CoP 28: Osinbajo’s proposal on exchanging debt for climate initiatives is being reconsidered

Climate change and its whims have been prominent themes in international conversations throughout time.

From CoP1 in Berlin, Germany in 1995 to CoP27 in Sharm el-Sheikh, Egypt, there has been a great deal of discussion and activism over how to lessen the effects of climate change and accomplish a fair energy transition in relation to the phase-out of fossil fuels.

Notably, the CoP28 meeting, which is set to take place in Dubai from November 30 to December 12, is quickly approaching, and the concerns related to modern climate change—such as energy transition, desertification, drought, floods, heat waves, and disruption of food systems—will continue to recur.

Energy transition continues to be an enormous and capital-intensive undertaking for Africa, a continent whose economies are beleaguered by crippling external debt.

According to Nigeria’s relevant authorities, the country would spend over 410 billion dollars by 2060 to implement its energy transition strategy.

Unsettlingly, according to data from the National Bureau of Statistics (NBS), Nigeria’s external debt was N33.25 trillion as of the second quarter of 2023.

Analysts worry that the massive amount needed to pay impoverished nations’ energy transformation plans is confusing them due to the size of their foreign debt.

Given the aforementioned considerations, astute stakeholders believe that the Debt-for-Climate (DFC) Swap agreement put forth by former Vice President Yemi Osinbajo ought to be discussed during the CoP28, which is set to take place in the United Arab Emirates from November 30 to December 12.

The DFC swap agreement was put out by climate change activist Ingrid Osinbajo in 2022 to guarantee a fair energy transition for African nations.

While looking for international alliances and backing for Nigeria’s Energy Transition Plan (ETP), he made the idea in Washington, D.C.

At the Centre for Global Development in Washington, D.C., the former vice president gave a talk outlining the DFC concept for a fair and just energy transition for Africa.

Osinbajo claims that debt-for-climate (DFC) is a sort of debt swap in which creditors forgive bilateral or multilateral debt in return for the debtor’s promise to spend the remaining debt service payments towards domestic climate action initiatives.

“Usually, if the debtor country pays the avoided debt service payment in local currency into an escrow account or any other transparent fund, the creditor country or institution agrees to forgive a portion of the debt, provided that the funds are utilised for the debtor country’s agreed-upon climate programmes.

“Decrease the debt burden for participating developing countries and increase fiscal space for investments related to climate change.”

“The swap may be made to count towards the creditor’s Nationally Determined Contributions (NDC).”

He claimed that in order to make the agreement acceptable and long-term, considerable legislative changes were required.

In addition, Osinbajo suggested that African nations participate more in the Global Carbon Market as he looked at financial options for energy transition.

He noted that in order to effectively collaborate towards shared objectives, a comprehensive strategy was required. This included taking advantage of the economic and environmental benefits that come with funding clean energy assets in expanding energy markets.

“Africa must be able to engage more completely in the global carbon financing market in addition to traditional capital flows from both public and private sources.

The majority of direct carbon pricing schemes, which use carbon taxes, are now found in high- and middle-income nations.

Osinbajo urged wealthy nations to assist Africa in becoming a major worldwide provider of carbon credits, encompassing energy-based and biodiversity-based credits.

The vice president stated that the problem of a just transition with two, not one, existential crises—the climate disaster and extreme poverty—was at the forefront of thinking for the majority of developing nations.

“This reality clearly implies that if we are to address poverty, our plans and promises to carbon neutrality must include explicit strategies on energy availability.

“This covers energy access for both productive and consumptive use, encompassing cooking, heating, electricity, and other end-use sectors,” he stated.

He issued a warning, saying that restricting funding for gas projects intended for residential use would make it extremely difficult to advance clean cooking technologies, access to power, economic growth, and the expansion and integration of renewable energy sources into the energy mix.

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According to Osinbajo, the ETP was created with the dual crises of energy poverty and climate change in mind. It aims to provide energy for development, industrialization, and economic growth while achieving SDG-7 by 2030 and net-zero by 2060.

Prior to Cop28, Adullahi Evuti, a professor of environmental engineering at the University of Abuja, weighed in on Osinbajo’s suggestion and felt it was important enough to be on the conference agenda.

He regretted that the acts of affluent countries were mostly affecting underdeveloped countries, which is why a compromise like this was necessary.

“Given that the effects of climate change are transboundary, I endorse the proposition.

“The most polluting countries are industrialised nations like China and America; they release the biggest percentage of greenhouse gases annually, which has an impact on the entire planet. Nigeria and other developing countries are not immune to these consequences.

For example, among other things, desertification, flooding, and unpredictable climate change challenges are currently present in Nigeria.

And some of the consequences of the actions of developed countries may be to blame for these.

Accordingly, he stated, “the former vice president’s call that our debt be waived based on the consequences of developed nations’ actions on the climate is apt.”

The suggestion may be a useful instrument for attaining sustainable development and reducing economic imbalances, according to Dr. Abdullateef Taye, Registrar, African Institute of Waste Management and Environmental Studies, Kaduna.

He states that the main objective of the Debt-for-Climate exchange is to redirect financial resources away from fulfilling current debt obligations and towards combating climate change and promoting sustainable development in debtor countries.

According to him, the strategy was designed to persuade nations to fund initiatives related to adaptation and mitigation of climate change, both of which are essential in the battle against it.

A debt-for-climate swap agreement is a step in the right direction towards solving the world’s economic and environmental problems.

“It can encourage nations to take more sustainable measures, which is vital for tackling climate change, by forgiving debts in exchange for investments in climate action.

“However, the details and dedication of the parties involved determine how effective such deals are.”

Taye stated that a number of criteria will determine whether or not the proposal should be considered further at CoP28.

The degree of interest and support from participating countries, the possible effect of such agreements on global climate goals, and the specifics of the plan itself were among the issues he highlighted.

“If there is consensus among nations to do so, CoP meetings could be a suitable platform for such discussions as they serve as forums for discussing and advancing climate-related initiatives,” the speaker stated.

Mrs. Blessing Ewa, Founder and Director of Young Advocates for a Sustainable and Inclusive Future (YASIF) Nigeria, expressed similar views and stated that, considering the expense of treating issues related to loss and damage experienced by poor nations, she was totally in favour of the proposal.

The plan, according to her, ought to be discussed at COP28, with a focus on polluting nations that would carry on polluting while developing nations continued to clean up their mess since they owed them money.

“They must consciously work to cease polluting, as climate change is a worldwide problem and should be treated as such, not as a game of cards.

Furthermore, funds provided as loans to developing nations to cover losses brought on by the same rich nations ought to end.

“They lend us these money to fix the mess they caused and expect us to pay them back with high interest; this is one major reason developing countries keep getting deeply into debt with them,” the speaker stated.

Mr. Steve Abu, Coordinator, Climate and Sustainable Development Network of Nigeria (CSDevNet), stated that he was in favour of the tender and that it deserved no less attention.

He declared, “The proposal is exactly in order, and I support that it become an agenda item at CoP28.”

Experts believe that Osinbajo’s debt-for-climate swap proposal is a commendable and innovative concept, and as such, it ought to receive the consideration and momentum it requires at the upcoming CoP28.