Understanding Climate Finance: Current Flows, Challenges, and Future Targets
The Copenhagen pledge set a target of $100 billion per year by 2020 to assist poorer countries in reducing emissions and adapting to climate change. This has since evolved into a new target aiming for $300 billion per year by 2035, with a broader goal to mobilise approximately $1.3 trillion per year by 2035, much of it expected from private finance.
Data from the OECD for 2022 indicates that developed countries provided around $116 billion in climate finance, while Oxfam estimates this figure at $95.3 billion, with grant-equivalent funding under $35 billion. More than 75% of climate finance directed to developing countries originates from public sources and is delivered either as bilateral aid or through multilateral institutions. Donors include export credits and mobilised private capital in their accounting.
About one-fifth of 2022 public funding targeted the 44 poorest nations such as Tuvalu, Chad, Madagascar, Haiti, Mali, Niger, Sierra Leone, South Sudan, and Yemen. Larger recipients include countries like India and China, and somewhat surprisingly, some petrostates including Saudi Arabia and the UAE also receive climate finance.
Two-thirds of public funding comes from Japan, Germany, the United States, and France. Contributions from the US under President Biden helped meet the 2022 targets, with private investments playing an increasingly significant role. Roughly two-thirds of climate finance to developing countries is delivered as loans; many of these loans are non-concessional and some carry conditions requiring the procurement of goods and services from donor-country firms.
Transparency remains a concern as UN data on climate finance flows is not fully traceable, leading to worries about the accuracy of accounting. The 2035 target is seen as an opportunity to restore credibility and encourage more transparent reporting, including enhanced private-sector engagement.
In the context of upcoming COP28 and COP30 negotiations, discussions include debt-for-climate swaps, proposals for new taxes on the wealthy or fossil fuels, and other measures intended to raise funds and improve the governance of climate finance.
