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

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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)

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.

Suggested Citation

  • Hyun-Chool Lee & Youngbin Choi, 2024. "Application of Article 6-Linked Debt-for-Climate Swap for the Clean Energy Transition in Africa," Sustainability, MDPI, vol. 16(17), pages 1-22, September.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:17:p:7818-:d:1473685
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    References listed on IDEAS

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    2. Onuoha, Favour Chidinma & Dimnwobi, Stephen Kelechi & Okere, Kingsley Ikechukwu & Ekesiobi, Chukwunonso, 2023. "Funding the green transition: Governance quality, public debt, and renewable energy consumption in Sub-Saharan Africa," Utilities Policy, Elsevier, vol. 82(C).
    3. Danny Cassimon & Martin Prowse & Dennis Essers, 2014. "Financing the Clean Development Mechanism through Debt-for-Efficiency Swaps? Case Study Evidence from a Uruguayan Wind Farm Project," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 26(1), pages 142-159, January.
    4. Cassimon, Danny & Prowse, Martin & Essers, Dennis, 2009. "The pitfalls and potential of debt-for-nature swaps: a US-Indonesian case study," IOB Working Papers 2009.07, Universiteit Antwerpen, Institute of Development Policy (IOB).
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