Mia Mottley’s speeches for climate justice dominated media headlines at Cop26 in Scotland last year, where she called on world leaders to seize the moment and deliver on climate action . On Monday, she tried again. “We have the collective ability to transform ourselves,” she said. urged those gathered at COP27 in Egypt.
One of the main objectives in the sights of Mottley, Prime Minister of Barbados, is a new financial solution to the climate crisis, which is quickly becoming one of the key issues under negotiation at the conference.
One of the people who has worked behind the scenes with Mottley on this is Professor Avinash Persaud, who has been friends with her since the 1980s when they both studied at the London School of Economics.
Persaud thinks the global financial system is simply not set up to provide the scale needed to avert climate catastrophe. He says it puts the burden of climate impacts on the world’s poorest countries, those who are “most urgent to act”. [and] least able to act.
Barbados, one of Caribbean nations on the front lines of the climate crisis, is a perfect example, and the country’s recent experience with Covid-19 also shows how, without a paradigm shift in the architecture of global finance, natural disasters translate by increasing the debt burden of those who can least afford it.
“Covid has reduced our debt from 120% of GDP to 150%, [from] a level that was heading towards sustainability at a level that was not,” says Persaud.
The Caribbean is among the most indebted regions in the world, with debt levels averaging 90.1% of GDP since the start of the pandemic. Persaud points out that across the region, climate shocks and debt continue to feed each other in an unfortunate downward spiral.
“We found that 50% of the increase in our [regional] the debt could be attributed to a natural disaster that we had to pay for ourselves,” he says.
Persaud was one of the architects of international banking regulations post 2008 Basel 3, created following the bankruptcy of Lehman Brothers. It turned out to be a fiscal stability strategy that effectively overturned decades of neoliberal financial orthodoxy.
“It was a decade of crisis,” says Persaud. He says that the solutions promoted by the IMF and the world Bank, such as currency devaluation and rapid debt reduction, meant that emerging markets had effectively “doubled” their vulnerability, increasing the overall level of instability in the system. “People like me said we needed a different financial system,” he says, “but nobody listened.”
The turning point came with the global financial crisis of 2008 where, according to Persaud, “because it involved America and Europe, more people became willing to accept that booms and crashes were amplified by finance and that we needed a more shock-absorbing financial system”. .
After the rapid succession of two Category 5 hurricanes, Irma and Maria, which hit the Caribbean two weeks apart in 2017, he saw the threat posed by the growing vulnerability of countries on the front lines of the climate crisis and already straddling the debt. due to decades of structural adjustment.
In Dominica, for example, the damage caused by Hurricane Maria alone cost the country more than double its annual GDP. “The climate is the [economic] today’s crisis”, says Persaud.
Throughout 2022, Persaud worked with Mottley to craft a blueprint for reformed architecture that would speak as poignantly to leaders in global finance as it does to communities living on the frontlines of climate collapse.
The evolving proposals, called the Bridgetown Agenda, have seen the pair make inroads into organizations as diverse as the IMF and the Climate Vulnerable Forum, while winning support from key figures including climate champions from the UN Mahmoud Mohieldin and Nigel Topping, and the great economists Nicholas Stern and Vera Songwe.
Topping says, “We need more of a Marshall Plan mentality because it’s about growing the global economy and increasing global economic stability and global prosperity. If we don’t solve this, we will have very bad economic and security results. »
At the heart of Barbados’ proposals is the creation of a climate mitigation trust that would incentivize the IMF to release $650 billion through a mechanism called special drawing rights, which allows members to borrow to each other at very low interest rates.
Persaud’s calculation is that if the IMF disburses an initial amount of $650 billion, it will stimulate private investment by an additional $2 billion, which would come considerably closer to the sums that experts say need to be raised to put on the right track to stop global warming.
Other features of the Barbados initiative include access for climate-vulnerable countries to long-term, low-interest loans for adaptation, natural disaster clauses in all bank loans and subsidies for losses and damages which would be financed by a 2% tax on fossil resources. fuel exports, shifting the burden from the world’s poorest people directly onto polluters.
As issues of climate finance and implementation take center stage Cop27Persaud hopes that this plan will be recognized as “achievable, practical, as well as meaningful and morally right”.
“In Barbados,” he says, “it’s part of our makeup that we don’t beg. So we don’t come into the world and beg, we come into the world and say, this will make the world a better place for everyone.