Middle-income developing countries hit by devastating climate disaster risk missing out on rescue funds, the head of one of the world’s development banks has warned.
Hyginus Leon, the president of the Caribbean Development Bank, told the Guardian that some developing countries with per capita incomes that would disqualify them for some forms of overseas aid could be made ineligible for climate funds.
That would be a mistake, he said, as many such countries were still vulnerable to the devastating impact of the climate crisis. He said money to help developing countries cope with the climate crisis should be allocated on the basis of their need and vulnerability, not only on their existing income.
“There is significant heterogeneity, or variation, in need, in requirements and the positioning of different groups [of countries],” he said. “We may be talking of exceptions for those countries that are high GDP but have high vulnerability, because of natural hazards, or have low resilience capacity and so cannot get out of a shock or crisis easily.”
Governments are working on plans for a “loss and damage” fund, that would pay out to countries stricken by climate disaster, for rescue and the rehabilitation of economies and societies. At the Cop28 UN climate summit this November, countries will discuss ways of filling the fund.
That should not be the end of the discussion, Leon said: “After we accumulate or mobilise the financing that we are talking of, the bigger issue we will face is how do you allocate that finance – and we are not yet talking about this.”
Some countries are in a “grey zone”, classed as developing but not among the very poorest, yet still vulnerable, so arrangements for which countries receive climate finance should be flexible, he argued. “You have to be able to tailor it – a one-size fits all measure is not going to be as effective as it could be. If we end up with one instrument, one panacea for everybody, in the end very few will end up being satisfied.”
Heatwaves have broken temperature records around the world in the past weeks, with forecasters predicting further hot weather to come. Swathes of Greece have been evacuated because of forest fires, while Italy and Spain have experienced soaring temperatures and in some cases flash flooding.
Developing countries are also feeling the heat, with the Mediterranean heatwave also affecting Algeria and Morocco, while India has halted rice exports because of fears the hot weather will affect the harvest, while China has issued alerts for heatstroke.
The poorest quarter of people in the world are most likely to suffer extreme heat, research has found. But middle-income countries are also experiencing climate disaster, and many smaller nations are at particular risk of having their economic progress reversed.
Leon said: “The fact that our income as countries tends to be much higher than the ODA type thresholds, and therefore we are not being measured on a need basis, we are measured on a past income basis, that does not reflect at all the shocks, the vulnerabilities, the difficulties to recover that we face.”
Some Caribbean countries are at grave risk of hurricane damage. Scientists are unsure whether hurricanes could become more frequent owing to the climate crisis, and their frequency may even reduce. But they are likely to become significantly more intense, and more damaging, the hotter the world becomes.
Leon said much of the climate finance likely to be made available to poor countries in future would probably be in the form of loans, as well as grants. Some campaigners have argued that many countries are already indebted, and loans to help them cut emissions and adapt to the impact of the climate crisis could drive them deeper into debt.
However, Leon said it was not possible to have all finance in the form of grants. “I think it becomes a useful exercise to separate the way we perceive new debt, without necessarily the encumbrance of the legacy debt as of today. I see nothing wrong in principle in separating repayment as one repayment stream based on existing debt, and another repayment stream based upon new debt,” he said. “All you need to do is think of it as two blocks.”
He said there had to be a mix of loans and grants. “You may never be able to get grant funding for zero costs for all of your needs going forward. You will, at some point, need to say how much of that is good debt that I’m willing to undertake. What matters is development outcomes for countries.”
