FOSSIL FUEL TREATY DEBT JUSTICE AND FINANCING THE JUST GLOBAL ENERGY TRANSITION

The document examines the 'climate-debt trap' facing low- and middle-income countries (LMICs), where escalating external debt—reaching nearly US$6.5 trillion in 2023—crowds out climate investment. It analyzes existing financial mechanisms such as Climate Resilient Debt Clauses (CRDCs), Catastrophe (CAT) bonds, and debt swaps, while critiquing the G20 Common Framework for its inadequacy. The authors advocate for the cancellation of 'odious debt' linked to fossil fuel projects and propose that a Fossil Fuel Treaty could establish a Debt Resolution Facility to help member nations renegotiate debts in exchange for phasing out fossil fuels.

• External debt for low- and middle-income countries (LMICs), excluding China, nearly doubled between 2010 and 2023, reaching almost US$6.5 trillion. Debt service payments also doubled in that period, hitting nearly US$900 billion in 2023, which restricts the ability of these nations to invest in climate action.
• The structure of creditors for LMICs has shifted from traditional 'Paris Club' bilateral creditors toward private creditors, the IMF, multilateral financing, and China, which complicates debt restructuring. Specifically, debt service payments to China saw a 1,450 percent increase between 2010 and 2022.
• Many Global South nations are caught in a 'climate-debt trap' where they are forced to take on more debt to fund climate adaptation and mitigation. In 2022, 68 developing countries experienced net financial outflows, meaning debt service payments exceeded the inflows of new public financing.
• Existing 'innovative' financial instruments have mixed results: Climate Resilient Debt Clauses (CRDCs) allow temporary payment suspension during disasters (used by Grenada and Barbados), but Catastrophe (CAT) bonds are criticized for being costly and having overly rigid trigger conditions, as evidenced by Jamaica receiving no payout after Hurricane Beryl.
• Sovereign debt restructuring via the G20 Common Framework has been described as arduous and inadequate, with only four countries—Ghana, Zambia, Chad, and Ethiopia—applying for relief. Analysis of six recent deals shows that private creditors are repaid 28 percent more than government creditors on average.
• The report proposes that a Fossil Fuel Treaty could implement a 'Debt Resolution Facility' in the short-to-medium term to help members audit and renegotiate debts, potentially in exchange for commitments to phase down fossil fuel production.
• Advocates argue for the cancellation of 'odious debt'—specifically debts accrued from fossil fuel projects—on the basis that these activities caused harm to citizens or locked countries into damaging activities.

APA

Rambarran, J., & Sawas, A. (2025). FOSSIL FUEL TREATY DEBT JUSTICE AND FINANCING THE JUST GLOBAL ENERGY TRANSITION. Fossil Fuel Non-Proliferation Treaty Initiative. https://fossilfueltreaty.squarespace.com/s/Debt-Justice.pdf

Chicago

Rambarran, Jwala, and Amiera Sawas. FOSSIL FUEL TREATY DEBT JUSTICE AND FINANCING THE JUST GLOBAL ENERGY TRANSITION. Fossil Fuel Non-Proliferation Treaty Initiative, 2025. https://fossilfueltreaty.squarespace.com/s/Debt-Justice.pdf.

Wikipedia

{{cite report |last1=Rambarran |first1=Jwala |last2=Sawas |first2=Amiera |title=FOSSIL FUEL TREATY DEBT JUSTICE AND FINANCING THE JUST GLOBAL ENERGY TRANSITION |publisher=Fossil Fuel Non-Proliferation Treaty Initiative |date=April 2025 |url=https://fossilfueltreaty.squarespace.com/s/Debt-Justice.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rambarran2025fossil, author = {Rambarran, Jwala and Sawas, Amiera}, title = {{FOSSIL FUEL TREATY DEBT JUSTICE AND FINANCING THE JUST GLOBAL ENERGY TRANSITION}}, institution = {Fossil Fuel Non-Proliferation Treaty Initiative}, year = {2025}, month = apr, url = {https://fossilfueltreaty.squarespace.com/s/Debt-Justice.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }