Energy

Rich Countries Make A Killing On Interest Attached To Climate Loans For Developing Countries

A man holds a sign as activists mark the start of Climate Week in New York during a demonstration calling for the U.S. government to take action on climate change and reject the use of fossil fuels in New York City, New York, U.S., September 17, 2023. REUTERS/Eduardo Munoz

Wealthy nations are making considerable amounts of money from interest payments on climate-related loans to the world’s developing nations, a Reuters investigation found.

Countries including the U.S., Japan, Germany and France have loaned about $18 billion to other nations to address climate change at prevailing interest rates, as opposed to providing grants or loans with low or no interest, according to Reuters’ investigation, which was conducted in tandem with Stanford University’s Big Local News journalism program. Wealthy nations, especially Japan and European states, have also issued billions of dollars of climate change loans that require recipients to hire or enlist companies, nonprofits and government entities — typically from the issuing country — to do work or procure materials pursuant to the objectives financed by the loans.

Many of the loans and grants examined in the Reuters investigation counted toward a 2009 international United Nationspledge to deploy $100 billion in climate finance to the developing world each year by 2020.

Reparations for what? Being less developed? https://t.co/BVqEc6JoLw

— Daily Caller (@DailyCaller) November 20, 2022

Nations of “the global south are experiencing a new wave of debt caused by climate finance,” Andres Mogro, the former Ecuadorian national director for adaptation to climate change, told Reuters.

The findings belie the spirit of international climate finance, according to Reuters. Proponents often assert that rich countries should provide funds to poor countries to deal with climate change’s effects because those developing countries played a minor role in driving emissions, but Reuters’ findings indicate that these funds often find their way back into the economies of wealthy nations issuing them.

These conditions are necessary and even beneficial in some instances, especially when a recipient lacks the prerequisite materials or expertise to take action themselves, according to Reuters.

“From a justice perspective, that’s just deeply reprehensible,” Liane Schalatek, the associate director of the Washington branch of the Heinrich-Boll Foundation, a German organization focused on green policies, told Reuters. “Climate finance provision should not be a business opportunity.”

Reuters and Big Local News examined nearly 45,000 records regarding climate change finance filed with the United Nations Framework Convention on Climate Change and more than 133,000 records submitted to the Organization for Economic Cooperation and Development.

France provided about $28 billion in climate financing between 2015 and 2020, of which 90% was in the form of loans, while loans made up nearly 80% of the $58 billion deployed by Japan over the same period, Reuters found. Loans constituted about half of the $45 billion in climate financing issued by Germany during that five-year window, and approximately 30% of America’s $9.5 billion in contributions were loans.

Additionally, more than $85 billion of climate loans were issued to countries classified as low-income, lower middle-income or upper middle-income despite the fact that many countries receiving the loans have significant debt problems, according to Reuters.

The State Department did not respond immediately to a request for comment.