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Governments Spend Billions Subsidizing Climate-Harming Industries: New Report

The report further found that governments in the North continue to fuel the climate crisis disproportionately, and even though the developed world has just a quarter of the world’s population, their annual average fossil fuel subsidies amounted to USD 239.7 billion.

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Joseph Loree, who lives in the oil-rich Lokichar area of Turkana in northern Kenya, keeps a few goats due to frequent droughts. Governments in the Global South are spending billions of dollars subsidising industries harming the climate, such as the one in Lokichar. Credit: Maina Waruru/IPS

:Report exposes corporate capture draining $700B in public subsidies from Global South, hindering climate action while fossil fuels outpace renewable energy funding.

By Maina Waruru

A report examining corporate capture of public finance is accusing industries fueling the climate crisis, including fossil fuel ones, of draining public funds in the Global South, singling them out for squeezing out of governments USD 700 billion in public subsidies each year.

The report, How theFinance Flows: Corporate capture of public finance fuelling the climate crisis in the Global South, released on 17 September says that the climate-destructive sectors are benefiting from money that could go to paying for schooling for all Sub-Saharan African children 3.5 times over, even as Global South renewable energy projects remain starved of cash, receiving 40 times less public finance than the fossil fuels sector.

While urging governments in the developing world to allocate more of their limited resources in ways that “truly serve their people’s needs” through climate solutions for food and energy, the analysis of financial flows by ActionAid reveals that the fossil fuel sector in the region received a staggering annual average of USD 438.6 billion a year in subsidies, between 2016 (when the Paris Agreement was signed) and 2023.

The industrial agriculture sector alone benefited from government subsidies equivalent to a whopping USD 238 billion a year on average between 2016 and 2021, even as it continued to contribute to the worsening of nature, it  reveals.

It further reveals that the industries causing the climate crisis are also draining the lion’s share of public funds, including in “climate-hit countries,” in places like Sub-Saharan Africa, even as initiatives providing climate solutions remain severely underfunded.

The report points to corporate capture of public finance, combined with a lack of international climate finance, as some of the factors holding back climate action in some of the “countries and communities that need it most”.

While also finding that climate finance grants from the Global North for climate-hit countries are still grossly insufficient to support climate action and the necessary transitions in the southern hemisphere, it gives examples of several countries in Africa where policies in place were in conflict with actual reality actions.

These include the fossil fuel-rich African countries of South Africa and Nigeria, which have been found to be heavily subsidizing the discredited sector.

The countries, including Bangladesh in South Asia, Action Aid says were providing fuel subsidies up to between 22 and 33 times the “per capita level of annual public investment in renewable energy” flow, for example.

As a result, in the hemisphere, renewable energy initiatives are receiving 40 times less public finance than the fossils sector, while climate finance grants amount to just a 20th of the Global South’s public finance going to fossils and industrial agriculture.

“While trillions of dollars in climate finance from the Global North to the Global South are necessary to adequately address the climate and development crises, Global South governments must allocate their limited resources in ways that truly serve their people’s needs through climate solutions for food and energy,” it says.

“Meanwhile, the failure of Global North countries to provide adequate climate finance for climate transitions means that Global South countries are locked into harmful development pathways that destroy ecosystems, grab lands and compound the injustice of climate change,” it adds.

Citing the example of Southern Africa’s Zambia, it says that the industrial agriculture sector in the country gobbled up 80 percent of the national agriculture budget in 2023, through subsidies for “climate-harming synthetic fertilizers and commercial seeds.”

“Meanwhile, only 6 percent of the Agriculture Ministry’s Agricultural Development and Productivity Programme was spent on supporting farmers to adopt agroecological, nature-friendly farming approaches, that naturally strengthen soil fertility and reduce dependency on agrochemical inputs,” it explains the contradiction.

Zambia’s neighbor Zimbabwe has made public policy statements in support of a shift towards agroecology, a shift evidenced by 34 percent of the country’s agriculture budget this year supporting farmers to adopt practices to move from climate-destructive agrochemicals.

Despite that, Zimbabwe is still using approximately 50 percent of its entire national agriculture budget towards subsidizing industrial agribusiness inputs such as fertilizers and hybrid seeds,” signaling the industry’s continued control over the sector and budget, as well as the potential to free up more public finances for public good’.

Two west African countries, the Gambia and Senegal, and South America’s Brazil were equally  found to be engaging in contradictory practices, making public investments in renewable energy, on a scale that is almost comparable to the per capita public subsidy provision for fossil fuels.

