Climate-change survivors

Climate-led disasters are pushing developing and under-developed countries into the poverty trap. Sudden financial losses caused by natural calamities increase the financial crisis of weak economies and exacerbates their need for financial assistance in the form of loans and funding, so that they can avoid slipping down to alarmingly high levels of poverty.

Pakistan is one of the worst-impacted countries by climate change, facing various catastrophic events like floods, glacier melting, heatwaves, and droughts. It witnessed the most devastating floods of its history in 2022. The destruction and damage caused by last year’s floods led to a socio-economic loss of $30 billion for Pakistan.

The already deteriorating economy of the country faced another blow in the shape of these floods. The aid provided by rich nations was not enough to fully rehabilitate and recover flood victims. These affected people are still waiting for funds and assistance to go back to normalcy. Until now, Pakistan has spent the amount generated from its meagre resources and received in the form of loans from international financial institutions for flood-relief efforts.

Earlier this year, Pakistan witnessed another round of floods in Balochistan and Khyber Pakhtunkhwa. Now alarm bells for intense heatwaves have been raised. Pakistan and other developing countries are stuck in this vicious cycle, and are forced to spend their financial resources to recover from climate change catastrophes caused by the unchecked development process of rich nations.

Every year, a new climate disaster brings these countries back to square one, making it impossible for them to break the poverty trap. Due to inflation, devaluation of currencies, and high-interest rates, their debt continues to multiply, thus pushing them down the spiral of the poverty trap.

The international financial crisis resulting from climate-led disasters needs to be regulated within the norms of international law and the mutual consensus of nations. For the first time, France hosted an international conference for a new global financial pact from June 22 to 23. The prime minister of Pakistan was also invited to the conference.

The conference aimed to redefine and reshape the global financial system to achieve the Sustainable Development Goals (SDGs) keeping in view the new emerging challenges faced by humanity.

There were four major objectives of the conference. Restoring fiscal space to countries facing short-term difficulties, especially the most indebted countries; promoting private-sector development in low-income countries; encouraging investment in green infrastructure for the energy transition in emerging and developing countries; and mobilizing innovative financing for countries vulnerable to climate change.

It is important for nations to discuss new financial agreements and ensure that 50-70 per cent of loans of countries like Pakistan which are facing the brunt of climate change and confronting the financial crunch are waived off. In addition to it, a 20-year extension should be granted to pay back the remaining 30-50 per cent loans if a country faces a major climate-led calamity in a particular year. Under the second objective of the conference, nations should develop a consensus to incentivize the private sector to work on climate-related projects in developing and underdeveloped countries.

Climate-friendly businesses can be promoted through easy policies by granting a special status to facilitate the import and export of their raw materials and products. Under this pact, tax-free zones can be created in the Global South for international companies having expertise in green projects. Rich nations should export raw materials and other products for green projects to climate-affected developing countries on lower rates.

International and national tariffs can be reduced on materials used by climate-friendly industries and businesses in climate-hit poor countries. International and regional organizations should fix 30-50 per cent of their funding to be utilized in developing countries for mitigation and adaptation projects every year. Such projects can also help achieve many other SDGs undermined by climate change.

The funding of NGOs working on climate-related projects in low-income countries can be associated with the implementation of projects at the grassroots level; there should be a third-party audit to verify the same. The third objective aims to strengthen infrastructure in low-income countries for green energy. The funding should be provided for building dams, installation of solar panels, and windmills.

The transport system of low-income countries can also be funded to convert it to clean energy. The agriculture sector and the industrial setup need to be upgraded to use green energy. Solar panels can be used for tube wells in the agricultural sector.

World leaders also need to identify and explore unique ideas for financial support to countries vulnerable to climate change’s negative impacts. One such idea can be to reach an agreement to tax historically polluting countries. The tax collected can be used to provide funding to developing countries – the most vulnerable to climate-change impacts.

Also, rich countries that fail to meet their targets of net-zero should be fined as a penalty on a yearly basis which should be increased steadily if they continuously fail to achieve their targets.

Initiatives like the new global financial pact are important to serve financial and climate justice and protect vulnerable nations from the devastating impacts of climate change. Such an idea can help low-income countries to break the vicious cycle of poverty trap.

The writer is a graduate of University of Oxford in Public Policy. She tweets @zilehumma_1