Simplicity is the key to closing the climate finance gap

22 Apr 2024 12:50 PM


Conventional, publicly capitalized financial instruments are the only way to mobilize private finance on a very large scale.

One of the most important topics at this week’s spring meetings of the IMF and World Bank is how to close the enormous climate finance gap.

More than $1.7 trillion was invested in clean energy alone in 2023, according to the IEA. But this compares poorly with a total estimated climate finance need of $8 trillion a year today, rising to $10 trillion a year after 2030.  

Moreover, less than 3 per cent of total global climate finance in 2020/21 went to or within least developed countries (LDCs) and only 15 per cent went to or within emerging and developing economies (EMDEs) excluding China.

These countries therefore face a particularly acute financing gap, with a need to spend an additional $1 trillion a year on climate related goals by 2025 (4.1 per cent of GDP) and around $2.4 trillion per year by 2030 (6.5 per cent of GDP).

Given very high public debt in many advanced countries, acute domestic spending pressures, and the continuing need for development finance outside the climate sphere, the scope to increase the amount of public international finance for climate action is limited.

Click here to continue reading the full version of this Expert Comment on the Chatham House website.