Covid-19, Climate Debt and India’s Chance to a Better Future

Climate change is causing severe inequality across the globe, giving unprecedented momentum to the calls for penalising the polluters for their actions. Climate debt is reckoned as an effective tool to take the emitters to the task. But is that a feasible idea?

As Covid-19 continues to wreak havoc across India, as if it wasn’t enough, the eastern and western parts of the country were ravaged by two cyclones — Cyclone Yaas and Cyclone Tauktae, respectively. Over the past two decades, the Indian peninsula has recorded more than 300 natural calamities, lost around 80,000 lives, and affected the lives of more than 100 crore Indians. 

Topping the list are the US and China, the two worst-affected countries by natural calamities, registering 467 and 577 such incidents, respectively. According to a UN report, in the last 20 years, India has experienced an average of 17 floods every year while China experienced an average of 20 floods per year.

No prizes for guessing the root cause of all the above — Climate Change.

The disproportionate impact of Covid-19 on the economy and citizens is causing growing inequality across the globe. What also has to be seen in this context is the role of inequality in driving carbon emissions.

Oxfam’s Carbon Inequality Era report points out that the impact of the world’s richest people is unmistakable — nearly half the total growth in overall emissions between 1990-2015 was caused by the richest 10 per cent, with the richest 5 per cent alone contributing over a third (37 per cent).

The remaining half was due almost entirely to the contribution of those who belonged to the middle 40 per cent of the global income distribution. The impact of the poorest half of the world’s population was practically negligible. Moreover, while emissions from China and India have been witnessing an upward trend for the past few years, the amount that India and China emit per person is vastly smaller than the US or the UK.

Growing emissions

In fact, among its many conclusions, the Oxfam report also stated that despite increasing per capita incomes and related consumption emissions by the ‘global middle class’ in the last 20-30 years, as millions of people have escaped poverty in countries such as China and India, the consumption emissions associated with the world’s richest households have continued to grow, leaving the distribution of emissions fundamentally unchanged. 

So while emissions across developed countries increase, the developing countries are left with weak or no infrastructure to deal with the consequences of the ‘climate debt’ owed by developed countries and largely by the US, which is the biggest contributor to carbon dioxide (CO2) emissions.  

As part of the climate debt debate, several individuals and organisations began promoting debt-for-climate swaps, considering the current triple crisis of Covid-19, economic shock, and climate change. 

Debt for Climate (DFC) swaps are a type of debt swap in which the debtor nation makes payments to the country it owes a debt to in a local currency to finance climate projects domestically on agreed-upon terms, instead of continuing to make external debt payments in a foreign currency. 

However, to be eligible for DFC swaps, debtor countries have to be heavily indebted, make use of other more favourable debt relief instruments and demonstrate a good governance track record. According to research, highly indebted countries are often also vulnerable to the effects of climate change, resulting in higher borrowing costs.

And as developing countries continue to face the challenges presented by the pandemic and public budgets become further constrained, there is a risk that a number of them will turn to fossil fuel extraction as a source of revenue, worsening the emission status and the borrowing cost. Thus, debt-for-climate swaps are recommended as an attractive means of promoting sustainable development benefits in broader debt relief efforts. The US owes India $216 billion in loans. It owed the country $23.4 trillion in 2020, amounting to more than Rs 52 lakh ($72,309) in debt per person. 

Adaptation costs 

At the 2015 Paris Conference, the developed countries had pledged to mobilise $100 billion a year in climate finance by 2020 and agreed to continue mobilising finance at the level of $100 billion a year until 2025 to compensate for the climate debt they owe the world. But with time, these pledges are only expected to be increased, due to a continued increase in emissions from these countries. 

According to the UNEP Adaptation Gap report 2021, the costs of planning, preparing for, facilitating and implementing adaptation measures against climate change, also called Adaptation Costs, in developing countries are estimated at $70 billion. The report underlined that this figure is expected to reach $140-300 billion in 2030 and $280-500 billion in 2050. 

According to the Climate, COVID-19, and the Developing Country Debt Crisis report, although a large short-list of countries could be considered for debt-for-climate swaps based on their macroeconomic situation, fossil fuel indicators and some indication of climate ambition, a smaller number perform well with regard to governance. Interestingly, India failed to be considered for even one of those parameters due to its climbing per capita CO2 emissions. 

The polluting rich 

Further looking into India’s growing emissions, a recent study discovered that the country’s top 20 per cent of high-expenditure households are responsible for seven times the emissions traceable to the poor who spend less than Rs 140 a day! 

Moreover, Oxfam research shows if India’s economic policies continue aiding its upper-middle-class families, making the nation’s middle-class families increase their expenditure, India will witness a 10 per cent rise in its carbon emissions. While if it focuses on eradicating poverty, seeking to help the bottom 20 per cent of the Indian population to the low-expenditure category, India will see only a 1.97 per cent rise in carbon emissions. If all of India were to begin consuming like its rich class, it will increase its overall CO2 emissions by 50 per cent

What’s evident by now is that if India begins to introduce diligent steps through more efficient policies such as promoting public transport and introducing carbon pricing of goods and services to manage consumption, and coherent governance, not only will it be able to enhance its economic development by uplifting people out of poverty, it will also be able to foster better living standards for everyone. 

Also See: What Links Climate Change and Covid-19

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