Debt for Climate Swaps

 What is Debt-for-Climate ?

• The countries most vulnerable to the effects of climate change are often the least able to afford the investment needed to strengthen their resilience
• This puts these countries in danger of facing prolonged fiscal crises, forcing them to rely on aid from the international community

Debt-for-Climate Swaps

• innovative financial instrument that aims to address this issue by creating fiscal space for climate investments.
• incentivize debtor countries to take       meaningful action on climate while reducing their debt burdens.
• These swaps involve reducing debt in exchange for policy commitments or spending by debtor countries.

• The first debt-for-climate swap was implemented in 2006 between Germany and Indonesia, with the latter committing to reduce greenhouse gas emissions from deforestation and forest degradation (REDD+) in return for debt relief.

How will it Help ?

• Debt- for-climate swaps can foster mutual trust and collaboration, create win-win solutions, and contribute to the global efforts to achieve the Paris Agreement and the Sustainable Development Goals.
• Debt-for-climate swaps offer a possible solution for SIDS to address these issues. These involve reducing external debt in exchange for policy commitments or spending by the debtor country
• By participating in debt-for-climate swaps, SIDS can reduce its external debt and free up fiscal resources for other developmental needs, including climate action. This can help them increase their domestic investment in climate action.

Prelims Question for Practice

Mains Question for Practice

Chetan Bharat Learning is the best institute in Chandigarh for UPSC IAS ,PCS preparation. To know more about Chetan Bharat Learning’s Online & Classroom Courses, click on the following links: