Climate, COVID-19, and the Developing Country Debt Crisis

The document examines the potential for "debt-for-climate" swaps as a mechanism to provide budgetary relief to developing countries while funding climate mitigation and adaptation. It argues that while these swaps are not a universal solution and must supplement general macroeconomic stabilisation, they offer mutual benefits for debtors and creditors. The authors propose a selection framework based on economic need, emissions potential, climate ambition, and governance capacity. Applying these criteria, the paper identifies several Small Island Developing States (SIDS)—including Dominica, Granada, Samoa, St. Vincent and the Grenadines, and Tonga—as well as Bhutan and Rwanda, as promising candidates for such initiatives. However, the authors note a trade-off: while these countries are highly suitable, their low emissions mean the global impact on emissions would be smaller compared to including larger emerging economies.

• The convergence of the COVID-19 pandemic, economic instability, and the climate crisis has created a situation where climate action is frequently sidelined due to constrained economic environments in developing countries.
• Debt-for-climate swaps are proposed as a tool to provide fiscal relief to debtors and a way for creditors to promote climate-friendly development, though they must be implemented in addition to, rather than instead of, general macroeconomic stabilisation.
• The authors suggest four primary categories of criteria to identify priority countries for debt swaps: economic indicators for debt relief need, emissions and fossil fuel indicators for reduction potential, climate action indicators for country ownership, and governance indicators for fiscal capacity.
• Based on the proposed criteria, the most promising candidates for debt-for-climate swaps include the SIDS of Dominica, Granada, Samoa, St. Vincent and the Grenadines, and Tonga, as well as Bhutan and Rwanda.
• A significant trade-off exists where the most suitable candidates for these swaps have relatively low emissions, meaning that while the local impact is high, the global impact on emissions is smaller than it would be if larger emerging countries were included.

APA

NewClimate Institute (2021). Climate, COVID-19, and the Developing Country Debt Crisis. http://www.newclimate.org/resources/publications/climate-covid-19-and-the-developing-country-debt-crisis

Chicago

NewClimate Institute. Climate, COVID-19, and the Developing Country Debt Crisis. 2021. http://www.newclimate.org/resources/publications/climate-covid-19-and-the-developing-country-debt-crisis.

Wikipedia

{{cite report |author=NewClimate Institute |title=Climate, COVID-19, and the Developing Country Debt Crisis |date=1 April 2021 |url=http://www.newclimate.org/resources/publications/climate-covid-19-and-the-developing-country-debt-crisis |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{newclimateinstitute2021climate, author = {{NewClimate Institute}}, title = {{Climate, COVID-19, and the Developing Country Debt Crisis}}, institution = {NewClimate Institute}, year = {2021}, month = apr, url = {http://www.newclimate.org/resources/publications/climate-covid-19-and-the-developing-country-debt-crisis}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }