In faraway Washington, DC over the weekend, Vice President Yemi Osinbajo propounded new ideas on how best to bring developing nations to contribute adequately to the course of global net-zero emissions targets, facilitate energy access and development of African countries. Speaking at a lecture on a just and equitable energy transition for Africa at the Center for Global Development, the VP proposed a Debt-For-Climate (DFC) Swap deal in which “bilateral or multilateral debt is forgiven by creditors in exchange for a commitment by the debtor to use the outstanding debt service payments for national climate action programs.”
“Typically, the creditor country or institution agrees to forgive part of a debt, if the debtor country would pay the avoided debt service payment in a local currency into an escrow or any other transparent fund and the funds must then be used for agreed climate projects in the debtor country,” Prof Osinbajo stated.
Justifying the rationale behind such a debt swap deal, the Vice President submitted that the commitment to it would “increase the fiscal space for climate-related investments and reduce the debt burden for participating developing countries. For the creditor the swap can be made to count as a component of their Nationally Determined Contributions (NDC).” Osinbajo reasons that “there are of course significant policy actions necessary to make this acceptable and sustainable.”
The immediate implication of the VP’s Debt-for-Climate swap idea is that it would essentially lead to the cancellation of billions of Nigeria’s foreign debts over time. Nigeria’s foreign debt is about $40 billion.
According to the WHO, Climate change is impacting human lives and health in a variety of ways. It threatens the essential ingredients of good health – clean air, safe drinking water, nutritious food supply and safe shelter – and has the potential to undermine decades of progress in global health. Between 2030 and 2050, climate change is expected to cause approximately 250,000 additional deaths per year from malnutrition, malaria, diarrhoea and heat stress alone. The direct damage costs to health are estimated to be between US$ 2-4 billion per year by 2030.
Greenhouse gas emissions that result from the extraction and burning of fossil fuels are major contributors to both climate change and air pollution. Many policies and individual measures, such as transport, food and energy use choices, have the potential to reduce greenhouse gas emissions and produce major health co-benefits, particularly by abating air pollution. The phase out of polluting energy systems, for example, or the promotion of public transportation and active movement, could both lower carbon emissions and cut the burden of household and ambient air pollution, which cause seven million premature deaths per year. Areas with weak health infrastructure – mostly in developing countries – will be the least able to cope without assistance to prepare and respond; and that’s why Prof Osinbajo’s proposal is innovative, important and requires urgent attention from the global community.
The Vice President also proposed the greater participation of African countries in the Global Carbon Market while exploring financing options for energy transition. He reasons that there is a need to take a comprehensive approach in working jointly towards common goals, including the market and environmental opportunities presented by the financing of clean energy assets in growing energy markets. “In addition to conventional capital flows both from public and private sources, it is also essential that Africa can participate more fully in the global carbon finance market. Currently, direct carbon pricing systems through carbon taxes have largely been concentrated in high and middle-income countries.
However, carbon markets can play a significant role in catalyzing sustainable energy deployment by directing private capital into climate action, improving global energy security, providing diversified incentive structures, especially in developing countries, and providing an impetus for clean energy markets when the price economics looks less compelling – as is the case today.”
It is important that developed countries support Africa to develop into a global supplier of carbon credits, ranging from bio-diversity to energy-based credits, which would be a leap forward in aligning carbon pricing and related policy around achieving a just transition. I commend the Vice President for the profundity of his thoughts. The acuity and depth of his suggestions speak to Prof Osinbajo’s intellect and capacity to understand the major issues of our time. It is regrettable that none of our presidential candidates preparing for elections next year has a good understanding of this issue. Over the last seven years, Prof Yemi Osinbajo has differentiated himself as a thought leader, a man of great ideas and ideals. I call on the Nigerian government to make the Debt-for-Climate Swap a major policy thrust of our diplomacy. We should endeavour to make it an item on the agenda of every international gathering: AU Summit, UN General Assembly and the World Bank/IMF Meetings.
* Etim is a journalist and author