The Myth of Scarcity: Financing Life or Sustaining the Privileges of Climate Debtors

Climate Finance Proposals from Tax Justice and the International Financial Architecture

This paper analyses why the climate finance gap in Latin America does not stem from a genuine scarcity of public resources, but rather from fiscal, financial, and governance choices that concentrate wealth, erode tax bases, and perpetuate dependence on debt financing.

Based on a mixed-methods approach, comprising a systematic literature review, a comparative analysis of fiscal measures, and semi-structured interviews with strategic stakeholders, the study demonstrates that, in the context of the Global North’s failure to meet its climate finance commitments, alongside quality-related challenges associated with the predominant use of loans and limited access and transparency, the region can mobilize substantial resources through four main channels: the elimination of regressive subsidies and tax expenditures, the taxation of extreme wealth and rents generated in fossil fuel markets, the reduction of tax evasion and avoidance, and reforms in sovereign debt and international liquidity frameworks, with the ultimate objective of redirecting these resources towards vulnerable sectors.

The findings indicate that the revenue-raising potential of these measures is significant; however, their impact depends on intersectional equity criteria and on the political feasibility and willingness to implement them. At the national level, the current fiscal architecture continues to privilege high-income sectors and carbon-intensive activities, thereby constraining the State’s capacity to finance adaptation, mitigation, and social protection. At the regional level, the lack of coordination and the limited deepening of information exchange and good practices in tax matters, as well as the absence of common standards, weaken the negotiating position of the Global South in
international fora and facilitate a race to the bottom in taxation. At the global level, the rules governing international taxation, debt, and climate finance reproduce structural asymmetries that constrain the region’s fiscal space.

The persistent climate finance gap is not solely the result of a lack of political will or technical constraints. On the contrary, it reflects a structurally produced scarcity embedded in the current international financial architecture. This system actively constrains the ability of countries in the Global South to mobilize public resources, while enabling wealth accumulation, tax evasion and avoidance, and the reproduction of extractive economic models. In this regard, the climate finance gap should be understood as a political outcome of global tax injustice and asymmetrical power
relations in the international financial system, rather than as a neutral or inevitable condition.

The analysis concludes that advancing towards equitable climate finance requires integrating tax justice, climate justice, and a profound reform of the international financial architecture. A just transition in Latin America is not a technical challenge, but a political one: it requires political will, regional cooperation, the democratization of global governance, and an effective redistribution of power and resources. Far from the narrative of scarcity, this study demonstrates that viable alternatives exist to finance climate action without deepening debt-based and/or austerity-driven policies, and that the key lies in transforming the rules that currently produce and reproduce vulnerability and inequality.