Application of Article 6-Linked Debt-for-Climate Swap for the Clean Energy Transition in Africa

Hyun-Chool Lee () and Youngbin Choi
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Hyun-Chool Lee: Department of Political Science and Diplomacy, Konkuk University, Seoul 05029, Republic of Korea
Youngbin Choi: Department of Political Science and Diplomacy, Konkuk University, Seoul 05029, Republic of Korea

Sustainability, 2024, vol. 16, issue 17, 1-22

Abstract: This study presents an innovative financial model that integrates the debt-for-climate swap mechanism with Article 6 of the Paris Agreement, specifically designed to support Africa’s transition to clean energy. The model connects debt-for-climate swaps with the creation of internationally transferred mitigation outcomes (ITMOs), offering mutual benefits for both debtor and creditor nations. This approach aims to improve the debt sustainability of African countries while strengthening their climate resilience by combining Article 6 of the Paris Agreement with Official Development Assistance (ODA). Additionally, this model aligns with key Sustainable Development Goals (SDGs), including SDG 7 (Affordable and Clean Energy), SDG 13 (Climate Action), and SDG 17 (Partnerships for the Goals). Furthermore, the study proposes a restructuring of existing environmental safeguards by incorporating the “Do No Significant Harm” (DNSH) criteria and environmental contribution indicators to ensure alignment with the minimum safeguards mandated by Article 6 and international development standards. Through quantitative analysis, our findings indicate that the proposed debt-for-climate swap model could significantly contribute to Africa’s clean energy transition, address the region’s external debt challenges, and enhance climate resilience.

Keywords: debt-for-climate swap; climate finance; official development assistance (ODA); market mechanism (Article 6 of the Paris Agreement); clean energy transition in Africa (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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