Author: Lara Cornaro

The current bleak outlook for the world economy, with a likely recession in major economies, high inflation, rising interest rates, and slow productivity growth, will adversely emerging market and developing countries (EMDE) over the next few years. Unfortunately, these countries emerged from COVID-19 with less fiscal space and rising debt service payments. Policies to insulate the domestic economy from these external shocks will present policymakers with difficult choices among exchange rate stability, capital mobility, and monetary independence: the so-called monetary trilemma. The impact of these external shocks on the domestic economy could be reduced if there were greater flexibility in exchange rate management and/or management of capital flows. This would keep the ability to influence domestic interest rates with the national authorities to foster economic growth. In addition, EMDEs need to design and implement policies to protect the labor force, and to restore productivity growth. Greater coordination between developed and developing economies and international organizations is also critical for satisfactory debt resolution for both low- and middle-income countries. Failure to make the right economic policy choices could lead to financial crises and could cause the debt distress to spread from low-income to middle-income countries, a situation similar to Latin America’s ‘lost decade’ beginning in 1982.

One aim of COP27 was to persuade countries to make commitments to reduce emissions and earmark resources for technologies to be transferred from industrialized states to less developed states. Hovering over the COP27 was the reluctance of wealthy states to live up to their 2009 commitment to provide $100 billion to poor countries, financial assistance for adaptation (as opposed to just mitigation projects), and more compensation for what the Paris Agreement termed “loss and damage,” that is recompense for destruction already wrought by climate change. This year’s gathering is the first where “funding arrangements” for “loss and damage” were included on the agenda, to the displeasure of the US and European Union who fear liability.

INTRODUCTION 

In November 2022, representatives of two hundred states gathered in Sham al-Sheikh, Egypt for the COP27 summit to coordinate how to address multiple climate threats facing the planet: the rising emission levels post-pandemic, the mounting sea levels, floods, heat waves, drought, and wildfires that have afflicted various parts of the globe. The Conference of the Parties (COP) summits are organized under the United Nations Framework Convention on Climate Change, launched at the 1992 Rio Earth Summit. One aim of COP27 was to persuade countries to make commitments to reduce emissions and earmark resources for technologies to be transferred from industrialized states to less developed states. Hovering over the COP27 was the reluctance of wealthy states to live up to their 2009 commitment to provide $100 billion to poor countries, financial assistance for adaptation (as opposed to just mitigation projects), and more compensation for what the Paris Agreement termed “loss and damage,” that is recompense for destruction already wrought by climate change. This year’s gathering is the first where “funding arrangements” for “loss and damage” were included on the agenda, to the displeasure of the US and the European Union who fear liability. 

Global South counties, led by China, have long argued that they are facing climate threats because policies pursued by industrialized states since the 1850s have increased the planet’s temperature, and led to great economic losses, and the destruction of resources and heritage. “Loss and damage” is basically a diplomatic way of speaking of climate reparations, and was raised by countries in the Pacific. Other developing countries have since joined the campaign. Currently, estimates of the money for climate reparations range from $290 billion to $580 billion per year by 2020, rising to $1.7 trillion by 2050.

Much was said about how relations between the West and the Global South, the West, and rising powers like China and Russia, could undermine the COP27 meeting. In Glasgow, at COP26, China reached a historic agreement with the US (recently suspended in light of Nancy Pelosi’s visit to Taiwan.) Similarly, it was feared that Russia, embroiled in a war with Ukraine would opt to undermine possible agreements. Geopolitics hovered over COP27 in another way: numerous reports have noted that climate can be a threat-multiplier, exacerbating ongoing inter- and intrastate conflicts in climate-fragile regions. In East Africa, for instance, extreme weather has worsened conflict in South Sudan, Somalia, and Kenya. One ICG report notes that drought in Kenya’s Laikipia Plateau has sparked violence between herders and farmers leaving dozens dead, in the lead-up to elections. A severe drought in Somalia has devastated livestock and set the stage for famine. In Ethiopia, drought has exacerbated the humanitarian situation created by the war between Addis and Tigray. The war in Yemen has made that impoverished country even more vulnerable to climate stress. This piece looks at the link between climate stress and conflict and examines policies introduced by Global South states.