18 February 2023

Can debt swaps be a game-changer for poor nations to go green?

GS-2: Effect of policies and politics of developed and developing countries on India’s interests

Conservationists suggest "debt-for-environment swaps" as a solution for developing nations facing increasing debt, climate change, and nature loss. Poor countries owe $62 billion in annual debt service, with a 35% yearly increase, raising the risk of defaults. However, countries need to invest more in climate and biodiversity protection to meet their commitments. Portugal and Cape Verde recently agreed on a "debt-for-nature" swap, and Zambia is also considering a similar proposal from WWF.

Decoding Green Debt Swaps

• Debt swaps are a means of altering a nation's borrowingterms with bilateral government lenders, development finance institutions, or private banks. 
• Creditors can agree to give states more time to repay loans or lower interest rates and repayment amounts. 
• This can help low-income countries avoid default and free up resources to invest in climate change, nature protection, health, or education. 
• For creditors, debt swaps can decrease their risk by providing additional guarantees and ensuring that at least a portion of a loan is repaid eventually.

The current status of Green Debt Swaps

• Debt-for-nature swaps began in the 1980s, mainly in Latin America, and the Jubilee 2000 movement in the late 1990s called for debt relief for African and other poor countries. 
• Environmental debt swaps were uncommon and mostly small government-to-government deals for $10-20 million. 
• However, there are now attempts to expand them, although they can be administratively complicated and expensive to arrange. 
• Today, 70-80% of countries' debts are owed to private creditors, such as banks and asset managers. 
• High debt levels have been exacerbated by the COVID-19 pandemic, and more severe climate-driven disasters are increasing countries' debt distress.

Exploring the Push for Debt-for-Nature Swaps and its Drivers

• Developing countries that are struggling to repay creditors and unable to invest in environmentally-friendly projects are promoting green debt swaps. 
• Egypt presented a swap with Germany as a model for other countries seeking to raise funds for clean energy projects at the 2021 U.N. climate summit. 
• Although some multilateral development banks see potential in green debt swaps, many backers, such as WWF, consider them an insufficient long-term solution to the high levels of indebtedness among the poorest countries because they only address a small fraction of overall debt and do not address current lending practices. 
• However, organizations like The Nature Conservancy and the International Institute for Environment and Development (IIED) are helping arrange, monitor, and occasionally finance green debt swaps. 

Advantages of Green Debt Swaps: Financial and Political Perspectives

• Green debt swaps are advantageous because they allow countries to reduce their debt and free up funds for environmentally-friendly investments.
• The IIED has estimated that if 10% of the sovereign debt in developing countries was used for climate and nature action, it could raise around $100 billion through debt relief. 
• While climate and the environment were not a high political priority in many developing countries in the past, Climate and nature debt swaps can help bring various government ministries, such as finance, environment and agriculture, together to discuss policies that can lead to debt relief and give environment a voice in the conversation.

Boosting Green Debt Swaps: Strategies to Encourage and Scale up Initiatives

• The establishment of a global framework for green debt swaps is seen as a way to attract more creditors and increase the size of deals. WWF suggests that a public campaign similar to the debt and poverty reduction movement in the 1990s could also help. There is a need for performance indicators to monitor if governments are meeting their green commitments. 
• However, some critics argue that instead of debt swaps, poor nations should be given outright debt relief and use the funds as they see fit.

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What the Ministry of Mines’ draft Geo-heritage Sites and Geo-relics Bill says

GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

The Ministry of Mines has notified bill called the "Preservation and Maintenance of Geo-Heritage Sites and Geo-Relics Bill," which seeks to establish a framework for safeguarding and maintaining nationally significant geological sites and artifacts, known as geo-heritage sites and geo-relics. The purpose of this legislation is to support geological research, education, and awareness by declaring, conserving, and protecting such sites.

Understanding Geo-Heritage Sites and Geo-Relics

• As per a press release by the Ministry of Mines in 2016, the Geological Survey of India (GSI) is responsible for designating geo-heritage sites and national geological monuments that require protection and maintenance. 

• The GSI, which was established in 1851 falls under the Ministry of Mines.
• Objective: To investigate and assess the country's coal and mineral resources through regional-level exploration.

• The GSI or the relevant state governments are responsible for taking appropriate measures to safeguard these sites. 
• Under the proposed bill, geo-heritage sites are defined as areas that contain significant geological phenomena, stratigraphic type sections, geological structures, geomorphic landforms, caves, natural rock-sculptures of national and international interest, and the adjoining land required for their preservation or access. 
• Geo-relics, on the other hand, are defined as geological relics or materials of significance or interest, such as sediments, rocks, minerals, meteorites, or fossils, which the GSI can acquire for preservation and maintenance.
• The 32 geo-heritage sites that are spread across 13 states include the Volcanogenic bedded Barytes of Mangampeta in Cuddapah district of Andhra Pradesh, the Akal Fossil Wood Park in Jaisalmer, Rajasthan, and others.

Understanding the Proposed Provisions of the Geo-Heritage Sites and Geo-Relics Bill

• The proposed Ministry of Mines Bill highlights concerns over the preservation of India's geo-heritage sites and geo-relics, which are at risk of being destroyed due to the absence of legislation for their protection, maintenance and preservation. 
• The bill emphasizes the significance of India's fossil wealth, including dinosaur remains in Madhya Pradeshand Gujarat, marine fossils in Kutch and Spiti, and oldest life forms like stromatolites in Rajasthan and Madhya Pradesh, and metallurgical records of gold, lead and zinc in Rajasthan and Andhra Pradesh. 
• These sites have immense geoheritage and geotourism value, and the bill suggests that necessary measures must be taken to protect them.

Provisions regarding preservation

• The proposed Geo-heritage Sites and Geo-relics Bill would empower the Central Government to declare a geo-heritage site as nationally significant under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act of 2013 (RFCTLARR Act). 

• The government would issue a public notice in the Official Gazette specifying which areas would be acquired and providing a two-month window for objections. 

• The Bill also stipulates compensation to be paid to landowners or occupants who suffer losses or damages due to the government's exercise of power. 

• The market value of any property would be determined based on the principles of the RFCTLARR Act. 

• The Bill prohibits any construction, repair, or renovation of buildings or other use of the site, except for construction related to preservation and maintenance or for essential public works. 
• The Bill outlines penalties including imprisonment for up to six months, fines up to Rs.5 lakh, or both. 

• In the event of a continuing contravention, an additional fine of up to Rs.50,000 per day may be imposed.

Criticism

• There are concerns over the bill’s distribution of power and its potential impact on local communities. 
• The Bill grants the GSIsweeping powers to acquire any material of geological significanceand sites of geological importance. 
• The issue of land acquisition for safeguarding these sites could also lead to issues with local communities.

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