Debt for climate, a proposal for the Italian G20

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Ecologists with banners shouting in megaphone about pollution, global warming

An intelligent proposal from the Green Climate Fund, the most important international fund for financing projects to combat climate change in developing countries, could combine the commitment to reduce the debt of the least developed countries with the need to support their investments in favor of the climate and the environment.

We know well that the pandemic has aggravated the level of international debt and at the same time the possibility of dealing with it, since the resources must be earmarked for social and health expenses and for the recovery of the economy.

The leaders of the G20 have decided to temporarily suspend the payment of the debt of the poorest countries, from May 1st to the end of 2020. It is a debt of 11 billion euros and affects 77 countries. In theory, it will have to be paid between 2022 and 2024, along with interest accrued over time (source: Jubelee Debt Campaign).

Will the moratorium be extended in 2021? What initiative could Italy, this year President of the G20, take to help resolve the situation and qualify its international role?

The Green Climate Fund with which our Agency for Cooperation has an established partnership, puts forward an interesting proposal. In short, it is a formula for converting part of the debt into the local currency of the debtor country, provided that the converted sum is used for climate change mitigation or adaptation projects.

The mechanism would work like this: the creditor (developed country) waives part of the debt, transferring it to the Green Climate Fund, in exchange for a commitment by the debtor (developing country) to use the equivalent amount, in local currency , to finance actions to combat climate change.

The Green Climate Fund will manage, with the control of the creditor country, the project initiatives and will add its own funds to the converted sum, up to double it, thus increasing the impact of the project.

The agreement will be advantageous for the creditor who, by renouncing his credit (often de facto irrecoverable), will be able to fulfill the political commitments to support the ecological transition in the countries of the South, quantified in 100 billion by the Paris Agreement, and maybe recover white certificates to compensate for any excess emissions.

All this would also be very advantageous for the debtor country, which would no longer have to repay its debt in hard currency, draining its currency resources in a moment of delicate restart, but would have to invest national currency in environmental projects.

“Debt-for-Climate” pilot agreements will be launched in at least 2 developing countries by COP 26 (in Glasgow next November) but the Italian G20 could relaunch the proposal in a very relevant context, ensuring support and that political boost which he still misses.

On the other hand, environment and climate change represent one of the three pillars of the G20 Agenda of the Italian Presidency and a proposal in this sector, presented in a coordinated and complete way, discussed in the ministerial departments of the Ministers of the Economy or the Environment and included in the official conclusions could constitute a virtuous initiative of certain political importance for our country


Source: HuffPost Canada – Athena2 – British Columbia Vertical Google Newsstand by www.huffingtonpost.it.

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