Around the world, we are witnessing the devastating effects of temperature change. Droughts, floods and sweltering heat are killing lives, eroding hard-earned socio-economic gains and putting countries’ futures at risk. To make matters worse, those who have contributed the least to the climate crisis are being hit the hardest. The challenges are clear for all countries. We need to step up our environmental efforts to limit global warming and build resilience to growing climate-related risks. However, this will require large-scale financial mobilization.
At last year’s United Nations Climate Change Conference (COP28) in Dubai, governments pledged to “accelerate action in this critical decade and accelerate the transition away from fossil fuels in our energy systems in a just, orderly and equitable manner, and by 2050. ” As we look ahead to this month’s UN Future Summit and COP29 in November, the need to reform global financial architecture and set ambitious new goals for international climate finance is even clearer. Both are essential to achieving the important challenges of climate mitigation and adaptation.
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We know it is possible to transition from fossil to renewable energy at the speed and scale needed. Thirty years ago, Denmark was heavily dependent on oil and gas. However, renewable energy currently accounts for 90% of electricity consumption and is estimated to account for 110% by 2030. At the same time, the rapid growth of Denmark’s wind industry is facilitating employment transition and creating a more sustainable and environmentally friendly labor market.
Given these benefits, the global climate finance gap should be seen as an opportunity. Emerging market and developing countries (EMDEs) excluding China will require an estimated $2.4 trillion (€2.2 trillion) annually in climate and nature-related investments by 2030. This has the potential to foster climate-positive growth that helps countries manage the impacts of climate change. We fight climate change, create decent jobs, expand capital markets and strengthen resilience, all at the same time.
The good news is that many of the best climate-related investment opportunities lie in EMDEs. Moreover, technological tipping points are making low-carbon, nature-friendly and equitable solutions increasingly commercially attractive.
Assuming greater risk
The bad news is that annual investment in clean energy in EMDEs (excluding China) will need to increase sevenfold by 2030 to meet the Paris climate agreement. Africa boasts 60% of the world’s highest solar resources, but only 1% of solar capacity is installed. And the numbers are even worse when it comes to adaptation. Between 2016 and 2021, only 9% of private climate finance mobilized across developing countries went towards adaptation. To say we’re not doing enough is an understatement.
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