The new climate debt

As combined economic entities, members of the International Emissions Trading Association (IETA) exceed the size of most governments. So, when IETA made a new financing proposal just prior to last week's UN global climate talks in Bonn, attention was paid.

IETA's 170 transnational financial, law, energy and manufacturing firms are aggressively pushing for a global system for trading carbon emission credits and their financial derivatives. Their latest proposal, “green sectoral bonds,” are being sold as the only option for developing countries to access financing for projects that reduce greenhouse gas emissions.

Like conventional bonds, the green sectoral bonds would allow developing countries to borrow money from private investors to meet greenhouse gas reduction targets—the principle to be paid back with interest over time. The proposal represents a major shift in climate finance discussions.

As IATP's Steve Suppan writes in a new analysis of the IETA proposal, “If implemented, the proposal would transform climate finance from a public fiduciary duty primarily funded by developed countries to a new source of developing country debt to private creditors and of profits for IETA members.”

While it would seem that a proposal that deepens the debt of developing countries already battling an economic crisis would be dead on arrival, IETA argues that developed countries are facing their own budget shortfalls and simply don't have the resources for additional climate aid. Unfortunately, the longer global climate talks stumble, the more attractive IETA's proposal may become.

You can read Steve's full analysis of the IETA proposal here.