Climate finance is within reach as COP30 eyes stronger commitment

The United Nations Climate Change Conference (COP30) has convened in Belem, Brazil. Apart from discussions on scientific and technical issues, much of the debate is expected to be focused on the resources needed for mitigation and adaptation. Though estimates of such financing costs have fallen over time, most still remain very large, implying the need for large financial transfers from advanced to emerging market and developing economies (EMDEs).

 

Recent studies have estimated climate finance requirements of EMDEs at $1-4 trillion per year up to 2030, which is seen as daunting, leading to even less action than might have been possible. Also, these estimates rely on top-down approaches and are difficult to parse for a better understanding of sectoral and regional details.

 

Our study “Climate Finance Needs of Nine G20 EMEs: Well Within Reach1” estimates the climate finance requirements of the nine G20 EMEs — Argentina, Brazil, China, Indonesia, India, Mexico, the Russian Federation, South Africa and Turkiye — till 2030. Our estimates are granular and address the incremental investment needed for mitigating climate change over and above the investment required in the business-as-usual scenario (BAU).

 

The study finds that the nine EMEs will require incremental climate finance of $2.2 trillion for four sectors (power, road transport, steel and cement) between 2022 and 2030, averaging $255 billion annually, equivalent to 0.6 per cent of the combined gross domestic product (GDP) of these nine economies — a figure that appears to be in the feasible range. Assuming that the costs of mitigating the remaining 50 per cent of emissions from the sectors not covered in the study is consistent with these estimates, the total annual cost would still be just over half a trillion dollars.

 

Much of the discussion on climate mitigation has focused on the needs of the energy transition. In contrast, our study finds that the largest chunk of climate finance of $1.2 trillion (52 per cent of the total requirement) is needed for the steel sector, followed by road transport ($460 billion) and cement ($450 billion).  

 

Steel and cement are hard-to-abate sectors and they require largely the use of carbon capture and storage (CCS), which is expensive to deploy, but is the only feasible technology option available at this stage. Hence, they require the largest chunk of the total climate finance estimated.

 

The power sector is estimated to need only about $150 billion, including $28 billion for storage (pumped and battery storage), but excluding additional grid costs. Our  estimates are lower than all other estimates because, first, our study has accounted for saving in capital expenditure on BAU fossil-fuel based sources of power, which no other study has reckoned, and, second, capital cost of renewable energy has declined precipitously due to the rising scale of production, research and development and technological breakthroughs. Thus, in contrast to the common narrative, energy transition needs the least amount of climate finance of all the four sectors in all the nine economies.

 

Climate finance for the road transport sector is estimated at (–) $5 billion for transitioning from internal combustion engine vehicles to electric vehicles. This is largely because vehicle sales in China are projected to decline by 15 per cent between 2022 and 2030. However, the nine economies are estimated to require large capital expenditure of $465 billion to develop charging infrastructure. Much of this large cost is due to China, which is developing high-speed charging stations, the cost of which is about seven times more than the slow-speed chargers developed elsewhere. 

 

At an economy level, China’s climate finance needs of $1,340 billion (61 per cent of the total for all nine EMEs and $155 billion, or 0.7 per cent of its GDP, annually) are by far the largest, driven largely by its dominant share in steel and cement production. Climate finance required by India is estimated at about $470 billion ($55 billion per year or 1.3 per cent of GDP), the second-largest requirement among the nine EMEs after China. Excluding China and India, the climate finance requirements for the seven other economies are estimated at $390 billion for 2022-2030 or $45 billion annually (0.3-0.7 per cent of GDP).

 

The study finds that the estimated climate finance for the nine EMEs for the power, steel, and cement sectors could eliminate 33 billion tonnes of CO2 emissions. To mitigate one tonne of CO2 (tCO2) in the nine EMEs, the average cost is estimated at $53 per tCO2. The power sector is the most expensive to decarbonise in terms of per unit cost ($66 per tCO2), followed by the steel sector ($53 per tCO2), and the cement sector ($49 per tCO2).

 

In sum, the estimates of our study are far lower than those by other studies, and are well within the realm of feasibility. COP30 should, therefore, end with a distinct note of optimism on the expectation of managing the resources required for climate mitigation in EMDEs. 

The authors are, respectively, president emeritus and distinguished fellow, and senior fellow, Centre for Social and Economic Progress, New Delhi.

1.  Raj, J, and Mohan, R (2025). Climate Finance Needs of Nine G20 EMEs: Well Within Reach