Opponents of the World Bank’s solution to climate change, the Climate Investment Funds (CIFs), recommend the UN Framework Convention on Climate Chance (UNFCCC) as a much better alternative. One of their key grievances is the Bank’s intention to issue loans as well as grants to help developing countries hinder and adapt to climate change.
Why would such loans be illegitimate? The UNFCCC makes it very clear: developed countries are primarily responsible for climate change. Therefore, “as historical polluters and due to their higher technological and economic capabilities, developed countries should shoulder the main burden for resolving the crisis” (Celine Tan, Third World Network). Issuing loans for climate financing will put poor countries into illegitimate debt for a problem caused by the industrialization and economic growth of richer nations. At a time when poor countries have to face their own development challenges, debt repayments will further entrap them in economic stagnation.
Moreover, if the new loans come with the World Bank’s typical bundle of rigid macroeconomic conditions, they might contradict their purpose to fight global warming by, for example, giving tax breaks to polluting businesses.
The argument could be made that loans make recipient governments more accountable to solve the crisis effectively, when grants might otherwise disappear at the hands of corrupt leaders. However, donor governments hold just as much liability in monitoring how resources are spent. One way to make sure that grants are put to good use would be to issue them not solely to governments, but also to local civil society groups who might do a better job of implementing local and sustainable development. Local civil society watchdogs also play a key role in holding their own governments accountable.
Click here to view a statement protesting against the use of loans for climate financing, signed by over a hundred civil society groups last month during the Week of Global Action against Debt and International Financial Institutions.