Global Climate Finance Reached USD 1.5 Trillion in 2022: Urgent Need for Fivefold Increase by 2030

Global investment in climate change efforts reached nearly USD 1.5 trillion by 2022, doubling since 2018. However, this amount needs to increase fivefold by 2030 to limit global warming to 1.5 degrees Celsius, according to a new study. The Global Landscape of Climate Finance 2024 report by the Climate Policy Initiative (CPI) highlights that current climate finance is only 1% of global GDP, which is insufficient.

Emerging markets and developing economies (EMDEs) may require about 6.5% of their GDP by 2030 to achieve climate goals. Despite some progress in global climate finance, a more ambitious and effective strategy is necessary to bridge the significant funding gap, stated Barbara Buchner, CPI’s Global Managing Director. The report emphasises the need for increased investment across all sectors and regions to meet shared climate objectives.

Climate Finance Goals and Challenges

The annual flow of climate finance rose from USD 674 billion in 2018 to USD 1.459 trillion in 2022. However, a fivefold increase is still essential to reach the USD 7.4 trillion required annually through 2030 to limit warming to the desired level, as per the report. Alarmingly, fossil fuel investments continued to rise globally in 2023 and 2024, exceeding USD 1 trillion despite commitments to reduce such investments.

Subsidies for fossil fuel consumption in emerging economies also increased fivefold during this period. At the UN climate conference in the UAE in 2023, countries agreed on transitioning away from fossil fuels. This year's UN climate summit in Baku, Azerbaijan, is expected to set a new climate finance target for developed countries to support developing nations starting in 2025.

Adaptation Finance and Economic Risks

The CPI report warns that economic losses by 2100 could be five times greater than the climate finance needed by 2050 to remain within the 1.5-degree Celsius limit. Adaptation finance more than doubled from 2018 to 2022, reaching USD 76 billion. However, annual adaptation flows have only reached one-third of the volume needed each year from 2024 to 2030 in EMDEs alone.

The United Nations Framework Convention on Climate Change (UNFCCC), adopted in 1992, mandates high-income industrialised nations—historically responsible for most greenhouse gas emissions—to provide finance and technology to help developing countries combat and adapt to climate change. These nations include the United States, Canada, Japan, Australia, New Zealand, and EU member states like Germany and France.

Developing Nations' Perspective

Developing and poorer countries view an ambitious new climate finance goal as crucial for enhancing climate action. They argue that expecting them to do more undermines equity principles, especially when many are still struggling with poverty and inadequate infrastructure amid worsening climate impacts.

COP29 presents an opportunity for establishing clear commitments towards financing the transformation needed for a sustainable future. The data from CPI’s Global Landscape report underscores that investment must scale up domestically, internationally, and across sectors to achieve mutual climate goals.