Amid a challenging geopolitical backdrop, COP29 in Baku and the G20 Summit in Rio de Janeiro made only modest progress on debt and climate finance. However, the discussions underscored the importance of addressing debt to tackle the climate crisis, paving the way for future reforms. Here’s a look at the key takeaways.
by Arabella Wintermayr (Editor) & Sarah Ribbert (Project Coordinator)
Dear Reader,
Debt distress and climate action took center stage at COP29 in Baku (November 11-22) and the G20 Summit in Rio de Janeiro (November 18-19), yet meaningful progress remained elusive. While global leaders acknowledged the critical intersection of fiscal constraints and climate resilience, their actions lagged far behind public demands for systemic reform. The disconnect between rhetoric and results underscores a persistent failure to address these twin crises holistically.
Ahead of COP29, Nigerian President Bola Tinubu captured this contradiction in a Politico op-ed, warning that offering climate finance without addressing debt is like ‘pedaling harder on a bicycle as its tires go flat.’ His metaphor aptly highlights the untenable position of debt-burdened nations in the Global South, which are expected to lead on climate action but lack the fiscal space to invest in resilience.
Yemi Osinbajo, Nigeria’s former vice president, echoed this analysis in an op-ed for the Financial Times calling it a “silent debt crisis”. He argues that developing nations cannot fund adaptation or mitigation efforts without meaningful debt relief. “Over half of African countries now spend more on interest payments than on healthcare, and lack the fiscal space to invest in sustainable development.“ Osinbajo emphasized that “urgent action is needed,” particularly as Africa faces the disproportionate brunt of climate change, with 17 of the 20 countries most vulnerable to its impacts located on the continent.
The New Collective Quantified Goal: A Half-Measure
Despite these powerful calls, the outcomes of COP29 offered little substantive progress and debt loomed as the unacknowledged elephant in the room, with no meaningful action taken.
A key outcome of COP29 is the adoption of the New Collective Quantified Goal (NCQG). By 2035, industrialized countries are to raise at least USD 300 billion annually from private and public funds for developing countries. While this represents a step up from previous commitments, it falls far short of the $1 trillion economists estimate is needed annually.
Many countries had raised debt distress and the high cost of capital as major concerns. While the NCQG decision text echoes these concerns, there are no concrete next steps on these issues. Countries have also left undefined what fraction of the $300 billion will be concessional finance, which could deepen debt burdens for nations already grappling with fiscal constraints. This is particularly relevant for African nations, whose fiscal space remains too constrained to access sufficient funding, rendering the agreed $300 billion target nearly irrelevant. Consequently, it will be important to make sure that countries are able to access finance under the terms that are most favorable.
On a more positive note, the NCQG includes a broader roadmap—the “Baku to Belém Roadmap”—to mobilize $1.3 trillion annually by 2035 through a mix of public, private, and multilateral contributions. This roadmap is a silver lining, explicitly calling for increasing fiscal space and providing an opportunity to bring debt discussions into the central arena of climate finance ahead of the 2025 G20 Summit in Belém.
Little progress was made on expanding the donor base beyond industrialized nations. The text merely “encourages” developing countries to make contributions to the new finance goal “on a voluntary basis”. Doubts also linger about the sufficiency of the new overall target. If inflation until 2035 and the expanded donor base are factored in, the new target may not significantly exceed the previous $100 billion per year goal. The NCQG also omits provisions for climate damage financing, a glaring missed opportunity for addressing systemic inequities.
G20 Summit in Rio de Janeiro: Incremental Progress Amid Missed Opportunities
Still under the impression of COP29, the G20 leaders met in Rio de Janeiro. Ahead of the meeting, Simon Stiell, UNFCCC Executive Secretary, delivered a powerful message to G20 leaders, urging them to scale up climate finance, address the debt crisis, and enhance climate mitigation ambitions. He emphasized debt relief as a cornerstone for enabling bold climate actions by vulnerable nations.
However, the G20 Rio de Janeiro Leaders’ Declaration introduced no significant new provisions on debt relief. Instead, it acknowledged the importance of addressing debt vulnerabilities in low- and middle-income countries and recognized progress under the G20 Common Framework. This framework, however, remains applicable only to low-income nations, excluding many countries in urgent need of debt restructuring and does not sufficiently incentivize the participation of private creditors.
On a more positive note, US President Joe Biden called on G20 nations to expedite debt relief efforts and streamline restructuring processes. This reflects a growing recognition that swift and comprehensive debt relief is essential for enabling countries to address their economic and climate crises.
Moreover, the Brazilian Presidency successfully placed wealth taxation on the G20 agenda, securing a vague mention in the communiqué. This marks a small but meaningful step toward fostering a more equitable global financial system. Looking ahead, the South African Presidency has an opportunity to build on this momentum and push for concrete debt relief commitments at the 2025 G20 Summit.
A Vicious Cycle: Debt, Climate, and Inaction
The failure to address debt directly at COP29 and the G20 summit risks trapping developing nations in a vicious cycle, as a new video by the Debt Relief for a Green and Inclusive Recovery (DRGR) Project illustrates. With most climate finance likely to come in the form of loans, fiscal pressures will only escalate, undermining climate investments.
Calls for debt relief as a cornerstone of climate action are more pressing than ever. A notable contribution to this discourse is a recently published op-ed by Mark Sobel, the U.S. Chair of the Official Monetary and Financial Institutions Forum (OMFIF) and a seasoned U.S. Treasury official with two decades of experience in international financial diplomacy. Sobel’s collaboration with Kevin Gallagher in this piece is particularly striking, as they advocate for debt relief and challenge the IMF’s stance that indebted nations primarily need additional liquidity to overcome financial hurdles. Read more here.
As the world looks toward upcoming climate finance milestones, integrating debt relief into broader strategies will be critical. By addressing these twin crises holistically, global leaders can create the conditions for a just, sustainable transition. Until then, the gap between public demands and official commitments persists, underscoring the urgent need for systemic reform.
Thanks for reading, and until next time.
Drop us a line with your thoughts: ribbert@boell.de