The finance ministers of the G7 group are meeting this week to discuss, among other global issues, climate finance and how to make more money available to the poorer nations of the world that transition advocates argue suffer most of the ill effects of industrialization.
It turns out, however, that what most like to call climate finance is, in fact, not so much help for the world's poorer nations. Instead, it is a tool to enrich G7 entities—and saddle the poor nations with debt.
Reuters made the revelation in a detailed expose in which it said that Germany, Japan, France, and the United States were among wealthy countries that offered developing nations loans and transition deals that ultimately benefited companies and organizations in those same wealthy countries while adding to the debt load of the developing nations.
After reviewing UN data and speaking to a variety of analysts, climate activists, and government officials who took part in climate finance negotiations, Reuters reported that G7 members had, as a matter of course, offered developing nations loans at market rates and instead of grants
Data provided by the Big Local News—the Stanford data provision program for journalists—showed that the four G7 countries listed above struck loan deals related to the energy transition worth at least $18 billion with developing nations. Of these, Japan offered the most, at $10.2 billion, followed by $3.6 billion in loans offered by France, $1.9 billion offered by Germany, and $1.5 billion provided by the United States.
Reuters points out in its expose that lending at market rates is not standard practice when, allegedly, trying to help a poor nation tackle the alleged effects of catastrophic climate change. Yet market rates are exactly what Japan, France, Germany, the U.S. and other G7 members asked of their borrowers.
Not only this, but the investigation that Reuters conducted showed that lenders often attached conditions to their loans, namely that the recipients of those loans hire certain companies to do the work that the money was supposed to enable. Essentially, this meant not only did the lenders benefit from the repayment of the loans—plus market-rate interest—but they also gave a leg up to their own companies instead of letting the borrower decide on the best deal.
Reuters quoted one activist as calling this "deeply reprehensible" and saying that "Climate finance provision should not be a business opportunity,". Liane Schalatek, from German environmentalist NGO the Heinrich-Boll Foundation, also said that instead of bringing in profits, climate finance should "serve the needs and priorities of recipient developing countries."
Yet this statement has a problem—because many climate change activists and transition champions in government and the NOG sector are presenting the energy transition precisely as a profit opportunity. Investors are being convinced that investing in solar development companies or green hydrogen research would not only help the planet but make them money, too. And governments in developing countries are being told that the transition will protect their economies from devastating future losses caused by unmitigated climate change—hypothetically.
So, it appears that those G7 governments that were doing the loan deals, were simply taking advantage of the opportunities that the energy transition presented to them. That this put developing nations that cannot afford to take the same advantage is an unfortunate fact that will no doubt be used by leaders in those nations to strike back against the West's pressure on them to avoid developing their natural hydrocarbon resources and go right to the wind and solar stage of energy supply.
Many African leaders have already expressed quite understandable outrage at conditions attached to loan finance provided by the IMF and the World Bank, which essentially tie the provision of these loans to certain transition commitments. Now, with the Reuters investigation, the outrage may well become louder—and perfectly justified.
The nations of the so-called "global south are experiencing a new wave of debt caused by climate finance," a former Ecuadorian climate change official told Reuters. What the statement suggests is a confirmation of the above claim that wealthy nations—or rather their governments and large corporations—are taking advantage of the opportunity that the energy transition presents, just not in the sense possibly envisioned by climate activists.
Not only this, but these governments and corporations are offering more loans than grants, the Reuters investigation showed, with the amount of climate debts provided to poor and middle-income nations so far representing 54% of total climate finance under the international target of $100 billion—which the world has failed to live up to.
So, it appears that some of the most vocal government supporters of the energy transition may have more than one kind of motivation for supporting the transition. It is quite an awkward revelation as developing countries step up their pressure on the wealthy world to pay for what activists argue is climate change of its own making.
It becomes even more awkward in light of the fact that while those governments and corporations were doing the lending and attaching the strings, the living standard of their own nations declined—in no small part thanks to those governments' focus on climate change above all else.
By Irina Slav for Oilprice.com
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