SHARM EL-SHEIKH, Egypt – Small island states and other African and Asian developing nations stepped up their appeals Tuesday for a reboot of the global financial system to make climate finance more affordable to their debt-ridden nations, now battling a rising wave of climate emergencies along with demands to “go green”.

Reducing interest rates on climate loans; shifting more climate finance from loans to grants; imposing a carbon tax on fossil fuel producers; and a fossil fuels ¨non-proliferation treaty¨  were among the proposals tabled by countries from South Africa to Bermuda and Pakistan to Mali, in the second day of high-level statements at the UN Climate Conference (COP27). 

“The oil and gas industry continues to earn almost $3 billion daily in profits,” said Gaston Browne, Antigua’s prime minister, speaking on behalf of the Alliance of Small Island States, whose very existence is threatened by sea level rise and extreme weather. 

“It is about time that these companies are made to pay a global carbon tax on their profits as a source of funding for loss and damage,” he said. “While they are profiting, the planet is burning.”

Loss and damage pledges inadequate

Meanwhile, a handful of rich countries announced about $60 million in initial pledges of aid for climate ¨loss and damage”.

Civil society groups immediately decried the pledges as woefully inadequate against the more than $1 trillion a year of actual costs for low and middle-income countries, ranging from flood-ravaged Pakistan to the drought-ridden Horn of Africa, and small island states devastated by increasingly powerful cyclones and hurricanes. 

However, just getting loss and damage on the climate agenda is “a significant achievement”, observed Mia Mottley, Barbados´ prime minister.

¨It recognizes that those countries such as ours, who have not contributed greatly to the emissions of greenhouse gasses should not be crowded out of our fiscal space in order to be able to finance the reconstruction after a climatic event,¨ she said. 

But she warned that ¨we will not achieve the conclusion of it¨ at the present COP.

The even bigger challenge involves finding new ways to finance climate actions that reduce, rather than add to, the already heavy debt load – including interest rates on that debt – of low- and middle-income nations, Mottley noted.

 ¨The reality is that unless our financial institutions can speak to the current realities, they will not be able to help us transition in this new way,¨ said the prime minister. 

She added that her ¨Bridgetown agenda¨ for financial reform, including an agreement with the IMF and others on a new ¨Blue-Green¨ finance facility to preserve the ecosystem of the Caribbean region with a 10-year interest moratorium, could provide one such model. 

 Remake global financial institutions or face millions of climate refugees

It´s in the interest of rich countries to rethink finance arrangements on all fronts – mitigation, adaptation and loss-and-damage, added Phillip Davis, prime minister of the Bahamas. 

¨What is it worth for you, the world, to keep millions of climate refugees from turning into tens of millions and then hundreds of millions, putting pressure on borders and security and political systems around the world,¨ he asked. 

¨ I´m not telling you to overhaul the World Bank for this new climate era because it´s the right thing to do, I´m telling you to get smart and act quickly,¨ said Davis who also echoed a recent World Health Organization appeal for countries to agree on a  ¨fossil fuels non-proliferation treaty to steer our models towards renewables. 

¨Let´s get real about what is coming.  Let´s get real about what we need to do next,¨ Davis added. ¨We have no other choice… The alternative compels us to present ourselves at your borders as refugees.  The alternative consigns us to a watery grave.¨

Pakistan reeling from multiple needs 

¨Estimated damage and loss has exceeded $30 billion and this despite our very low carbon footprint. We became a victim of something with which we had nothing to do,¨ said Pakistan´s Prime Minister, Muhammed Shehbaz Sharif, speaking about the August flooding.

The flooding left nearly one-third of the country under water and some 33 million people displaced. 

¨Winter is setting in and we need to provide shelter, homes, food packages and medical treatment for people … for which we are spending billions of rupees from our meager resources,” he continued. ¨And at the same time we have to spend billions to protect people against other [future] floods and emergencies.

“How on earth can we do this on our own?¨ he asked. ¨Loss and damage needs to be part of the core agenda of COP27 to meet the pressing humanitarian needs of those that are trapped in a crisis of public financing fueled by debt, and yet have to fund climate disasters on our own.¨

South Africa – only 2.7% of aid from wealthy nations is in grants   

Meanwhile, South Africa´s President Cyril Ramaphosa provided a tangible example of the problematics of green finance today – with reference to a new pact with Europe and the United States to support the country´s $98 billion plan for a  ¨just energy transition.¨ 

The deal, initiated at COP26 in Glasgow but only finalized on Monday at COP27, includes commitments by France, Germany, the UK, the US and the European Union, to provide some $8.5 billion in finance for the first phases of the South African plan.  The aim is to move the country away from its heavy dependence on coal and into green energy sources, including green hydrogen, as well as electric vehicles. 

Part of the financial package also will go to ensuring that coal worker and their communities – the people most affected by a transition – are not left behind. 

But of that support, only 2.7% is in the form of grants, with the rest to be made in ¨concessional loans and investments and risk sharing instruments,” according to a press release. 

And that is a big problem for debt-ridden nations like South Africa, complained Ramaphosa.

“Because South Africa already carries a fairly sizable loan burden, which it has to service from its fiscus, we require more grant funding,” Ramaphosa said, speaking in a separate press briefing. 

However, Ramaphosa expressed hopes that negotiations underway now could help shift that balance, creating a ¨real partnership,” as well as a climate finance model that other countries could emulate.  

“Industrialized countries … need to live up to the commitments that they have made, knowing full well that they – through development of their own economies – contributed a great deal more to the [climate] damage that many countries on our continent,” said the South African president.

Europe: Ambitious targets at home and new investments in Africa

The IPG investment in a green hydrogen facility in South Africa was one of several such announcements made over the past two days in this emerging technology. The European Union and Norway, meanwhile, announced similar partnerships with Namibia and Egypt. . 

¨The European Union’s additional renewable capacity is set to more than double this year, up to 50 gigawatts. And if we accelerate and if we scale up – and that is our plan – we can, in the next year, meet a new all-time record of over 100 gigawatts of additional renewable capacity,¨ said EU President Ursula Von der Leyen at the opening of the day`s plenary session, The EU leader’s comments also acknowledged, for the first time, need to talk about loss and damage. 

¨Because we know that every kilowatt-hour of electricity that we generate from renewable sources – like solar and wind, and green hydrogen – is not only good for our climate, but also good for our independence and our security of supply.

¨Here, the Global South has the resources in abundance. So let us team up. That is why the European Union is signing new hydrogen partnerships with Egypt, with Namibia and with Kazakhstan. That is why we are supporting partners such as Vietnam and South Africa to decarbonise their economies,¨ she  said. “Let us not take the highway to hell, let us earn the clean ticket to heaven.¨

And Norway´s Prime Minister Jonas Gahr Støre said that national climate commitments, updated since COP26 meant the Nordic country would increase carbon taxes to €200 per ton as well as reducing its own emissions by 55% by 2030, in line with the EU goal. 

¨We will fulfill our pledge to double climate finance within the next four years … and triple adaptation finance, with a particular emphasis on Africa,” declared Støre. He also welcomed Brazilian President-elect Lula da Silva´s ¨renewed commitment to the Amazon.¨ 

¨We also need to strengthen efforts to prevent loss and damage,¨ Støre added, almost as an aside.