Global warming: Osinbajo proposes a debt-for-climate swap

Nigerien Vice President Yemi Osinbajo has proposed a debt-for-climate swap to promote climate-friendly actions across the world.

Osinbajo made the call at a conference on energy transition in Africa in Washington DC, USA.

He proposed that multilateral or bilateral debts could be canceled provided that indebted countries show their commitment to channeling debt service payments into national climate action programs.

“Generally, the creditor country or institution agrees to cancel part of a debt if the debtor country would pay the avoided debt service payment in a local currency into an escrow or other transparent fund, and the funds must then be used for agreed climate projects in the debtor country,” he said.

According to him, this could increase climate-friendly investments while reducing the debt burden in participating countries.

Osinbajo, in the same spirit, urged African countries to participate more in the global carbon market while exploring financing options for the energy transition.

“In addition to conventional capital flows 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 are largely concentrated in high- and middle-income countries.

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“However, carbon markets can play an important role in catalysing the deployment of sustainable energy by channeling private capital into climate action, improving global energy security, providing diverse incentive structures, in particular in developing countries, and giving a boost to clean energy markets when the economics of pricing seem less compelling – as it is today.

Speaking further, the Nigerian Vice President urged developed countries to support Africa in its quest for a just transition, adding that developing countries also face extreme poverty which is holding back progress.

“The central thought for most developing countries is that we face on this question of a just transition two existential crises, not just one; the climate crisis and extreme poverty.

“The clear implication of this reality is that our plans and commitments to carbon neutrality must include clear plans on energy access if we are to tackle poverty. This includes access to energy for both consumptive and productive use and covering electricity, heating, cooking and other end-use sectors,” he said.

Osinbajo had previously called for collaboration to solve Africa’s energy and climate challenges.

At the virtual inauguration of Nigeria’s energy transition plan in August, he said Nigeria needed about $410 billion to achieve its energy transition targets by 2060.

Ijeoma Opara is a journalist at ICIR. Contact her via [email protected]

Teresa H. Sadler