At COP29, the UN Climate Conference held in 2025, a new climate finance target has become the central focus of discussions. With the urgent need to address climate change, an Independent High-Level Expert Group has proposed a target of mobilizing $1 trillion annually by 2030 from public and private sources for climate investments in emerging markets and developing countries (EMDCs), excluding China. This ambitious financial mobilization is crucial for helping these countries transition to sustainable practices and support global climate goals, specifically the goals of the Paris Agreement.
A Manageable Goal within the Global Economic Context
While $1 trillion per year might sound enormous, experts argue that this investment target is feasible within the context of the global economy. This annual amount represents only 1% of the global Gross Domestic Product (GDP) of about $100 trillion. In fact, it’s only half of what the world currently spends each year on defense. For those following the negotiations, this target aligns closely with previous estimates of the climate financing needs of developing nations, roughly $1.3 trillion annually. Although developed countries have yet to commit to a specific figure, many believe this proposed goal is reasonable and achievable, as well as likely to gain international support.
The Balance Between Public and Private Finance
One key question in reaching this finance goal is how much funding should come from public sources (such as governments) and how much from private investments. According to the expert group, private finance could potentially cover around half of the needed climate investment, given the growing interest of private companies in green projects and sustainable practices. However, the exact balance between public and private funding will likely be a central and challenging point in COP29 negotiations.
The expert group report emphasizes that various types of climate projects have distinct needs. While public funding may be essential for large-scale infrastructure projects, private investments could support areas like renewable energy and technology. Amar Bhattacharya, one of the report’s lead authors, noted that “different kinds of investment need different kinds of finance,” with a significant share of the finance for energy transition expected to come from private entities.
Source: Republic World
The Importance of Early Investments
The expert group also underscored that early mobilization of climate funds is essential. The report states that any delay in climate investments before 2030 would make it costlier to achieve climate stability in the following years. Early action, therefore, is crucial to avoid increasing financial burdens and to ensure a smoother path toward achieving climate goals.
Regional Climate Investment Needs
The report provides a breakdown of how much money each major region will need to meet the Paris Agreement’s targets. Globally, the projected investment required for climate action is between $6.3 and $6.7 trillion per year by 2030, increasing to $7 to $8.1 trillion per year by 2035. These figures highlight the scale of investment needed worldwide, with specific requirements for different regions:
- Advanced Economies: $2.7–$2.8 trillion annually by 2030, slightly decreasing to $2.6–$3.1 trillion by 2035.
- China: Roughly $1.3–$1.4 trillion by 2030, with a modest increase to $1.3–$1.5 trillion by 2035.
- Emerging Markets and Developing Countries (EMDCs) other than China: $2.3–$2.5 trillion by 2030, rising to $3.1–$3.5 trillion by 2035.
This detailed breakdown shows where resources will be most needed, underscoring that EMDCs will require substantial support to achieve sustainable transitions.
The Role of Cross-Border Private Finance
A key takeaway from the expert report is that cross-border private finance can meet about half of the annual $1 trillion requirement by 2030. This aligns with the changing nature of investment opportunities, as more companies seek involvement in green initiatives. However, it’s important for developed countries to demonstrate commitment to this goal and to support international private finance through incentives and partnerships.
Advanced Economies Must Lead the Way
The report calls on advanced economies to make credible commitments to the New Collective Quantified Goal (NCQG). This includes securing and mobilizing the funds required for developing countries to meet climate goals. Vibhuti Garg, Director for South Asia at the Institute for Energy Economics and Financial Analysis (IEEFA), highlighted that it’s not only the amount of funding that matters, but also the quality. For instance, concessional finance—low-interest loans or grants—is crucial for countries that are already dealing with high levels of debt. Without these flexible financing options, countries in the Global South may struggle to implement effective climate actions without risking debt distress.
Moving Forward with a Balanced Approach
The proposed financial goal represents a structured path to achieving the climate goals of the Paris Agreement. The mix of public and private funding will be vital, and early investments are essential for keeping the transition affordable and sustainable. As COP29 negotiations continue, this financing framework provides a realistic approach to help the world tackle climate change, and to build a foundation for a more sustainable future for all.