In the Gambia, the scale of public investment in renewable energy is more than four-fifths that of public finance provided to fossil fuels; while in Brazil and Senegal, the scale of renewables investment was found to be two-thirds that of fossil fuel subsidies.

“Kenya’s ambition to be a global leader in renewable energy is borne out by the finding that per capita investment in renewables in the country is outspending public subsidy provision to fossil fuels. However, recent protests in Kenya against the government’s reduction of fossil fuel subsidies underline the importance of feminist Just Transition principles,” the investigation found.

“Shifts in public financing must be carefully sequenced to protect the rights of people—especially women—living in poverty. Any reductions in fossil fuel subsidies should target the wealthy corporations first. Only once accessible and democratic alternatives and comprehensive social protections are available to people on low incomes, should progressive policies be shifted,” the analysis concluded.

The report further found that governments in the North continue to disproportionately fuel the climate crisis, and even though the developed world has just a quarter of the world’s population, their annual average fossil fuel subsidies amounted to USD 239.7 billion.

Action Aid laments that renewable energy public investment in the Global South comes to an annual average of USD 10.3 billion each year, noting that even worse, renewable energy investment in the South has been on a downward trend, more than halving from USD 15 billion in 2016 to USD 7 billion in 2021.

It calls on governments to speed up the transition to green, resilient, democratic and people-led climate solutions for food and energy, such as renewable energy and agroecology. “For Global South countries already experiencing the devastating consequences of climate change, the need for global transition is all the more urgent”.

According to Arthur Larok, Secretary General of ActionAid International, the report further helps expose wealthy corporations’ ‘parasitic’ behavior.

“They are draining the life out of the Global South by siphoning public funds and fueling the climate crisis. Sadly, the promises of climate finance by the Global North are as hollow as the empty rhetoric they have been uttering for decades. It is time for this circus to end; we need genuine commitments to ending the climate crisis,” he said.

The report also debunks the “false narrative” that fossil fuel and industrial agriculture expansion in the Global South is necessary to address food insecurity and energy poverty and to provide livelihoods and public revenue, said Teresa Anderson, Global Lead on Climate Justice at ActionAid International and one of the report’s authors.

“It seems that money is the root of all climate upheaval. Climate-destructive industries are bleeding the Global South of the public funds they should be using to deal with the climate crisis. “The lack of public and climate finance for solutions means that in climate-vulnerable countries, renewable energy is receiving 40 times less public finance than the fossil fuel sector,” she added.

The time had come for the poor to stand up to industries that are draining their finances and wrecking the climate.

Public resources, the report recommends, should be directed toward supporting just transition away from climate-destructive fossil fuels and industrial agriculture and in favor of “people-led climate solutions that safeguard people’s rights to food, energy and livelihoods.”

It should also go to scaling up decentralized renewable energy systems to provide energy access, and gender-responsive agricultural extension services that offer training in agro-ecology and adaptation.

It appeals to wealthy countries to provide “trillions of dollars in grant-based climate finance each year to Global South countries on the front lines of the climate crisis,” including by agreeing to an ambitious new climate finance goal at COP29.

Further, it calls for regulation of the banking and finance sectors to end destructive financing, including setting minimum standards for human rights, social and environmental frameworks, and transformation of the international financial institutions that are pushing climate-vulnerable countries into “spiraling debt.”

Keywords:Corporate Capture:Fossil Fuel Subsidies:Climate Finance:Global South:Renewable Energy

IPS UN Bureau Report

Charles Wachira, Managing Editor of businessworld, has disproportionately worked as a foreign correspondent in Nairobi, Kenya. Formerly an East Africa correspondent with bloomberg, covering the business beat he has since been published by a legion of other authoritative global news platforms including Global Finance Magazine, Toward Freedom, Earth Island Journal, and Dialogue. earth and so on. He is also a co-author of, Success to Significance, a biography of pre-eminent global industrialist and renowned philanthropist Dr. Manu Chandaraia. He’s an alumnus of the University of Nairobi and Nairobi School.

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CLIMATE CAPITAL

African Nations Deserve Climate Funding, Not Debt, Says Economist

The United Nations Development Programme estimates Africa needs about US$2.8 trillion by 2030 for climate mitigation, despite contributing only 4% of global greenhouse gas emissions. However, the continent’s urgent need is for adaptation funding, as climate change is already impacting lives. In 2022, only half of the climate finance Africa received—US$4.6 billion—was allocated to adaptation, with the rest directed towards mitigation or a mix, reflecting the global north’s priorities.

