By Editor-June 13th, 2023.
Officials from Latin America and the Caribbean were vocal participants in last year’s United Nations Climate Change Conference in Sharm el-Sheikh, Egypt, known as COP27.
But perhaps no other initiative from the region could have as much of a global impact as Barbados’s proposed climate finance plan.
The Bridgetown Initiative, as it is known, was devised by a group steered by Barbadian Prime Minister Mia Mottley and her climate finance envoy, Avinash Persaud.
While developing countries have long called for similar measures, Mottley’s plan has earned public praise from global political figures. A perennial question hanging over U.N. climate conferences is how developing countries will finance their domestic climate mitigation and adaptation efforts.
Rich countries currently provide them with a little less than $100 billion per year in a combination of grants and loans for this purpose, but their annual need is widely understood to be in the trillions of dollars.
Developing countries have contributed far less to climate change than wealthy ones—but disproportionally bear the brunt of its effects.
Mottley, for her part, said in a speech last year in Glasgow that climate finance should come at least in part from the IMF. She called for the fund to issue the equivalent of $650 billion annually in its reserve currency, known as special drawing rights (SDRs), for 20 years to finance developing countries’ climate needs.
At the time, observers celebrated Mottley’s speech for its moral clarity. But her idea did not gain traction at the IMF. Now—against a backdrop of energy market chaos and a global economic slowdown that has left many developing countries facing potential debt crises—that may be changing.
Mottley and Persaud spent the past year developing their Glasgow pitch into a more solid proposal and workshopped it at a July meeting in the Barbadian capital of Bridgetown with academics, IMF executives, and the U.N. deputy secretary-general.
The document that emerged from these discussions—dubbed the Bridgetown Initiative—made a one-time $650 billion request of the IMF (a departure from Mottley’s original suggestion that this amount be paid annually) and called for development banks to issue $1 trillion in low-interest loans for climate spending in developing countries.
An updated version of the Bridgetown Initiative that Persaud published last November also advocates for a tax on oil companies to finance reconstruction grants that would be dispensed to developing countries after climate disasters, though it did not specify how exactly this would work. Persaud also wrote that countries’ outstanding loan repayments should be temporarily paused after such disasters.
The Bridgetown Initiative Is Calling for 5 Main Things:
- First, it calls for changes to how money is loaned to and repaid by a country hit by disaster, aiming to prevent countries spiraling into a debt crisis. One example would be allowing for a pause on debt payments so the country has more available money to spend on immediate relief and rebuilding.
- Second, it’s calling on the world’s development banks — like the World Bank and the International Monetary Fund (IMF) — to mobilize an additional $1 trillion to developing nations for climate resilience. It sounds like a whole lot, but this money can be unlocked.
- Third, it’s calling for a new mechanism to be set up to fund climate mitigation and rebuilding in the wake of a disaster. Called the Global Climate Mitigation Trust, it’s believed this could leverage up to $5 trillion from the private sector and up to $500 billion in a special emergency currency called Special Drawing Rights (SDRs).
- Fourthly, “Bridgetown” is calling for a widening of the eligibility for lending below market rates for climate-vulnerable countries investing in resilience in climate-vulnerable countries. In other words, more climate-vulnerable countries would be able to access better lending deals to invest in measures that would help them be more resilient to climate change.
- Fifthly, it calls for a new loss and damage fund that pays out when major climate disasters hit.
Sources: Foreign Policy Magazine, Barbados Government Press Releases.
