TWN Info Service on Biodiversity and Traditional Knowledge (Nov22/07)
2 December 2022
Third World Network

Dear Friends and Colleagues

The CBD must address debt as a driver of biodiversity loss

We’re pleased to share a new TWN Briefing Paper, which lays out three key reasons why debt is relevant to the Convention on Biological Diversity (CBD):

1)      Debt can incentivize ecologically-damaging resource extraction for export

2)      Debt can limit fiscal policy space for biodiversity protection

3)      Debt imposes fiscal and ecological costs on those nations least responsible for the biodiversity crisis, yet which stand to suffer the greatest damage.

The authors call for the relevant decisions to be taken at the upcoming meetings in Montreal to address the connections between debt, austerity, and biodiversity loss. As such, the debt issue should remain on the agenda of the CBD’s Subsidiary Body on Implementation (SBI) and in Target 19.1 of the post-2020 Global Biodiversity Framework (GBF), as well as operationalized throughout the relevant decision adopting the GBF.

With best wishes,

Third World Network

TWN Briefing Paper, December 2022

The CBD must address debt as a driver of biodiversity loss

Tova Gaster, Jessica Dempsey, Audrey Irvine-Broque (University of British Columbia’s Centre for Climate Justice), Patrick Bigger (Climate and Community Project) and Lim Li Ching (Third World Network)

For the first time, there are potential decisions by the Conference of the Parties (COP) to the Convention on Biological Diversity (CBD) that address the connections between debt, austerity, and biodiversity loss. The draft decision on resource mobilization – arising from Recommendation 3/6 of the CBD’s Subsidiary Body on Implementation (SBI), paragraph 40(f) – asks the CBD Secretariat: “[To prepare a report on the relationship between public debt, austerity measures and the implementation of the Convention, with a view to removing specific impediments to the implementation of the Convention].” This text is currently bracketed, indicating no consensus as yet.

Additionally, text proposals from a developing country Party for Target 19.1 of the post-2020 global biodiversity framework (GBF) include the need to address sovereign debt in just and equitable ways, in order to increase domestic resource mobilization. Another developing country Party proposed that the Target take into consideration the fiscal space and the levels of sovereign debt.^[i] These text proposals have however not been included in the “streamlined” text resulting from the Informal Group on the Post-2020 Global Biodiversity Framework (CBD/WG2020/5/2). They should be reinstated given the importance of the issue.

A developing country Party has also asked for the draft elements of a possible decision operationalizing the post-2020 global biodiversity framework to include the issue of debt. Among others, it proposes that the CBD Executive Secretary “…initiate a process for considering the debt cancellation and efforts to put in place a multilateral debt restructuring process in order to allow financing for biodiversity conservation, in particular for the benefit of developing countries and megadiverse countries”.^[ii]

This briefing lays out three key reasons why debt is relevant to the CBD and should remain on the agenda of the SBI and in Target 19.1 of the GBF, as well as operationalized throughout the relevant decision adopting the GBF:

4)      Debt can incentivize ecologically-damaging resource extraction for export

5)      Debt can limit fiscal policy space for biodiversity protection

6)      The debts of heavily-indebted poor countries may violate the principle of common but differentiated responsibilities (CBDR), as debt imposes fiscal and ecological costs on those nations least responsible for the biodiversity crisis, yet which stand to suffer the greatest damage.

As such, it is crucial to the implementation of the Convention that the relationship between debt and biodiversity loss be further interrogated and options for contending with an important indirect driver of biodiversity loss explored.

1) Conditions on sovereign debt for developing nations often incentivize overexploiting primary exports in order to earn foreign currency in the short term, driving biodiversity loss

●          Most major external debts are foreign-denominated, resulting in a reliance on foreign currency to make payments. The high pressure to earn foreign exchange creates a reliance on export commodities, many of which are directly linked to high levels of biodiversity loss. According to one study, 927 species are projected to go extinct due to global land use change (prominently including deforestation, mining, and agriculture), and 25% of these extinctions have been directly linked to the production of exports.^[iii]

●          Compounding this, unfavourable conditions on these debts (for example, short-term debt tenors that inhibit investment in long-term sustainable development projects) often force nations to double down on commodity exports. Studies have drawn connections between structural adjustment programmes and deforestation due to export pressures,^[iv] but more research is needed to determine which specific conditions on debt create conditions which will limit the implementation of the CBD and the post-2020 GBF.

●          Conserving biodiversity requires reducing intensive resource extraction and land use change. This will require that all Parties are able to invest in long-term sustainable development projects and diversify their economies to meet the social and environmental needs of their people without reliance on biodiversity-degrading exports. An SBI-mandated study on the links between sovereign debt conditionalities and CBD implementation would provide vital information to support such action.

2) High levels of debt servicing also reduce fiscal space to invest in protecting biodiversity

●          High levels of debt distress make addressing this matter increasingly urgent. The International Monetary Fund (IMF)’s World Economic Outlook from July 2022 reported that “60 percent of low-income countries [are] in or at high risk of government debt distress”^[v] while 135 Global South countries are considered critically indebted by the Global Sovereign Debt Monitor.^[vi]  

●          Such an outlook means that a large proportion of government spending is being directed to repayment of foreign debts, rather than investment in meeting social and environmental objectives. In 2022, low-income indebted nations’ debt servicing exceeds 170% of social spending on average. In nations currently in default, debt represented twice the budget allocation for social spending.^[vii]

●          In many cases, the poorest countries are in the most precarious state in terms of both environmental change and debt distress; recent figures show that without substantial increases in non-lending finance, countries in Sub-Saharan Africa will need to take on almost US$1 trillion in debt to adapt to climate change, raising debt-to-GDP ratios by nearly 50% and dramatically curtailing investment potential in other social and environmental protection priorities.^[viii]

●          Because debt service must be prioritized in order for borrowing countries to maintain access to further lending, biodiversity action is perpetually neglected, allowing the ecological systems which underpin public health, national economies, food, and water to collapse. Without urgent, substantial investments in biodiversity protection and climate change-resilient food system reform, costs will continue to increase as ecosystem functions reach tipping points.^[ix]

●          The SBI recommendation will enable systematic study of the ways that debt occupies vital fiscal space needed to invest time, personnel, and money into biodiversity protection and sustainable use. 

3) Without action, heavily-indebted poor countries will pay more than their fair share for managing the effects of global environmental degradation

 

●       Wealthy states have failed to live up to their obligations under Article 20 of the CBD, which operationalizes the CBDR principle.

●       This principle was established as a result of the history of colonial resource theft in Latin America and other formerly-colonized regions, during which developed nations benefited from environmental destruction and racked up their own ecological debts.^[x] One recent study values the cumulative net “drain” of resources flowing from the developing to developed countries between 1990-2015 at US$242 trillion.^[xi]

●       Meanwhile, indebted nations which are the least responsible for the ecological crises are forced to pay escalating sums in debt servicing rather than address their own urgent biodiversity needs.

●       Debt cancellation is one crucial mechanism to distribute fiscal responsibility for biodiversity more equitably, an area which deserves further study. The draft text proposed for the post-2020 GBF, to consider debt cancellation and restructuring in order to meet biodiversity objectives, should be supported by Parties to the Convention.

In 2019, the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) called for “transformative change”, defined as “fundamental, system-wide reorganization” to preserve the ecosystems on which all life on earth depends. This necessarily means economic transformation, including reckoning with the vast wealth inequalities that accrued over centuries of exploitation in the Global South.^[xii] The COP must begin to take these on, and including debt in the resource mobilization and GBF decisions, and in the GBF itself, is a vital preliminary step towards this “transformative change”.