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Prof. Carlos Lopez urges African countries to use COP29 to address systemic biases that inflate risk perceptions, downplay achievements, and exacerbate borrowing costs and commodity dependence.

: As COP29 kicks off on November 11, African nations face increasing pressure to tackle climate adaptation, but their reliance on loans instead of grants is deepening the debt crisis.
 By Prof Carols Lopes

As we approach the global annual climate change conference, COP29, the need for increased public finance from the global north to address climate adaptation in Africa has become more urgent than ever.

However, framing the finance debate solely around this need risks deepening mistrust and downplaying the scale of the challenge. The financial burden of addressing climate change, coupled with limited fiscal space, creates a precarious situation for many African countries. African countries bear no historical responsibility for causing the climate crisis. However, they rely heavily on external financing to solve climate change problems.

Unfortunately, much external climate finance comes from loans rather than grants. This only worsens Africa’s debt burden. There is also not nearly enough money being channelled to Africa to pay for climate change adaptation.

At COP29, African negotiators will undoubtedly focus on reducing dependence on debt, and improving access to finance. I’m an economist who specialises in climate change and governance, with a long background at the United Nations and the African Union. Without robust commitments from public financial institutions, Africa will continue to face the dual crises of climate vulnerability and debt.

African countries must use COP29 to tackle systemic biases that inflate risk perceptions, minimise African achievements and inflate its problems. These biases drive up borrowing costs, and worsen commodity dependence.

THE CLIMATE FINANCE GAP

The African Development Bank has estimated that Africa needs between US$1.3 trillion and US$1.6 trillion in total climate financing every year between 2020 and 2030. This will enable African countries to meet their commitments to reduce greenhouse gas emissions, known as nationally determined contributions.

The Global Center for Adaptation estimates that Africa requires at least US$52.7 billion annually for adaptation every year until 2035. However, this figure could rise to US$106 billion. This is because data gaps allow for double counting of financial contributions. There is also very little transparency about the real amounts of climate finance being disbursed. Because nationally determined contributions are focused on mitigation, carbon depletion tends to be measured without accurate calculations of the amount of emissions that are captured, or carbon that is conserved.

The United Nations Development Programme says that Africa’s nationally determined contributions mean the continent needs about US$2.8 trillion by 2030 for climate mitigation. However, Africa contributes only 4% of all greenhouse gas emissions currently. It needs funds for adaptation to adjust to climate change that is already changing the lives of many, rather than for mitigation.

But only about half of the climate finance received by Africa in 2022 was for adaptation (US$4.6 billion). The rest of the climate finance addressed mitigation or a mix of both, in line with the global north’s agenda.

Worse still, 64.5% of adaptation financing came from loans, which need to be repaid. This will increase the financial strain on African nations.

LOANS VERSUS GRANTS FOR CLIMATE CHANGE ADAPTION

Multilateral financial institutions such as the International Monetary Fund (IMF) and the World Bank, and the Organisation for Economic Co-operation and Development through their Development Assistance Committee, handed out US$8.33 billion to Africa in 2022 for climate action. But most of this – US$5.4 billion – was loans. Only US$2.9 billion was grants, with a small fraction in equity investments.

These loans come with lower-than-market rates or extended repayment terms. But they still add to Africa’s external debt, which reached US$1.12 trillion in 2022. African countries’ debt repayments are twice what they get as climate finance.

The United Nations Framework Convention on Climate Change says developed countries are responsible for financing climate adaptation in vulnerable regions. But loans that create a huge debt burden only enrich global financial institutions at the expense of African countries.

The effects of climate change are causing unprecedented floods, drought and other disasters across Africa. Yet it is becoming more difficult for African countries to access the climate finance they need to adapt to a warming world.

Why is the situation worsening?

First, access to climate finance remains a bureaucratic nightmare with complex application processes. There also needs to be more transparency in fund allocation. The recently established Loss and Damage Fund could assist. It is meant to channel money to countries worst affected by climate change to pay for the damage caused.

Second, the focus on reforming Bretton Woods institutions and development finance institutions is shifting attention away from the obligations developed countries have signed up for. This distracts developing nations from making reforms in trade, taxation and financial regulations that could drive more meaningful results.

Third, there is a lack of liquidity (access to fresh money) needed to propel investment or allow countries to bridge their budget deficits. African countries are forced to juggle paying for healthcare, education and infrastructure development with paying back debt. Some spend more on debt repayments than healthcare.

