Climate debt campaign

Frequently asked questions about climate debt

For more in-depth answers check out our four page climate debt briefing or our full report, The Climate Debt Crisis

• Why does the UK owe a climate debt?
• Why is the climate debt campaign important?
• How can the climate debt be paid?
• How is the UK government using climate finance to reinforce existing inequalities?
• What is WDM calling for?
• How much does the UK owe?
• What's so bad about the World Bank?
• Wouldn’t it be easier to reform the World Bank rather than creating new institutions?
• What is the debt irony?
• In a time of cuts, where can this money come from?
• What about carbon trading?

Why does the UK owe a climate debt?

Rich countries like the UK have become wealthy by industrialising in a way that has pushed the world to the brink of climate catastrophe, but it is the world’s poorest people who are paying the price. By following such a high carbon development path, rich countries have not only pushed us to the brink of climate chaos, they have also used more than their fair share of the earth’s ability to safely absorb carbon, leaving the rest of the world unable to develop in the same way.

The UK is one of the world’s top emitters on a per person basis, both historically and currently. Our historical responsibility for climate change means we must now pay a massive climate debt to the world’s poorest people as compensation, so they can cope with the impacts of climate change and move towards climate-friendly ways to develop.

Why is the climate debt campaign important?

• “About 75 to 80 per cent of the damage caused by climate change will be suffered by developing countries.” – Justin Lin, chief economist at the World Bank
• Climate change is already killing 300,000 per year

Climate change is already disproportionately impacting the global south, threatening millions of people with famine, disease, drought, flooding and other weather related disasters. The major injustice is that the people most impacted by climate change are not responsible for causing it.

Despite making a lot of noise on the world stage about giving large figures for climate finance at the Copenhagen UN talks in December 2009, the reality behind what the UK is currently doing is quite different. Not only is the UK failing to recognise their debt and pay adequate compensation, but they are actually using climate funds to increase economic injustice and inequality. At the same time, the UK is continuing to emit more then its fair share, thereby continually increasing its climate debt.

WDM is campaigning with people around the world to get the UK to live up to its commitments.

How can the climate debt be paid?

Firstly, the UK must stop increasing its climate debt. Every day that the UK continues pumping fossil fuels into the atmosphere, it is increasing its climate debt. This means the UK must take the lead in reducing emissions by stopping new coal, cutting aviation and switching to a way of living that moves beyond the idea of continued economic growth at the expense of all else.

Secondly, we also need to provide compensation to the people who are suffering the worst impacts of climate change, to help them adapt by building strong infrastructure to cope with a changing climate.

Finally, the rich world also bares a responsibility to ensure that countries in the global south are able to access their right to develop in a climate friendly way. Countries from the global south, who do not bare the responsibility for climate change, can not be expected to sacrifice their right to development so that the rich world can continue living in an unsustainable way. While the world’s richest people continue to massively over consume the rest of the world’s resources, simply asserting our common interests for an environmental solution is simply not justice.
What is absolutely critical is that this happens in a way that does not reinforce existing inequalities, as the UK is currently trying to do.

How is the UK government using climate finance to reinforce existing inequalities?

Though the UK government made statements about large numbers for climate finance during the Copenhagen summit in December 2009, the reality is currently quite different. What the UK government is actually doing is taking money from its aid budget, intended to be used for vital services such as health and education, and channelling it as loans through the World Bank. These loans will only serve to lock countries into further poverty. Trying to pay compensation with climate loans is like a loan shark burning down your house and then offering one of his loans so you can rebuild it.

The UK has been instrumental in furthering the undemocratic World Bank’s ambition to be the primary climate change fund institution. This undemocratic and unjust institution has been completely discredited in the global south, and the use of it for channelling climate funds is opposed by developing countries.

What is WDM calling for?

WDM is calling for climate funding to go through democratic and accountable mechanisms like the UN Adaptation fund, rather than the World Bank. The World Bank can use money to force economic and political conditions on countries, and has a track record of failing to consult the people its projects affect.

We are calling for this money to come from new sources, such as a tax on shipping and aviation, ensuring that corporations do not avoid payment of tax and a small financial transactions tax (Robin Hood Tax). All these would not only provide new money, but they would also be transformational in themselves, meaning that they would help us move to a lower carbon future. Finally, we must ensure that none of this money is given in the form of loans, but is instead given as grants. 

How much does the UK owe?

WDM’s report The climate debt crisis: Why paying our dues is essential for tackling climate change  estimates that the UK needs to provide around £17 billion a year over the coming years to enable developing countries to cope with the impacts of climate change that we caused, and move towards climate-friendly ways to develop. This is around 1 per cent of the UK’s national income. The less we act now to cut our emissions, the more we will owe in the future.

What’s so bad about the World Bank?

The World Bank has a long history of being an instrument of implanting the policies which benefit rich countries and increasing climate change. For example, World Bank lending in the 1970’s and 1980’s resulted in massive deforestation in Brazil and Indonesia, leading to an increase in carbon emissions. In the 1980’s and 1990’s irresponsible World Bank lending led to poor countries getting trapped into debt. The World Bank then used this debt to force poor countries to privatise infrastructure, liberalise trade policies and cut public spending on education and health care. These policies pushed millions more people into poverty, whilst creating business opportunities for western corporations.

