Mr. Steiner, at last year’s COP27, you were very concerned about the debt crisis in developing countries. Has the situation improved since then?
No, it has become even more acute compared to last year because the interest rates on the largest capital markets have actually gone up. The developing countries’ costs for their interest payments have become even higher.
What does this mean for these countries?
The governments of some countries now spend more on interest payments on foreign debt than on their own country’s education and health sectors. Important national revenues flow into debt servicing instead of there. And there is a point at which these countries can no longer obtain money on the international capital markets. And the instruments of the IMF and World Bank have not yet been changed as promised to such an extent that they could solve this problem.
Many countries are still on the brink of insolvency. How are these countries supposed to invest in climate action?
We can already see this in the fact that investments have partially declined, especially in developing countries and in many other countries. The International Energy Agency (IEA) also tells us this. It is not because countries do not need more energy infrastructure or electricity supply, but simply because no money is available. Our data shows 48 countries are just one step away from insolvency. But if they openly admit this, their loan rates will go up again. This is a massive threat to an economy and a vicious circle.
‘An enormous social volatility’
Why is there no international debate about this debt trap?
It is not an acute threat to the global financial system because these are smaller economies. But that is short-sighted. Because when countries collapse financially, this can very quickly lead to socio-political extremes or tensions. Forty percent of the world’s poorest people live in these countries. This means that we have enormous social volatility.
In other words, the debate here at COP about reforming the World Bank and other institutions bypasses these countries because they are too small?
The grand reform of the international financial architecture is still pending. And what we currently have are the emergency instruments from the pandemic to disburse more money in the short term. The only problem is that the current solution is exacerbating the problem because the mountain of debt is growing. Here at the climate conference, we are trying to convince developing countries to accelerate the transition to a low-carbon economy of the future. But many simply cannot afford the energy transition. Financially speaking, they don’t have the leeway to make these investments. That is why these international financial institutions are so crucial for these countries.
What would be the best outcome for these countries?
The best thing would be a decision to drive forward the global energy transition and to ensure that it is financed, especially in poor countries. We need more „concessional,“ in other words, low-interest loans. We must not forget that the poor countries themselves are already making amazing investments: China, India, Brazil, but also countries such as Uruguay, Kenya and Costa Rica. What we need here are investment partnerships where we, as the international community, i.e., the rich countries, allow these countries additional investment.
Developing countries as frontrunners
Many developing countries are indebted to China. What does that mean?
A little less than a third of all international debt is owed to China as a lender. I don’t want to point fingers, but rather ask: What does that do to a group like the G77? This is why calls to reform the international financial system are growing louder and louder. The UN Secretary-General has also called for this. And it was also a clear demand at the G20 recently. The USA, long skeptical, has also joined in. This means that reforms are now being implemented. The question is always, how far do you go? How far-reaching will the reforms be?
When it comes to climate policy, developed countries often claim to be frontrunners. But you say there are also role models in emerging and developing countries. Who are you thinking of?
I can give you dozens of examples. Take Uruguay: A nation with almost 95 percent of its electricity coming from renewables. That didn’t just fall out of the sky somewhere, it is the result of a consistent energy policy over the last 15 years. Now, the Ministry of Finance has analyzed how expensive the subsidies for diesel and petrol for local public transport are. And it turns out that it is cheaper to convert the country’s entire bus fleet to electric than to continue paying fossil fuel subsidies. In other words, they are converting now.
Can you give any other examples?
Costa Rica, for example, has increased its total forest area to almost 60 percent over the last few decades through consistent nature conservation and reforestation. Kenya, the country where I lived for ten years, started using geothermal energy in the Rift Valley back in the 1970s. Today, it is the backbone of an infrastructure network that provides well over 90 percent of the electricity supply from renewables. Fortunately, the country did not listen to external consultants at the time, who had advised against it.
‘We have to get off our high horse’
What can developed countries learn from this?
The most important thing is that everyone now knows what climate change is and that it is forcing us to think and plan for a low-carbon future. We need to get off the high horse of thinking that the developed countries are the ones taking action. In India alone, over 400 gigawatts of renewable energy will probably be connected to the grid in the next seven to eight years. No other country has achieved this in such a short time. It will also be interesting when a country like Namibia, with the support of the German government, starts to develop renewable energies and green hydrogen – for energy supply and development at home and the export of ‘green hydrogen’ to Germany. A whole new market for the global energy industry is emerging here.
Many countries in Africa, in particular, say that they have a right to fossil fuel development because they have contributed nothing to climate change. Do these countries have a right to fossil fuel development?
Who wants to deny them this right? With what legitimacy? You have to realize that many of those calling for restrictions belong to the largest oil and gas producers in the world themselves: the United States, Canada, Norway, Great Britain. The US produces more oil and gas than any other country. Canada has recently issued new licenses and Norway continues to expand. Our task as the United Nations Development Program is to support African countries in developing their energy sector – that means first giving them the opportunity to decide for themselves.
What does that mean specifically?
I would be surprised if an African country still opts for fossil fuels today if it receives – for example – accompanying financing from abroad for renewables. This is the only way they can ensure sustainable industrialization. Kenya’s president says something about African climate change that the world should listen to much more closely. Africa will perhaps be the first continent that will first need a green energy infrastructure to enable its industrialization.