Why wealthy countries owe the Global South US$5trillion a year in climate finance

From rising sea levels engulfing coastal communities to extreme weather events such as cyclones and droughts causing widespread destruction, the frequency and intensity of climate catastrophes are skyrocketing, causing devastating economic and social impacts.

But climate change is disproportionately affecting countries in the Global South, those that are least responsible for causing the crisis. Every year Africa, Asia, and Latin America & the Caribbean carry the cost of escalating climate change in destroyed infrastructure, crop failure, lands disappearing beneath the sea, ruined livelihoods, and lost lives.  

While countries on the frontlines suffer the most severe impacts, the wealthiest nations in the Global North that have industrialised for centuries, recklessly spewing carbon dioxide into the atmosphere, are still relatively unaffected when compared to the devastation we see on a daily basis in the Global South. Their economic growth, built on fossil fuels, has enriched them while condemning the Global South to climate-induced poverty, displacement, deepening debt, and hunger. 

The need for urgent global action to address the planetary crisis is clear. Action in every country is needed, whether to transition from fossil fuels to renewable energy, scale up regenerative approaches to agriculture and sustainable transport, protect and restore biodiversity, or to recover from and prepare for climate impacts. 

Wealthy countries therefore not only have the obligation to cut their own outsized emissions as rapidly as possible, but also pay for the climate chaos they have caused in the Global South. The costs of climate destruction continue to push Global South countries deeper into poverty and debt. By any fair logic, the costs of climate action should not be the burden of those most harmed and least responsible.

If we are to have a chance of avoiding runaway climate change, therefore, wealthy countries need to step up and pay what is owed to the countries on the frontlines of the climate crisis they are largely responsible for. 

Studies have calculated that even if the world takes urgent and sufficient action to limit warming to an average 1.5°C, fair reparations for the costs to the Global South caused by past decades of excessive pollution in the Global North, combined with projected escalating impacts, would come to US$192 trillion by 2050. Breaking that down and taking an average, the annual climate debt that wealthy countries need to pay to developing countries comes in at US$5trillion. 

To be clear: this is a debt that is owed, and cannot be a loan from the Global North to the Global South. For the best results, the yearly US$5trillion should be provided in grants, rather than loans which deepen countries’ vulnerability and create perverse incentives to expand fossil fuels. While additional private financing in the form of loans, insurance or investments should not be counted towards fulfilling the Global North’s moral debt to the Global South. 

A new global goal on climate finance is set to be the hot potato at the UN COP29 climate negotiations in Baku, Azerbaijan in November this year. With widespread recognition that developed countries’ broken promises on climate action and climate finance are pushing the planet to the brink, the new climate finance goal, which gets agreed to by governments, must be considered in the light of this climate debt, and viewed as an opportunity to reset the planet’s future through a new commitment for climate ambition. We need trillions not billions.

Under the #PayUp campaign banner, an array of civil society groups from trade unions, to women and gender organisations, youth and climate networks, are demanding the Global North to clear the climate debt owed to the Global South.

Wealthy countries may claim that jointly providing US$5 trillion a year in climate finance is an unreasonable expectation. But in 2020 during the COVID19 pandemic, the same countries mobilised US$16 trillion in fiscal stimuli to support their own economies, while the G7 spend over US$1 trillion each year funding wars and conflicts. 

More progressive tax measures that target the wealthiest individuals and corporations in wealthy countries could raise up to US$2 trillion for climate finance. The resources clearly exist - they are just being allocated based on current political will that fails to prioritise climate action and hardworking people. If trillions can be found for pandemic relief and military expenditures, the same financial commitment must be made to address the existential threat of climate change. 

The climate crisis is a shared challenge, but its impacts are not shared equally. The US$5 trillion climate debt is a down payment on a just future. It's time for wealthy countries to pay up.