Losses and damage due to climate change are largely concentrated in the countries of the Global South. These are also the countries that need finance for climate transition to help them develop, without adding significantly to the stock of greenhouse emissions. Current climate finance is inadequate.
But nations of the Global South face other financial handicaps that hinder their climate ambitions -- a growing debt crisis is one of them. Many low and middle-income countries pay more in annual debt servicing costs than what they would need to spend annually to achieve their NDC goals. Countries in the South also face prohibitively high costs of capital, particularly for green technologies, which hinders the economic attractiveness of clean energy investment in these countries even if they possess rich renewable resources.
Now, when we view the pressure to decarbonise against all these challenges, it looks as if the walls are closing in from all sides for the Global South. This system is broken and needs urgent reform. Climate ambition cannot be unlocked whilst operating in a financial system that is inequitable by design.
Note: An updated version of this paper has been uploaded on June 26, 2023.
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