On Monday 21 August, a coalition of nonprofits urged for Global North nations and institutions to cancel the crushing debts they have imposed on Global South countries. Crucially, the campaigners said that these debts are locking indebted countries into exploiting their fossil fuel resources.
Around 35 groups, including ActionAid International and Friends of the Earth International, published a joint new report titled ‘The Debt Fossil Fuel Trap’. In it, they argued that countries such as Argentina and Mozambique may find it “impossible” to phase out fossil fuels and transition to renewable energy sources unless the debt-fossil fuel trap is resolved.
Fossil fuel debts in fracking megaproject
The report highlighted Argentina as a key example of the burden of the debt-fossil fuel trap. The country has pursued fracking in Northern Patagonia as it seeks to ease its debt crisis. Notably, this has been backed by the International Monetary Fund (IMF). As the Canary previously explained:
Since Argentina nationalised its oil company in 2012, the government has been aiming to dramatically increase the extraction and export of oil and gas. In particular, the government plans to increase petroleum exports to address the country’s spiralling debt and poverty.
Echoing this, the new report stated that:
global north powers, especially global north dominated institutions like the International Monetary Fund (IMF) and World Bank, have actively encouraged and enforced the continued reliance on commodity exporting in global south countries through, for instance, direct funding or conditions attached to loans pushing a policy prescription based on extractive development models that see natural resources, including fossil fuels, as a key opportunity for economic growth and development.
Indeed, financial institutions like the World Bank and IMF have been financing and pushing the destructive Vaca Muerta fracking megaproject in the region. As the Canary detailed, Vaca Muerta is:
the second-largest reservoir of shale gas in the world. Additionally, it holds the fourth-largest deposits of shale oil globally. The oil field is found mostly in the Neuquén province, and spans an area the size of Belgium.
Naturally, the large-scale project has devastated the Indigenous Mapuche communities of the Patagonian region.
Meanwhile, far from resolving the country’s economic strain, 350.org has estimated that the potential societal costs of the project – such as the public health impacts, and potential oil and gas leaks – could exceed US $5.6 trillion. This would amount to 13 times Argentina’s enormous national debt.
Of course, Global North fossil fuel majors like TotalEnergies also turn a profit through operations in the destructive Vaca Muerta fracking fields.
Funneling finance to fossil fuels
In addition, the new analysis also pointed out that many Global North countries:
continue to finance fossil fuel projects, often through loans, adding to debt burdens and keeping countries locked into fossil fuel production.
In May, G7 committed to maintaining the public financing of overseas gas projects. As the Canary underscored, this finance has facilitated ‘energy colonialism’ in the Global South. In particular, the G7’s funding has enabled new fossil gas projects which has primarily supported exports of energy, as opposed to supplying the domestic market.
On top of this, while finance continues to flow to fossil fuels, Global North nations have been shirking their climate funding pledges. The joint report detailed that as a result of their failure to deliver the necessary finance:
many global south countries are forced to find resources for adaptation, mitigation and addressing Loss and Damage elsewhere, including taking on more debt.
In other words, the rich countries which are already saddling poor countries in extortionate fossil fuel debts are also entrenching it further. Without adequate funds from wealthy nations, the Global South is forced to turn to its fossil fuel reserves. The revenue from the exports of these reserves then finances the growing costs of climate impacts.
Recent duplicitous discussions on the loss and damage fund have also exemplified the Global North’s bad-faith promises on climate finance. In November 2022, countries committed to the historic fund at the COP27 climate summit in Sharm el-Sheikh, Egypt. Delegates agreed to the fund to facilitate the vital transfer of finance to Global South countries. Specifically, the fund would direct aid to countries dealing with the devastating impacts of the climate crisis.
While Global South bloc negotiators articulated the need for grants-based finance, Global North nations doubled-down on private streams of funding. In particular, former colonising countries have argued for expanding existing loans and insurance-based funds for loss and damage. Needless to say, this will only add to the debt burdens of countries and communities on the frontlines of climate chaos.
Relentless profit and greed
Echoing this, Tess Woolfenden from Debt Justice said that:
High debt levels are a major barrier to phasing out fossil fuels for many global south countries. Many countries are trapped exploiting fossil fuels to generate revenue to repay debt.
She urged Global North countries to cancel debts for Global South nations “to prevent further climate turmoil”.
Meanwhile, Mae Buenaventura from the Asian People’s Movement on Debt and Development said that the root of the problem was:
the global north’s relentless extraction of human, economic and environmental resources to feed the drive for profit and greed.
In addition, Buenaventura argued that:
Surely, debt cancellation – especially of fossil fuel debts – is the least that rich countries and lenders can do to repay the global south, to make reparations and bring about restitution as a matter of justice
In short, Global South nations are bearing the brunt of the increasing number and intensity of climate-fueled extreme weather events. Given that these countries are the least responsible for the climate crisis, Global North countries should ditch these unjust debts once and for all.
Additional reporting via Agence France-Presse.
Feature image via Televisión Pública/Youtube screengrab.
