SOAS Research Online

Abstract

Many developing countries are struggling under a high sovereign debt burden and rising interest rates that leave little fiscal space to meet their Nationally Determined Contributions under the Paris Climate Accord. To enable these countries to invest in climate mitigation, we propose the establishment of a Finance Facility against Climate Change (F2C2) that would raise $1 trillion. The facility would mobilize grant funding through the issuance of green bonds earmarked for emission reduction programmes in the eighty countries classified as low income or lower-middle income. The bonds would be backed by rich nations’ future commitments of official development assistance, which cover the green bonds’ debt service obligations. This would allow the necessary frontloading of climate spending in poor countries, while minimising the short-term impact on donor countries’ stressed budgets.