T20 Brasil event discusses the implications of the climate crisis to developing countries, and the need for a fairer international financial architecture. According to Indian economist, the climate crisis is a direct reflection of these global inequalities.
At an event in Rio de Janeiro that expanded understanding of the intersections between public debt and climate change in developing countries, experts discussed approaches to creating a more sustainable future, highlighting the importance of social equity and the need for concrete actions against inequality and climate change. The conference about "The Relationship Between Public Debt and Climate Change in Developing Countries" highlighted the need for structural reform to address contemporary global challenges. The event was organized by T20 Brasil, which brings together research centers from around the world.
Indian economist Jayati Ghosh, professor at the University of Massachusetts and one of the most influential voices in the discussion on global inequality, did not hold back in her criticism of the current scenario. Ghosh opened her speech by addressing the intrinsic relationship between inequality and carbon emissions, pointing out that "the largest carbon emissions come from core countries and global elites, who have historically been the greatest beneficiaries of the global economic system." To the professor, the climate crisis is a direct reflection of these inequalities since, while developed countries and elites accumulate wealth, developing countries and vulnerable populations face the worst consequences.
Indian economist Jayati Ghosh, professor at the University of Massachusetts and one of the most influential voices in the discussion on global inequality, did not hold back in her criticism of the current scenario. Ghosh opened her speech by addressing the intrinsic relationship between inequality and carbon emissions, pointing out that "the largest carbon emissions come from core countries and global elites, who have historically been the greatest beneficiaries of the global economic system."
Ghosh argued that current policies which should mitigate the impacts of climate change often end up exacerbating inequalities. "The paradox of the energy transition is that it is creating new forms of inequality, both among and within countries," noted the economist. Ghosh highlighted that the concentration of technologies that are essential to the energy transition in the hands of a few rich countries and China prevents developing nations from having access to these resources, perpetuating a cycle of dependence and underdevelopment. "The energy transition, instead of being an opportunity to correct inequalities, is becoming a new source of exploitation, especially as to mineral resources in Global South countries," she said.
Need for a new International Financial Architecture
Another topic raised by Ghosh was the crisis regarding the sovereign debts of developing countries. She explained how these debts, often contracted under unfavorable conditions, make it impossible for these countries to invest adequately in resilient infrastructure and climate adaptation policies. "Low-income countries are being strangled by unpayable debts with spreads that are much higher than those practiced in advanced economies," she said. According to Ghosh, this situation is aggravated by the lack of an international framework that allows for debt renegotiation in a fair and effective way.
The Indian economist advocated for a review of the international financial architecture, suggesting that developing countries need "a new global social contract" that takes into account historical disparities and environmental responsibilities. "We need a framework that allows these countries to breathe, so that they can invest in their future without constantly being on the brink of financial collapse," she argued. Ghosh also stressed that solutions to the debt crisis need to go beyond traditional austerity measures, which only deepen poverty and social instability.
"Low-income countries are being strangled by unpayable debts with spreads that are much higher than those practiced in advanced economies," she said. According to Ghosh, this situation is aggravated by the lack of an international framework that allows for debt renegotiation in a fair and effective way.
Luciana Mendes dos Santos Servo, president of Brasil's Institute of Applied Economic Research [Instituto de Pesquisa Econômica Aplicada/Ipea] and one of the leaders of T20 Brasil, shared the group's vision of global challenges. Servo emphasized that the main objective of T20 is to transform the recommendations drawn up at the conferences into public policies that can be implemented by governments. "What we discussed here needs to become concrete action. The challenge is enormous, but the need is urgent," said Servo. She also stressed that T20 discussions must take into account the diversity of contexts of member countries. To her, the group's success depends on its ability to articulate a global agenda that is inclusive and takes into account the economic and social realities of developing countries. "Climate change is not an isolated problem, but rather part of a network of interconnected crises that include poverty, inequality, and debt. We need a holistic approach to address these challenges," stated Servo.
Tatiana Berringer, international policy researcher and representative of Brasil's Ministry of Finance [Ministério da Fazenda] at the G20 Social, analyzed the issue regarding public debt in countries that are most vulnerable to climate disasters. According to Berringer, most of the financial resources in these countries are earmarked for repaying debt, leaving little room for investment in climate infrastructure. "It is a vicious cycle: debts accumulate due to the need to rebuild after climate disasters, and the lack of investment in resilience only worsens the situation," said Berringer.
Beatriz Mattos, a climate finance expert, addressed the inequalities inherent to the current climate finance system. Mattos questioned the fairness of loans at market interest rates, which end up worsening the situation of countries already in debt. "Climate finance cannot be a tool of economic oppression. If we continue using the current system, we will be perpetuating inequality instead of combating it," criticized Mattos.
Ana Garcia, an expert in energy transition, focused on the Brazilian context. Garcia highlighted that, despite the enormous opportunities for energy transition in Brasil, such as its vast water and wind resources, the country faces significant challenges due to fiscal constraints imposed by the spending cap. "Brasil has enormous potential to lead the energy transition in Latin America, but we need to negotiate better with multinationals to ensure that the benefits of this transition are distributed fairly," concluded Garcia.
Jayati Ghosh's central message, echoed by the other participants, is clear: unless the international financial architecture is restructured, taking into account the realities of developing countries, any attempt to mitigate climate change will be insufficient and, even worse, could deepen existing inequalities.
Watch the full seminar "The Relationship Between Public Debt and Climate Change in Developing Countries" organized by T20 Brasil:
