Who owes who? Ecological debt: the biggest debt of all

October 2001. By Andrew Simms

The debate around international debt is about to switch dramatically. The focus of attention to date has been on orthodox Third World debt. But when people realise the scale and threat of ecological debt, no one again will have the audacity to demand that countries like Mozambique or Niger send a penny more unpayable debt service back to their so called rich country ‘creditors.’

If you use more than your logical, fair share of natural resources in a delicately balanced ecosystem you run-up an ecological debt. It’s a one-way ticket to view a world turned upside down. And climate change is the key to understanding it.

The limitations of Third World debt campaigns

Conventional Third World foreign debt dominated the international development debate in the second half of the 1990s. But in many ways it was less a sophisticated exchange between policy experts, and more like the camp theatre of silent movies. Wide-eyed, campaigners pleaded on the streets and in the conference venues for the future of desperately poor and indebted populations. At the same time Victorian stage villains from the World Bank and IMF sniggered and said life wasn’t that simple.

Millions signed petitions. Thousands attended demonstrations. Dozens of reports were written, (several by me). And what was the result of the biggest international mobilisation since the anti-apartheid movement? Officials made a U-turn in policy. They decided that the debts of the poorest countries were, indeed, unsustainable and designed a labyrinthine mechanism to deal with it. In practice, however, little has changed.

In July 2001, Jubilee plus, a successor to the Jubilee 2000 coalition campaign, declared that official debt relief measures were moribund. They described how all 23 countries that had qualified for the so-called Highly Indebted Poor Country initiative (HIPC), from an original list of 41, were returning to ‘unsustainable debt burdens’. In spite of winning limited debt relief for a handful of countries and building an international campaign movement, a harsh judgement would say that everyone’s best efforts had failed. The poorest countries in the world were back where they started. The problem, most probably, was that the outstanding poor country foreign debt, mostly African, at around $350 billion, simply isn’t big enough to worry the powerful and extract necessary action.

Climate change turns the tables

But during the debt campaign something happened that started to turn the world upside down. A connection was made and, looked at afresh, creditors became debtors and vice versa.

In 1998 Hurricane Mitch hit Central America. The Honduran President Carlos Flores commented, ‘We lost in 72 hours what we have taken more than 50 years to build." The map of the region was literally and metaphorically redrawn. Harvests of staple foods such as rice and sweet potato were destroyed. Virtually all banana plantations that provided Honduras’ chief export crop were flattened. At the time, Nicaragua was paying over half a million dollars a day in debt service (sucking up 39 per cent of government expenditure) and Honduras was paying $1.5 million per day. Yet, even in light of the disaster, the official creditors’ immediate response was to refuse to forgive the debt.

Hurricane Mitch struck at the end of a decade in which climate driven natural disasters had increased enormously. According to the reinsurance giant Munich Re the number of climate related so-called ‘hydro-meteorological’ disasters quadrupled during the 1990s compared to the 1960s. During the same period economic losses increased eight-fold. While no single method exists to measure it, the estimates of economic damage from climate change are growing.

The financial services initiative of the UN Environment Programme estimates that the extra economic costs of disasters attributable to climate change are running at over $300 billion annually. The best guess of development groups is that climate change could cost developing countries up to £6.5 trillion over the next 20 years, many times anticipated aid flows.

Working, almost literally, at the coalface of global warming the insurance industry are most open to looking into a glass darkly and suggesting what the future may hold. A former director of insurance giant CGNU plotted a graph to see where climate change bankrupted the global economy. He concluded that we have less than a lifetime left, just over half a century.

Industrialised countries become the largest debtors

It is generally accepted by climate watchers that, historically at least, industrialised countries are almost entirely responsible for human-driven global warming. So, stripped of cant and rhetoric here was the new situation.

In addition to having to pay to service dubious foreign debts, sacrificing health and education opportunities in the process, the poorest people in the poorest countries are also paying the price of global warming, or, in other words the interest on the ecological debts of the rich world. Of all deaths from natural disasters, 96 per cent occur in developing countries.

If a target is set for an acceptable concentration of greenhouse gasses in the atmosphere, and an ‘emissions budget’ set to meet it, it becomes possible to work out for every year from now until the target is met, what everybody’s logical and equal share is of the atmosphere’s ability to soak up our waste emissions. Pump out more than your fair share – or sustainable threshold – and you instantly run up an ecological debt.

Putting a price on the debt can be illuminating. In the report, ‘Who owes who? Climate change, debt equity and survival,’ published in 1999, Nick Robins, Aubrey Meyer and I calculated that the value of economic output built on such a growing carbon debt attributable to the G7 countries was in the region of $13-15 trillion for a typical year in the 1990s. At the same time the conventionally indebted poor countries had a carbon credit that could be valued at three times their orthodox foreign debts.

In terms of claiming compensation for ecological debt these may well be fantasy figures. But they say something more important. In the light of global warming and its physical and economic consequences, they turn the moral authority in all relations between industrialised and non-industrialised countries upside down. They also demand a reverse process of adjustment toward sustainability in rich countries.

An environmental war economy

If we don’t tackle the ecological debt by drastically cutting Northern emissions, everyone faces environmental bankruptcy. But how can the argument for reducing voracious consumption be put in a way that conveys urgency and inhabits a framework of known experience?

One answer could be to elaborate the theme of an environmental war economy - with the enemy being a hostile climate rather than another country. The simultaneous focus on radical cuts in domestic resource consumption and the protection of the health and basic well-being of the population of the 1940s war economy is instructive. Over a six year period in Britain private vehicle use was cut 95 per cent and there was a significant drop in infant mortality, as well as wider health improvements.

In 1943, Hugh Dalton, president of Britain’s Board of Trade said, ‘There can be no equality of sacrifice in this war. Some must lose their lives and limbs, others only the turn-ups on their trousers.’ In Bangladesh today, 20 million people are likely to be made homeless through flooding so that we can drive our sports utility vehicles.

Ultimately, though, the problem has to be addressed within a global framework. After the weak resolution to the Kyoto Protocol, which provides only the compromised Clean Development Mechanism and vague promises of adaptation funds to developing countries, a single contender is emerging, increasingly supported by governments, business and civil society. People are calling it ‘Plan B’ for global warming.

‘Contraction and Convergence’

"The only effective framework in which past ecological debt can be resolved and a uncontrollable climate change avoided, is a deliberate framework of contraction and convergence," says Aubrey Meyer of the London-based Global Commons Institute. "This requires agreement that there is a global contraction of emissions from human sources of 60-80 percent within a specified time frame. It also means that the international sharing of this process is arranged so that entitlements to emit are pre-distributed in a pattern of international convergence so that shares become equal per capita globally."

This doesn’t mean that overnight per capita fossil fuel use in the US and sub Saharan Africa suddenly become equal. A major negotiation is needed both to agree a target ‘acceptable’ level of greenhouse gas concentration, and the time frame over which to meet the target. The model, however, is flexible. It uses a trading mechanism in emissions entitlements like a parachute, allowing resources and technology to flow rich-to-poor smoothing the transition.

Behind Meyer’s clinical explanation lies an inescapable logical force that has drawn support from sources as wide as the insurance industry, the Royal Commission on Environmental Pollution and numerous developing countries. Meyer argues that contraction and convergence is even compatible with the negotiating position of a recalcitrant United States.

The immediate practical benefits too are many. "With this mechanism ecological debt is re-paid because developing countries can achieve the clean energy paths necessary for sustainable development at zero cost. But only to the extent that they unite around this process," says Meyer.

I was an agent in the Third World debt war. I wrote reports and agitated at international meetings. I attacked – on TV, radio and in print – Governments and World Bank staff for their inconsistent and illogical preservation of a blatantly uneconomic and unjust system. It was important, but I realised that even being part of the campaign meant I had accepted a state of affairs that was fundamentally false. Think about ecological debt and you will see the world differently. It could even save the planet from bankruptcy.

Andrew Simms, director of the Global Economy Programme at the New Economics Foundation in London, is writing a book about ecological debt to be published in 2002.. Website: http://www.neweconomics.org/