External publications

Build now, pay later: Frontloading poor countries’ climate mitigation investment

Kraemer, Moritz / Ulrich Volz / Dirk Schoenmaker
External Publications (2022)

published on cepr.org/voxeu/columns, 11.10.2022

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A debt crisis looms in many poor countries as interest rates rise and the world dips into recession, meaning these countries will struggle to meet their Nationally Determined Contributions under the Paris Climate Accord. This column proposes the establishment of a Finance Facility against Climate Change. Funds raised through the facility’s bond issuance would be earmarked for emission reduction programmes in poor countries, and the bonds would be backed by rich nations’ commitments of future disbursements to cover debt service obligations of the bonds. This would allow the necessary frontloading of climate spending in poor countries, while minimising the short-term impact on donor countries’ budgets.