As the United Nations’ COP29 climate summit in Azerbaijan approaches, researchers are urging Canada to take meaningful action on global climate finance that reflects its historical greenhouse gas emissions.
At the recent Canada’s Climate Fair Share Summit, experts and civil society groups convened to discuss the climate debt Canada owes the Global South, stressing that effective solutions can be found not just in scaling up finance but also in significantly reforming trade and taxation policy.
Hosted by the Climate Emergency Unit and the Padma Centre for Climate Justice, panelists discussed how financial structures like international investment agreements and national debt prevent Global South governments from investing in energy transitions.
Canada’s Responsibility
Under the 2015 Paris agreement, countries must fund global climate actions according to their responsibility for the crisis and their ability to pay. This principle of “common but differentiated responsibilities” (CBDR) has guided UN climate negotiations since 1992 and is a factor each country’s Nationally-Determined Contribution (NDC) emissions reduction targets. Canada is expected to release a new NDC in 2025.
But the CBDR framework isn’t working, Climate Emergency Unit researcher Rajinder Deol told the summit. It is voluntary rather than mandatory, and neither countries nor companies are buying in.
Canada, one of the top 10 wealthiest countries, is falling far short of addressing its share of the problem. It is a top nine greenhouse gas emitter, despite being home to just 0.5% of the global population, said Ceecee Holz, senior research associate at the Climate Equity Reference Project.
Holz, who developed a method for Climate Action Network Canada (CAN-Rac) to assign fair share financial contributions for climate adaptation, estimates that Canada must reduce emissions 160% below 2005 levels by 2035 to fulfill its obligation. That means pushing beyond domestic policy to help finance other nations’ efforts to reduce emissions and adapt to the impacts of climate change.
Holz pegs Canada’s fair share international financing contribution for climate change mitigation at C$25 billion in 2025, increasing to $86 billion per year by 2035. But as of September 2024, Canada has only committed 79% of its 2021-2025 pledge of $5.3 billion in climate finance, a pledge far short of its estimated fair share.
Tax Reform and Debt Justice
Climate financing for the Global South is not only about funding, say fair share advocates. It is also about addressing the financial constraints, including trade agreements and debts, that keep countries in a chronic state of shortfall.
Debt will likely force 38 of the 63 most climate vulnerable countries to cut public services, according to research by Action Aid. Yet over 17% of public climate finance in 2023 came in the form of market-rate loans. According to Deol, climate loans deepen climate injustice rather than addressing it, by reinforcing the same debt burdens that constrain climate action.
In addition to climate debt, Canada owes an ecological debt to the Global South for the disproportionate share of resources it has extracted, said Carola Meija, climate justice, transitions, and amazon coordinator at Latinddad.
A panel on tax and trade justice focused on the mechanisms, such as bilateral treaties, that ease the way for resource extraction. Many International Investment Agreements (IIAs) are designed to overrule countries’ own priorities, including around climate and natural resources, said Hadrian Mertins-Kirkwood, a researcher at the Canadian Centre for Policy Alternatives. Canada has signed 85 IIAs with 75 different countries.
“Thousands of these agreements have been signed, mainly at the behest of multinational corporations, especially in rich countries, that are trying to maximize profits abroad,” said Mertins-Kirkwood.
Several IIAs include Investor-State Dispute Settlement (ISDS) clauses, which allow companies to sue sovereign nations if they try to back out of resource export agreements. Mertins-Kirkwood said ISDSs can trap indebted nations into environmentally-harmful projects.
For example, in 2016, Canadian company Crystallex International Corporation won a US$1.2-billion settlement from Venezuela after Venezuelan regulators denied a gold mine’s environmental permit. Canada has pursued at least 56 international dispute settlements with countries outside North America, 70% of which were in the mining, oil and gas sector.
“Rich countries can afford to fight ISDS cases,” said Mertins-Kirkwood. “That’s not true for a lot of developing countries.” He described ISDS courts as a biased system where trade lawyers decide outcomes, with no conventional judge or appeals process.
Climate Carveouts
To reform ISDSs, some researchers advocate for creating climate carveouts in future IIAs to ensure that companies can’t trap Global South nations into ecologically-disastrous export agreements.
Climate Emergency Unit Director of Campaigns Anjali Appadurai, who organized the conference, said COP29 won’t likely result in foundational reforms to the international financial architecture, but will still be an opportunity to pursue climate finance in line with countries’ historical responsibilities.
In the short term, Meija recommended increasing Special Drawing Rights (SDR), a reserve currency issued by the International Monetary fund, to increase liquidity for countries in debt distress without forcing them to take out further loans. They also advocated for a wealth tax on both large fossil fuel companies and individuals.
“We have a big fair share gap, and what we’re providing is not nearly enough,” said Deol.
