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How Addressing the Debt Crisis Can Help Avert the Climate Crises and Stabilize Global Economies


Much of the world is awash in unsustainable public and private debt, made significantly worse by the COVID-19 crisis. Efforts to relieve the debt crisis provide opportunities to advance climate protection, health, and economic goals together, specifically through debt-for-climate swaps, building on the success of debt-for-nature swaps.

Nearly 30 countries have utilized debt-for-nature swaps since the 1980s to provide more than USD $1 billion to protect the environment. Extending debt-for-nature swaps to the broader concept of debt-for-climate swaps would provide funding for climate mitigation and adaptation in developing countries, at a discount to creditor countries. In a debt-for-climate swap, instead of continuing to make external payments on outstanding loans in hard currency, an indebted country makes payments in local currency to finance fast climate mitigation and adaptation project on terms agreed upon between debtors and creditors. Swapping some of the unsustainable public and private debt for climate protection can provide relief for debt-distressed borrowers, create local green jobs, stimulate investment in clean technologies, and drive a more resilient economic recovery. 

Swapping even a small percentage of global debt could direct billions toward climate protection to tackle the climate emergency while creating and maintaining millions of jobs essential for the economic recovery. In addition, creditor governments could use the relief to make good on their so-far unfulfilled promise to provide $100 billion per year in climate finance to countries vulnerable to the effects of climate change.

To learn more, see IGSD Background Note on Debt-for-Climate Swaps, August 2020