Increased tax efficiency and domestic savings, such as the savings maintained by pension funds, could be used. This should be the priority while the fight for better international conditions continues.

Fourth, the distinction between development finance and climate finance is becoming an impediment to progress. The conversation should move away from getting African countries to prioritise greenhouse gas emission reductions at the expense of other development priorities. Climate action is under-implemented and underfunded. The focus must be on excessive dependency on aid and rather promote market incentives to encourage the private sector to invest in climate adaptation in Africa.

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Plastic-Eating Insect Species Discovered in Kenya Offers New Hope for Waste Management

Plastic pollution is severe in parts of Africa, driven by high plastic imports and limited recycling. Dr. Fathiya Khamis and her team aim to harness natural “plastic-eaters” to develop faster, more efficient waste solutions.

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Dr. Fathiya Khamis, part of a team at the International Centre of Insect Physiology and Ecology, has discovered that Kenyan lesser mealworm larvae can digest polystyrene with the help of gut bacteria.

: Scientists have discovered mealworms in Kenya capable of digesting polystyrene plastic, potentially providing new tools for tackling global plastic pollution.
 By Dr. Fathiya Mbarak Khamis

There’s been an exciting new discovery in the fight against plastic pollution: mealworm larvae that are capable of consuming polystyrene.

 They join the ranks of a small group of insects that have been found to be capable of breaking the polluting plastic down, though this is the first time that an insect species native to Africa has been found to do this.

Polystyrene, commonly known as styrofoam, is a plastic material that’s widely used in food, electronic and industrial packaging.

 It’s difficult to break down and therefore durable. Traditional recycling methods – like chemical and thermal processing – are expensive and can create pollutants.

 This was one of the reasons we wanted to explore biological methods of managing this persistent waste.

I am part of a team of scientists from the International Centre of Insect Physiology and Ecology who have found that the larvae of the Kenyan lesser mealworm can chew through polystyrene and host bacteria in their guts that help break down the material.

The lesser mealworm is the larval form of the Alphitobius darkling beetle. The larval period lasts between 8 and 10 weeks.

 The lesser mealworms are mostly found in poultry-rearing houses which are warm and can offer a constant food supply – ideal conditions for them to grow and reproduce.

Though lesser mealworms are thought to have originated in Africa, they can be found in many countries around the world.

 The species we identified in our study, however, could be a sub-species of the Alphitobius genus. We are conducting further investigation to confirm this possibility.

Our study also examined the insect’s gut bacteria. We wanted to identify the bacterial communities that may support the plastic degradation process.

Plastic pollution levels are at critically high levels in some African countries. Though plastic waste is a major environmental issue globally, Africa faces a particular challenge due to the high importation of plastic products, low reuse and a lack of recycling of these products.

By studying these natural “plastic-eaters”, we hope to create new tools that help get rid of plastic waste faster and more efficiently. 

Instead of releasing a huge number of these insects into trash sites (which isn’t practical), we can use the microbes and enzymes they produce in factories, landfills and cleanup sites. This means plastic waste can be tackled in a way that’s easier to manage at a large scale.

KEY FINDINGS

We carried out a trial, lasting over a month. The larvae were fed either polystyrene alone, bran (a nutrient-dense food) alone, or a combination of polystyrene and bran.

We found that mealworms on the polystyrene-bran diet survived at higher rates than those fed on polystyrene alone.

 We also found that they consumed polystyrene more efficiently than those on a polystyrene-only diet. This highlights the benefits of ensuring the insects still had a nutrient-dense diet.

While the polystyrene-only diet did support the mealworms’ survival, they didn’t have enough nutrition to make them efficient in breaking down polystyrene. 

This finding reinforced the importance of a balanced diet for the insects to optimally consume and degrade plastic. The insects could be eating the polystyrene because it’s mostly made up of carbon and hydrogen, which may provide them with an energy source.

The mealworms on the polystyrene-bran diet were able to break down approximately 11.7% of the total polystyrene over the trial period.

GUT BACTERIA

The analysis of the mealworm gut revealed significant shifts in the bacterial composition depending on the diet. Understanding these shifts in bacterial composition is crucial because it reveals which microbes are actively involved in breaking down plastic. This will help us to isolate the specific bacteria and enzymes that can be harnessed for plastic degradation efforts.

The guts of polystyrene-fed larvae were found to contain higher levels of Proteobacteria and Firmicutes, bacteria that can adapt to various environments and break down a wide range of complex substances. 

