Global credit rating agency Moody’s has drawn up a map of the countries most at risk of defaulting on their debts because of climate change, showing that some of the poorest parts of the world are expected to be hardest hit.
And, in a warning to oil-producing states, it said they would face “an additional set of economic, fiscal and institutional credit challenges” as the world moves to a low-carbon economy.
The list of the “most susceptible” nations included the likes of India, Pakistan, Vietnam, Papua New Guinea, Ethiopia, Kenya, Angola, Namibia, Bolivia and Honduras, according to a report by Moody's.
In contrast, most of Europe, North America and China were among those considered least at risk.
The report’s conclusions fit with the general trend that poor countries which have done the least to cause global warming will suffer its effects the most and the nations that built their wealth on fossil fuels will fare better.
“While all countries will experience the physical effects of climate change to some degree, sovereigns [countries] with larger, more diversified economies and geographies are less susceptible,” Moody’s said.
“These economies generally have better infrastructure quality that can withstand disruptive events and an ability to carry a higher debt burden at more affordable interest rates.
“In contrast, those with a greater reliance on agriculture, lower incomes, weaker infrastructure quality, and smaller fiscal capacity exhibit greater susceptibility.”
It cited four main reasons why climate change could affect “a sovereign's ability and willingness to repay its debt”.
There were the potential economic impact, for example as a result of lost agricultural production; damage to infrastructure cause by floods and storms; rising social costs resulting from health or food crises; and “population shifts due to forced displacements resulting from climate change”.
But it warned the latter problem may have already helped push at least one country into war.
“According to some studies, the prolonged drought in Syria between 2006 and 2011 led to a large population displacement from rural to urban areas, a trend which contributed to the ongoing civil war,” the report said.
Saudi Arabia was listed as one of the “least susceptible” to the effects of climate change, but Moody’s said it was going to do more work on the effect of climate change on economies heavily dependent on fossil fuels.
“Some sovereigns, in particular oil-exporting ones, will face an additional set of economic, fiscal and institutional credit challenges over the longer term related to a transition to a low-carbon economy,” it said. “We plan to address the credit challenges facing sovereigns from carbon transition in a separate publication.”
It listed a number of problems already affecting parts of the world.
“In terms of climate trends, the gradual desertification of Israel, Lebanon, and Jordan is leading to land degradation and soil infertility,” Moody’s said.
“According to the Lebanese authorities, economic damage from climate change could reach more than $80 billion (156 per cent of 2015 GDP) by 2040.
“The impact of a single event can be severe. The estimated value of disaster effects on Fiji’s economy from Tropical Cyclone Winston in early 2016 was approximately … 21 per cent of 2015 nominal GDP.
“Floods in Mozambique in 2015 resulted in critical damage to roads and bridges, cutting land access to almost 70 per cent of the Zambézia province. Downed power cables and electricity towers also left several parts of northern Mozambique without power.
“The severe El Nino-driven drought in Papua New Guinea in 2015 affected more than two million people, or around one third of the population. The impact on food supply and the wider economy prompted the government to step in to buy rice, and provide drought assistance and disaster relief worth around 0.3 per cent of GDP.”
Climate and poverty campaigners said the report showed the need for wealthy countries to do more to help the developing world during the UN climate talks in Morocco, which began on Monday.
Tracy Carty, Oxfam's climate policy lead, said: “The cruel reality of climate change is that it hits those who are least responsible for causing it and have least capacity to cope with its effects.
“Low-income countries are on the frontlines of climate climate – they are most exposed and find it hardest to recover from climate shocks such as floods, droughts and heatwaves.
“Many low income countries have economies that are highly reliant on agriculture, a sector that is intensely vulnerable to climatic shocks and changes.
“Climate change is making development harder and more expensive, which is why urgent action is needed at [the UN climate summit] in Marrakech to increase financial support to help countries cope and adapt to their changing climates.”
And a spokesperson for Global Justice Now said: “The history of the world’s fossil fuel bingeing is fundamentally one of environmental racism.
“While it is the global north that has by far materially benefitted the most by being historically responsible for the most greenhouse gas emissions, it is countries in the global south that will be bearing the brunt of the rising sea levels, droughts, shifting disease patterns and so on caused by climate change.
“One of the fundamental problems of the UN climate talks is the unwillingness of Western countries to acknowledge the scale of this climate injustice and their refusal to stump up anything close to sufficient funds to financially support those countries who are going to suffer the hardest impacts.”
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