Trillions of dollars are needed each year until 2030 to transition the global economy away from fossil fuels, with at least $2.4tn per year required for developing countries excluding China. This amount, while significant, is only a small fraction of the global economy and is roughly equivalent to current spending on fossil fuels and high-carbon infrastructure. To achieve this transition, existing investments need to be redirected towards low-carbon technologies, renewable energy, and emission reduction efforts.
While developed countries and China are already taking steps towards boosting renewable energy, developing countries are struggling to secure the necessary investments to cut emissions and adapt to the impacts of extreme weather. The upcoming Cop29 in November aims to establish a new collective quantified goal on climate finance to replace the previous goal of providing $100bn per year to developing countries by 2020. However, there is a lack of agreement on key issues such as the quantum of finance, sources of funding, and expanding the contributor base for climate finance.
In order to limit global temperature rises to 1.5C above preindustrial levels, greenhouse gas emissions must be halved by the end of this decade. The current nationally determined contributions (NDCs) under the Paris agreement are inadequate and need to be strengthened. The interrelation between emissions reduction and climate finance is highlighted, as developing countries require financial support to cut greenhouse gas emissions effectively.
Geopolitical factors, such as the US election and the rise of right-wing parties in Europe, pose challenges to climate action. The potential impact of a US withdrawal from the Paris agreement, lack of climate finance support, and political instability in European countries could hinder progress towards emission reduction goals. Leadership is needed to ensure that rich countries contribute to financing climate action, as transitioning away from fossil fuels can bring economic prosperity and prevent the consequences of climate disasters in the future.
Discussions on “loss and damage” funds, aimed at assisting countries affected by climate-related disasters, have stalled despite the urgent need for financial support in vulnerable regions. The world’s top oil companies continue to generate significant profits, contributing to the climate crisis, raising questions about tapping into their profits to support impacted countries. Innovative financing options like wealth taxes, fossil fuel levies, and carbon charges are met with resistance from petrostates, highlighting the challenges ahead in mobilizing financial resources for climate action.
