Developing nations will require $1 trillion in annual external climate finance by 2030 to meet Paris Agreement goals, rising to $1.3 trillion by 2035, according to a major report released at the COP29 climate summit in Baku.
The findings from the Independent High-Level Expert Group on Climate Finance underscore the vast funding gap facing poorer nations as they attempt to tackle climate change, putting pressure on negotiators to reach an ambitious new climate finance agreement.
“The sheer volume of financing required presents a significant challenge,” said Michael Jarvis, Executive Director of the Trust, Accountability and Inclusion Collaborative. “Leading economists have made clear that poor countries alone will need $1 trillion a year in climate finance by 2030.”
The report, co-authored by experts Amar Bhattacharya, Vera Songwe and Nicholas Stern, estimates total global climate investment needs of approximately $6.5 trillion annually by 2030, with emerging markets and developing countries requiring $2.4 trillion of that sum.
This would require “a more than fourfold increase in total climate finance and a more than sixfold increase in external finance by 2030” to achieve Paris Agreement targets, the report states.
“One challenge is the sheer volume of financing required,” Jarvis said.
“Another debate is over the source of finance. Donor governments are facing domestic pressures to reduce aid amid their own tight fiscal situations. Western countries are pushing to broaden the pool of those who should contribute but that is not an easy battle.”
The figures emerge as countries negotiate a “new collective quantified goal” for climate finance beyond 2025, meant to surpass the previous $100 billion annual target that wealthy nations only met in 2022, two years behind schedule.
“Too often promises have been made with fanfare but then not delivered,” Jarvis said. “The previous donor countries’ commitment to provide $100 billion in climate finance was delivered two years late and even then with much questioning of what was counted as ‘climate’ finance. Should investing in a gelato shop really count? One country claimed it should.”
Of the $2.4 trillion annual investment needed by 2030 for developing nations excluding China, the report indicates $1.6 trillion should go toward clean energy transition, with $250 billion each for adaptation and loss and damage, and $300 billion for natural capital and sustainable agriculture.
The authors suggest domestic resources could cover $1.4 trillion of these needs, leaving a crucial external financing gap of $1 trillion to be filled through international public and private sources.
Jarvis noted that official development assistance represents only one funding stream. “Private-sector investment, government-incurred debt and government revenues are also vital sources of finance for climate actions,” he said.
The report calls for bilateral climate finance from advanced economies, currently at $43 billion annually, to at least double. It also urges multilateral development banks to triple lending capacity by 2030.
However, mounting debt presents a major obstacle for vulnerable nations.
“The hard reality is that many of the poorest countries, most affected by climate change are in a debt crisis,” Jarvis said.
“The Vulnerable Twenty group of countries estimated recently that climate risks have added US$ 40 billion of additional interest payments over the past 10 years.”
The report advocates exploring innovative funding mechanisms, including international taxation of high-emitting sectors.
“There is growing momentum, rightly so, around ‘solidarity levies’ to raise funds for climate programming,” Jarvis said.
“New taxes on financial transactions, such as in crypto, on aviation, or on the super-rich could generate important resources.”
The findings come as negotiators in Baku face pressure to make progress on climate finance ahead of next year’s COP30 in Brazil. While an early agreement on carbon offset standards has provided some momentum, observers remain cautious about prospects for a comprehensive finance deal.
“Radical progress is certainly unlikely, but some surprises typically emerge,” Jarvis said.
“Many stayed away from Baku as they had low expectations for what it could deliver. The New Collective Quantified Goal will be the key one to watch – will a final number be reached?”
The expert added that while he doesn’t “foresee significant progress on the debt front at COP29,” there are other processes where consensus can be fostered.
“Spain will host the Fourth International Conference on Financing for Development in June next year which will lay out the development finance agenda through 2035. We cannot and should no longer separate the development finance and climate finance agendas.”
The report stated that delayed action will only increase future costs. It warns that any shortfall in pre-2030 investment “will place added pressure on the years that follow, creating a steeper and potentially more costly path to climate stability.”
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