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Policy analysis reveals heterogeneous performance of financial mechanisms in climate-vulnerable nations, indicating tailored combinations of debt relief and green finance are required.
This article discusses the links between climate and debt sustainability by focusing on how climate mitigation and adaptation are paid for, and who pays for it. This requires thinking about instruments such as sovereign bonds, carbon credits, conditional official grants and debt relief from both public and private sources. The article discusses the role of green bonds, carbon offsets, grants and debt relief. Among these solutions, no single instrument appears to be right for all countries or at all times. To move forward, we make six proposals and policy recommendations that can jointly address climate change and debt sustainability.
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Bolton et al. (2023) studied this question.
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