As the world scrabbles to fund climate action, China’s debt relief could be key

Name: China to reduce carbon emissions by over 65 per cent, Xi Jinping says
Uploaded: 2021-02-07T10:30:13.000Z
Duration: 1 min 24 s
Description: China to reduce carbon emissions by over 65 per cent, Xi Jinping says

If markets cannot mobilise the funds needed to save the planet, then payment in kind may be more realistic

China is leading the way with debt forgiveness, easing pressure on developing nations to exploit their natural resources – and linking debt relief to climate action

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Engineers from Tanzania and China at the Dar es Salaam Port upgrade construction site on July 8 last year. China’s state banks are the largest bilateral creditors of developing countries, where many climate-influencing resources such as forests are. Photo: Xinhua

Anthony Rowley

Published: 6:30pm, 7 Feb 2021Updated: 6:36pm, 7 Feb 2021

How will the world pay for the averting of the existential threat posed by climate change? Trillions of dollars will be needed but what about payment in kind by creditors such as China, which could, in theory, agree to waive or reduce debts they are owed, to save the planet?

It is an intriguing idea and now is certainly the time for radical thinking on climate change, which, as International Monetary Fund managing director Kristalina Georgieva warned recently, poses “a greater threat” than Covid-19.

Climate change, she added, has reached a point where it represents a “fundamental risk to economic and financial stability”. Frontiers in Science Conservation journal meanwhile has warned of a “ghastly future of mass extinction, declining health, and climate-disruption upheavals”.

Markets are not taking these threats anywhere near seriously enough and seem hell-bent instead on self-destruction as they continue their credit-bloated rush towards a financial crash. If markets cannot mobilise the funds needed to save the planet, then payment in kind may be a more realistic option than cash.

A group of academics at Boston University’s Global Development Policy Centre propose that, as the world’s largest source of bilateral credit, China has great potential to cancel or reduce debt in return for binding commitments by its debtor nations to achieve climate change-related targets.

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China to reduce carbon emissions by over 65 per cent, Xi Jinping says

China is well placed to make a grand gesture, it is argued. Its state banks have become the largest bilateral creditors of developing countries, where many of the world’s most climate-influencing natural resources such as forests are located.