For example, as recently as April 2010 the World Bank agreed a £2 billion loan to South Africa for the completion of massive coal-fired power station, adding billions to South Africa’s already high level of debt. The loan will benefit some of the biggest corporations in the world which receive subsidised electricity whilst ordinary South Africans pay around four times as much per unit. As the US treasury states the loan showed “incompatibility with the World Bank's commitment to be a leader in climate change mitigation and adaptation”.

This sidelining of civil society, combined with allegations of corruption (it is claimed that the ANC will receive millions in kick backs) and a willingness to saddle South Africa with further unfair debt, shows that the World Bank remains ill-equipped for dealing with development issues in the global south. Its track record of imposing policy conditions and programs on developing countries, and its undemocratic governance structures seriously discredit the institution.

Wouldn’t it be easier to reform the World Bank rather than creating new institutions?

WDM, along with many other groups around the world, have campaigned for many years for the radical reform of the World Bank. However, in 2006 we released our Out of Time Report which argued that World Bank needed to be replaced instead, because efforts to reform it had been unsuccessful. Ultimately, the World Bank was set up to ensure that rich countries would always be in control of both the money it dispersed and the policies it advocated.

This is so fundamental to the way the World Bank is organised it is almost impossible to reform it to the extent that is needed. For instance, decisions are not made through democratic votes - instead, the numbers of votes per country are based on a complex formula of economic factors which give the impression of a scientific method - to conceal the political aim of ensuring that the United States (US) has a veto and that the other three victors of the Second World War have most of the other votes. The President of the World Bank is also always a US citizen.

The World Bank has proven incredibly resistant to reform and continues to be today as it looks to add distributing climate finance to its bow. We need fund management which is democratic, accountable and transparent. The UN Adaptation Fund is one example which already exists.

What is the debt irony?

The wealth created from burning fossil fuels has enabled the creation of an economic system where poor countries are trapped by unjust and unsustainable financial debt. Despite progress in recent years, on average developing countries still pay back £5 in debt repayments for every £1 they receive in aid.

For example, take the case of Bolivia. Bolivia was given debt cancellation through the Heavily Indebted Poor Countries (HIPC) initiative, resulting in £3.2 billion of Bolivia’s debt being cancelled between 2001 and 2005. As a result, Bolivia’s debt servicing has fallen from 4 per cent of GDP to 1.5 per cent. However, Bolivia still owes £1.8 billion of medium and long-term debt.

Rich countries have used this illegitimate financial debt to exercise control over developing countries. The World Bank and IMF have often acted as the vehicle for this control with its structural adjustment programmes. For example, in 2000 the World Bank forced Bolivia to privatise its water provision to US behemoth Bechtel – steep increases in price left many people without access to water. Today climate change is forcing Bolivia to once more take on loans from the World Bank creating new debt which could trap the world’s poor in poverty.

In a time of cuts, where can this money come from?

The UK alone needs to pay £17 billion a year to start repaying our debt. To raise such sums of money we need innovative new ways of raising funds. There are a number of ways that the large sums which are required could be raised such as:

International taxes on transport or carbon

• International aviation and shipping currently pay no tax on their fuel. An air passenger levy is estimated to be able to generate £5-13 billion per year in the first five years, and much more in the longer term. A maritime levy might generate between £1 and £16 billion per year.
• In addition, a general carbon tax could raise even more at an estimated £26-£32 billion per year.

Financial transaction tax (Robin Hood tax)

• This could raise £64-256 billion per year.

Stopping corporate tax evasion

• This could raise billions more.

Innovative financing sources such as the ones above would also have other benefits, helping our transition to a more just world. For example, air passenger and maritime levies or carbon tax would reduce unnecessary flights and material consumerism by making it more expensive for airlines to continue inefficient flights and make corporations pay the true cost of producing their goods, so these proposals would be transformational in themselves.

A financial transactions tax (Robin Hood tax) if set at a high enough level would help limit the currency and commodity speculation which forces millions into poverty. This tax could transform the global economy by making it more expensive for bankers to gamble on the markets. Economic policy would be returned to governments as speculators would no longer be able to freely blackmail governments with the threat of currency devaluation or be able to needlessly push up the price of food in speculative bubbles, creating hunger for the world’s poor.

What about carbon trading?

The concept of carbon trading means that rather than the UK cutting its own emissions, it pays other countries to cut their emissions instead. However, the UK still counts these cuts towards its own targets. To pay back our climate debt we need real emission cuts in UK as well as providing money to the global south.

Carbon trading, an unjust market mechanism that essentially amounts to privatising the air, will not pay our climate debt as we should be both cutting our emissions and providing funds to the south. In fact carbon trading is a ‘get out of jail free’ card for northern countries, allowing them to carry on as normal, whilst appearing to live within their carbon limits without reducing their domestic emissions. All too often projects which generate offsets do not actually cut emissions as the projects would have happened regardless of carbon trading.