Bacteria such as Kluyvera, Lactococcus, Citrobacter and _Klebsiella were also particularly abundant and are known to produce enzymes capable of digesting synthetic plastics. The bacteria won’t be harmful to the insect or to the environment when used at scale.

The abundance of bacteria indicates that they play a crucial role in breaking down the plastic. 

This may mean that mealworms may not naturally have the ability to eat plastic. Instead, when they start eating plastic, the bacteria in their guts might change to help break it down. Thus, the microbes in the mealworms’ stomachs can adjust to unusual diets, like plastic.

These findings support our hypothesis that the gut of certain insects can enable plastic degradation. This is likely because the bacteria in their gut can produce enzymes that break down plastic polymers.

This raises the possibility of isolating these bacteria, and the enzymes produced, to create microbial solutions that will address plastic waste on a larger scale.

WHAT’S NEXT

Certain insect species, such as yellow mealworms (Tenebrio molitor) and superworms (Zophobas morio), have already demonstrated the ability to consume plastics. They’re able to break down materials like polystyrene with the help of bacteria in their gut.

Our research is unique because it focuses on insect species native to Africa, which have not been extensively studied in the context of plastic degradation.

This regional focus is important because the insects and environmental conditions in Africa may differ from those in other parts of the world, potentially offering new insights and practical solutions for plastic pollution in African settings.

The Kenyan lesser mealworm’s ability to consume polystyrene suggests that it could play a role in natural waste reduction, especially for types of plastic that are resistant to conventional recycling methods.

Future studies could focus on isolating and identifying the specific bacterial strains involved in polystyrene degradation and examining their enzymes.

We hope to figure out if the enzymes can be produced at scale for recycling waste.

Additionally, we may explore other types of plastics to test the versatility of this insect for broader waste management applications.

Scaling up the use of the lesser mealworms for plastic degradation would also require strategies for ensuring insect health over prolonged plastic consumption, as well as evaluating the safety of resulting insect biomass for animal feeds.

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CLIMATE CAPITAL

CBK Migrates Kenya’s Payment System to ISO 20022 Standard

Kenya becomes the first East African country to adopt ISO 20022 in its primary payment system, setting a benchmark for regional financial innovation and solidifying its role as a financial technology leader in East Africa.

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CBK’s ISO 20022 adoption supports Kenya’s financial ambitions by enhancing investor confidence and solidifying Kenya’s standing in the global economy. This upgrade aligns Kenya with international payment standards, strengthening its leadership in East Africa’s economic growth.

: The Central Bank of Kenya updates KEPSS to ISO 20022, boosting faster transactions, fraud monitoring, and improved cross-border payments.
On October 14, 2024, the Central Bank of Kenya (CBK) made a significant leap in modernising Kenya’s financial systems by migrating the Kenya Electronic Payment and Settlement System (KEPSS) to the ISO 20022 standard.

The Role of ISO 20022 in Financial Messaging

ISO 20022 provides a universal messaging language, using XML to create a framework for various financial services. First introduced for financial institutions in 2004, this standard facilitates communication between different financial systems worldwide.

KEPSS: Kenya’s Financial Backbone

As the primary real-time gross settlement (RTGS) system, KEPSS handles Kenya’s large-value and time-sensitive payments, processing roughly $305 billion up to August 2024.

 Known as the “backbone” of Kenya’s domestic and regional payment transactions, KEPSS now operates with enhanced speed and fraud monitoring capabilities, thanks to ISO 20022.

Benefits of the Migration to Kenya’s National Payments Strategy

The ISO 20022 migration is a “key component” of Kenya’s National Payments Strategy.

 The CBK previously upgraded the Cheque Clearing House to this standard, and the recent KEPSS migration further advances Kenya’s payment systems, promoting financial inclusion and enabling cross-border interoperability.

Kenya’s Pioneering Move in East Africa

With this migration, Kenya is the first in East Africa to adopt ISO 20022 in its primary payment system.

 By leading in this regional upgrade, the CBK sets a model for other East African countries, enhancing Kenya’s reputation as a regional hub for financial innovation.

Supporting Financial Growth and Global Integration

CBK’s implementation of ISO 20022 is crucial for Kenya’s financial goals, boosting investor appeal and reinforcing Kenya’s competitive position in a globalized economy. 

This modern infrastructure also aligns Kenya with international standards, bolstering its role in East Africa’s economic development.

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