International Climate Finance – What is at Stake at COP30?

The provision of climate finance from developed to developing countries remains one of the defining issues of global climate negotiations, often determining the success or failure of COPs (conferences of the parties, the supreme decision-making body in climate negotiations).  

A landmark outcome of COP29 in Baku (2024) was the agreement by developed countries to provide at least USD 300 billion per year by 2035 for climate mitigation, adaptation, and related support to developing countries.  

This represents a significant step up from the USD 100 billion annual goal first established at Copenhagen (2009) and reaffirmed in Paris (2015).  

The decision taken at COP29 also acknowledged – based on a report of the Independent High-Level Expert Group on Climate Finance – a broader external climate-finance need of USD 1.3 trillion per year by 2035 (from all public and private sources) for developing countries, excluding China.  

This means that, even if the COP29 goal is fully met, an annual shortfall of roughly USD 1 trillion will persist between what is needed (USD 1.3 trillion) and what has been pledged in public funds (USD 300 billion).  

When compared to current international climate finance flows – around USD 200 billion in 2023, most of them coming from public sources in the form of non-concessional loans – the gap expands to approximately USD 1.1 trillion per year. 

How to close the finance gap? Expected discussions at COP30 

Bridging this gap will dominate the discussions at COP30 in Belém (10–21 November 2025), where different – and at times conflicting – approaches are expected to be debated. 

A usual argument is that finance would flow naturally to both developed and developing economies if incentives were properly designed in the “real economy” rather than in the financial system.  

Many clean technologies – such as solar energy and electric vehicles – are already becoming cost-competitive with fossil fuel alternatives. Complementary measures such as universal carbon pricing (and related proposals such as international carbon credits) or the redirection of fossil fuel subsidies toward green sectors (without increasing total public expenditure) could further accelerate this shift. 

However, this approach faces both political and practical challenges. Implementing carbon pricing remains contentious, and experience shows that carbon prices alone rarely trigger deep structural change. Moreover, developing countries face additional barriers: limited access to affordable capital and heightened vulnerability to climate impacts.  

As climate risks worsen, these economies often see their borrowing costs rise, undermining debt sustainability and creating a vicious cycle that further restricts their access to finance. 

The quest for ad hoc financial and fiscal mechanisms 

Against this backdrop, some debates will concern the need to find “pragmatic” approaches to increase international climate finance, while being as compatible as possible with the existing structure of the international financial system.  

One notable initiative is the Tropical Forests Forever Facility (TFFF), a Brazil-led blended-finance mechanism expected to be launched at COP30. Designed to mobilize around USD 125 billion, the TFFF would deliver results-based payments to countries that conserve intact tropical forests. The fund would be managed through financial market investments, using returns from an endowment to make annual conservation payments. 

Another proposal gaining traction is the creation of sector-specific Global Solidarity Levies (GSLs) – internationally coordinated but nationally administered taxes dedicated to financing global public goods such as climate mitigation and adaptation. A Coalition for Solidarity Levies, comprising 14 countries as of 2024, is exploring the potential of these mechanisms.  

According to a forthcoming reportⁱ, levies on sectors such as international aviation and maritime shipping could generate between USD 100 and 150 billion per year under conservative assumptions, and up to USD 400 billion in more ambitious scenarios – potentially covering 10 to 30 percent of the USD 1.3 trillion target. More politically ambitious levies on financial transactions, wealth, or fossil fuel exports could raise orders of magnitude more.   

The need for a deeper transformation of the international financial architecture 

While helpful in some respects, these measures may ultimately offer only partial solutions, perpetuating existing North–South inequalities and deepening financial dependence in Global South countries, without enabling them to pursue their own development pathways.  

Some therefore call for a deeper restructuring of the international financial architecture to address the underlying debt and liquidity constraints facing many countries in the Global South, particularly as several are currently on the brink of default. 

Debt restructuring tied to environmental efforts is often cited as a key component of such a transformation. By exchanging portions of sovereign debt for commitments to invest in climate mitigation or biodiversity protection, heavily indebted countries could improve fiscal space while advancing global sustainability goals.  

Another complementary measure would be to rechannel Special Drawing Rights (SDRs) – the international reserve assets created by the IMF – toward climate and nature-related investments. The IMF’s issuance of SDRs worth USD 650 billion during the COVID-19 pandemic – equivalent to half the estimated USD 1.3 trillion annual climate finance need – demonstrated the scale of resources that could be mobilized if such tools were repurposed for green objectives. Moreover, if used strategically, debt restructuring and SDRs could simultaneously leverage private investment. 

While financial innovations and reforms cannot substitute for real-economy measures – such as renegotiating trade agreements, expanding technology transfers and transforming food diets, to name just a few – they can significantly improve developing countries’ access to affordable, long-term climate finance (including both loans and grants).  

In this context, and even if all actions are welcome, it is necessary to think about systemic financial reform rather than only incremental funding commitments.