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The headlines coming out of COP29—the recently concluded United Nations climate conference—focus on one key number: $300 billion. This is the annual amount of climate finance the governments of wealthy countries are responsible for generating for developing countries by 2035.
But to focus solely on whether the number is too big or too small misses what it means and why it matters. The agreement does not automatically produce any funds on its own, and no court can enforce it.
Wealthy countries will not provide most of the funds directly; the money will pass through entities like the World Bank, the Green Climate Fund, or even private companies. And the $300 billion number is not even the only climate finance goal to come out of COP29—the agreement also includes a target of $1.3 trillion per year in climate investment from all sources for developing countries by 2035.
As many have argued, the $300 billion goal is too small, and both it and the $1.3 trillion goal are riddled with ambiguities. But the agreement is also a rare force that places pressure on developed countries’ climate finance, and taking its targets seriously demands more transformative action than developed countries had been anticipating. Actually achieving the agreement—and more importantly, maintaining a safe shared climate—requires a set of actions that must unfold across the global economy. Setting the goals was just the beginning. What matters most is what happens next.
The $300 billion goal is structured similarly to the original climate finance goal agreed upon in Copenhagen in 2009, which said that developed countries would provide $100 billion per year by 2020. It is perhaps the greatest failing of the new climate finance agreement that it did not correct the key unanswered questions in the formulation of that goal: the distribution of responsibility among developed countries; the allocation of resources between developing countries; how and whether to distinguish between grants, subsidized loans, and market-rate loans; and the relationship between climate finance and development finance.
The ambiguities are so great that countries could not even agree if the original goal has been met. Developed countries say they met it in 2022, but earlier versions of the new climate finance agreement contained dueling language on the question. It proved so impossible to agree that the subject was simply dropped from the final draft.
Unfortunately, developed countries will presumably continue using the same, disputed method of counting climate finance as they did before. And as with the original goal, only a relatively small share of the $300 billion will come from grants from a developed country to a developing country. Bilateral climate finance—climate finance from one country to another—currently adds up to $41 billion.
Increases in this bilateral finance, which tends to place the greatest strain on national budgets, will likely only go a small way toward the $300 billion. It is not that developed countries do not have the means to provide more, but that domestic political realities stand in the way.
Contributions from major developing countries, which are not required to contribute toward the new goal but can do so voluntarily, may add some money. For example, from 2013-2022, China provided an average $4.5 billion per year in climate finance under the label of South-South cooperation.
Finance through multilateral climate funds like the Green Climate Fund will also increase. The new agreement called for a tripling of financing through these mechanisms, but they are starting from such a low baseline that even this would only form a few percentage points of the $300 billion.
This leaves two main sources for developed countries to meet the goal. The first is mobilizing private finance, which developed countries controversially count toward the total. But despite years of ambitious plans to mobilize private finance, it has demonstrated little success. In the most recent year with data, less than a fifth of developed countries’ climate finance came through mobilized private investment.
These realities mean that multilateral development banks (MDBs) like the World Bank are the most viable route to power the growth in climate finance needed to reach the $300 billion goal. They were already the fastest-growing source of climate finance under the $100 billion goal and became the single largest source in 2022.
These banks provide few grants, but they provide loans at cheaper interest rates than borrowing countries could access on the market. And they are cost-effective for donors: They can lend out several multiples of what governments put in. However, if MDBs are to provide finance on the necessary scale—and if they are to ensure new climate finance does not come at the expense of development priorities—they will need shareholding countries to contribute more.
In recent years, as developing countries were hit by the COVID-19 pandemic, high interest rates and debt levels, as well as mounting climate impacts, the idea of international financial architecture reform grew in prominence. The idea expands focus beyond individual aid programs or funding priorities to the broader rules and institutions that direct money around the globe—too often in ways unfavorable to developing countries.
While the new climate finance goal does not explicitly engage with these debates, its contents make its achievement dependent on international financial architecture reform. Expanding and improving MDBs has been a major priority of these efforts: During the recent G-20 summit, members approved a road map to achieve this.
The overall $1.3 trillion investment target in the new climate finance goal is rightly criticized as vague, but it is more closely tied to the needs of developing countries than the $300 billion goal—and meeting it would require more ambitious action. The implication is that private finance is expected to fill the gap between the $300 billion goal and the $1.3 trillion goal.
But private financial flows will not suddenly proliferate without government action, and given how low private finance mobilization rates are, it is implausible that $1.3 trillion in investment could be met without an increase in public finance well beyond the minimum necessary to meet the $300 billion goal. Even the International High-Level Expert Group on Climate Finance, whose work was influential in shaping the $1.3 trillion target, projected that private finance would account for just around $500 billion of the $1.3 trillion total.
Reaching that target will also require addressing the financial constraints that prevent climate investment in developing countries. Many countries will need debt relief so that unsustainable debts do not crowd out climate investments. The International Monetary Fund will need to reorient itself to prioritize a green investment push. And international levies on undertaxed activities like shipping, aviation, and financial transactions could produce reliable revenue streams for climate finance.
The $1.3 trillion target also creates opportunities through the “Baku to Belém Roadmap to 1.3T”—a plan added to the agreement to address outstanding issues before next year’s COP30 in Belém, Brazil. It provides an opportunity to address the broader reforms needed in the international financial architecture, as well as to salvage priorities excluded from this year’s agreement, such as guaranteeing funding for particularly vulnerable countries and for adapting to climate change. With countries’ new climate action plans due in the coming months, it is crucial to give quick signals to developing countries that they will be backed by adequate finance.
The new climate finance agreement demands transformative action in the international economy. It is also eminently achievable. Even the broader $1.3 trillion target equates to about 1 percent of global gross domestic product. It is around half of global military spending. U.S. President-elect Donald Trump will likely pull the United States out of the 2015 Paris Agreement—again—but Washington already provided relatively little climate finance.
Much depends on whether rich countries see this year’s new goal as the bargain at the heart of global climate cooperation or an unwanted obligation they should minimize, as many developing countries understandably perceive them to have done under the original goal. This dynamic is part of why the $100 billion struggled to advance the objective it was meant to address—the need for developing countries to manage climate impacts they did little to cause and to forgo the fossil fuel-heavy development model today’s developed countries used to get rich.
Since the signing of the Paris Agreement, a period in which global emissions should have fallen rapidly, global emissions have grown, with two-thirds of growth coming from developing countries other than China. If developing countries cannot reduce emissions, any emissions savings from initiatives like the Inflation Reduction Act in the United States or the Green Deal in Europe could quickly be canceled out.
Wealthy governments will need to understand the centrality of climate finance to their global legitimacy, as well as the inescapably global nature of the climate crisis. And supportive domestic political constituencies must put organized pressure on them to follow through on the agreement.
Still, this climate finance agreement is not what decides whether humanity pays for climate change. Someone will pay. It could be—and often already is—farmers spending their savings to replace drought-ravaged crops and governments drowning in interest payments they incurred to help citizens drowning in floods.
It could be the governments of developed countries paying for the consequences of emissions and instability they could have helped avoid. But it doesn’t have to be. Working together to pay now is cheaper and fairer than paying the price later.