organizations, insurance companies, and international donors such as the world Bank and the International monetary Fund (IMF) is becoming stronger. The "debt report 2020", the aid organisations Misereor and "adoption year" to present next Monday, dedicated to the subject of a separate Chapter: "climate change and the increasingly frequent disasters pose a particular threat to highly indebted countries", - stated in the report presented to the taz in advance. "In particular, small island States in the Pacific and in the Caribbean, and the countries of the Sahel region are particularly affected."

alarm signals to ensure there are enough – even if many other factors can play a role, if help combat climate change-related Disaster to countries get into debt or you don't escape: As Mozambique in the spring of 2019 by the hurricanes, "Idai" and "Kenneth" devastated was, slumped to the growth of planned 3.3 to 2.7 percent. Mozambique came out of his Status as "virtually bankrupt," reported the rating Agency Fitch.

Pirmin Spiegel, Misereor

"The States take on more debt and/or save in the case of the Poorest"

The world Bank is alerted. In a comprehensive report "the Global Waves of Debt" from December 2019, warns you, in Emerging and developing countries, to the towers of the "largest, fastest and most comprehensive increase in debt", representing an historical high of 170 percent of the economic performance of these countries.

in 2017, the world Bank had written, extreme weather and the shift in the seasons due to climate change could cause damages of up to $ 500 billion. Particularly at risk: Emerging and developing countries, because they are more vulnerable, have less access to assistance, investments and capital. In the scenario of a global warming of 3 degrees – which is what the current Trends are – experts are expecting a loss of 10 per cent of global economic power by 2030.

The sign of a new debt crisis are increasing Because the interest rates in the developed countries are low, the capital, urgent investment opportunities. The need for infrastructure in Emerging and developing countries is huge, the markets are open, and with China a new lender on the market. External shocks "such as climate-induced storms, droughts or Floods are added suddenly," can spring the trap. Prior to that, at least in the "debt report" warns: countries such as Pakistan or Kenya, have invested scarce state resources to little adapted to local climate and large-scale engineering projects such as new power plants. The loans could quickly escalate into a "debt spiral".

climate change will result in a "double strike" against the poor countries, writes Benedict Libanda, Chairman of the environmental investment Fund of Namibia. If climate damages occur, should governments spend more money that is missing elsewhere. At the same time growth and government revenues decline. The ratings of the rating agencies would re-share once the industry States before, criticized Libanda: "you get better Ratings, because they are less vulnerable and more technology and money to absorb shocks."

Misereor, the managing Director of Pirmin Spiegel warns of the consequences: "The States take on more debt and/or save in the case of the Poorest. So these will always be more susceptible to the effects of climate change. The creditors are often countries in the global North that contribute significantly to climate change, while poor, suffering the consequences, contribute the least to it.“

The creditworthiness of a country, calculate the credit rating agencies even after that, how big are the savings and assets are of how often natural disasters happen, how much the houses in flood areas. For the South Pacific state of Fiji about the Agency Moody's writes: "the economy and public finances remain highly vulnerable to sudden climate events and long-term climate trends, which means restraint for the classification."

The Problem is recognized at the UN level. Really it is not addressed. At the climate conference COP25 in Madrid, the demands of the poor countries to the compensation provided for "loss and damage", once again, for agitation and Blockade. For the past five years, the States were talking in a cloudy "Warsaw mechanism" about whether, and how, in addition to CO2 mitigation and adaptation to climate change, also damage from droughts and sea-level rise to offset them.

But the industrial countries to block each of the basic regulation. As the main cause of climate change you fear to be the losers eventually damages sued, if you open this door.

The worry is quite justified. 50 billion U.S. dollars, an Alliance of environmentalists and Development agencies, estimates that the annual demand of poor countries for climate-related damage. From 2030 on, could even rise to $ 300 billion, says Sabine Minninger, which accompanied the climate negotiations for the development organization "bread for the world". "From 2020, the vulnerable countries will have to muster because of the climate risks the world is about 150 billion dollars, in addition to the cost of capital for their financing," says Minninger. 100 billion US dollars that says the rich to the poor countries annually in 2020 as climate assistance alone for climate protection and adaptation are so far.

A way out of the climate-fueled debt crisis, the developed countries want to help the loved one in the market economy, new insurance models, such as the "Insuresilience" the poor in public-private partnerships, against the destruction of climate change to protect and the insurance industry are opening up at the same time, a new challenging business field. But the poor need at least the basic capital and the risks need to be in spite of state aid control. Both is not the case in the climate change always.

A fundamentally different proposal from Jürgen Kaiser of the campaign "jubilee has discovered" in the Caribbean: a "debt-relief initiative" countries would suspend their debt service, when disasters happen. The money could then be used for fast emergency relief and reconstruction in the country, "there is an interest rate would need to be free debt moratorium and restructuring the debt to a sustainable level," said Kaiser.

In the case of the umbrella organisation of the international climate initiatives CAN the idea to get on well, says Kaiser. But, and pay it to the States.

Updated Date: 24 January 2020, 13:00

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