Developing countries need $1-1.5 trillion annually in grant-equivalent finance, study finds, exposing major flaws in current climate finance needs assessments.
Baku, Azerbaijan – As the second week of COP29 begins, a new peer-reviewed analysis published today in Nature Climate Action exposes flaws in existing methods for estimating climate finance needs. The study, Quantifying International Public Finance Provision Needs for the New UN Climate Finance Goal, reveals that political assumptions embedded in these estimates significantly underestimate the grant-equivalent funding required, particularly for the Global South.
The study estimates that developing countries require between $1 and $1.5 trillion per year in grant-equivalent terms to meet climate goals. It critiques the equity and transparency of current assessments, emphasizing the urgent need for ambitious international public finance to replace the outdated $100 billion annual climate finance commitment.
These findings amplify calls from climate advocates and nations in the Global South for an ambitious New Collective Quantified Goal (NCQG) at COP29 and notes the shortcomings of the International High Level Expert Group findings, notably in terms of expectations on developing country taxpayers and the underestimation of grant-equivalent funding needs.
The study builds on the IEA’s figures to suggest new grant-equivalent finance needs for energy transition in developing countries, while challenging the IEA to go beyond selective discussions of public finance for private finance mobilization. Adding to this, the study seeks to better capture the often underestimated finance needs for phasing out fossil fuels and ensuring a just transition for communities, which if fully reflected, could raise grant-equivalent needs in energy-related mitigation to over $200 billion annually, particularly during this “critical decade”.
The authors note that, in the absence of a decisive increase in international public funding for grants and concessional finance, developing countries will be essentially paying for a crisis they did not create, especially in terms of adaptation and loss and damage costs which alone come to at least around 1 trillion USD per year.
Key Findings:
- Climate finance support needs are underestimated: The report finds that many key climate finance analysts do not capture full support needs, or sustain problematic assumptions about who pays.
- Climate finance needs for developing countries: Unlike other studies, it provides an estimation in grant-equivalent terms to assess actual amount of support provided, estimating that annual climate finance needs in developing countries is between $1-1.5 trillion in grant-equivalent terms.
- Energy Transition: Current grant-equivalent needs for supporting an equitable 1.5 degree-aligned and just energy transition, such as those partially published by the International Energy Agency (IEA), are understated. In this study, the authors extrapolate the full amount needed has been underestimated by a factor of 5.
- Lack of integration of equity considerations in mainstream estimates: Previous studies often imply that the taxpayer base in developing countries will be footing a greater share of the cost than those of developed countries, or assume use of non grant instruments for areas such as adaptation.
Andreas Sieber, author of the study and Associate Director of Policy and Campaigns at 350.org says:
“Climate finance estimates fall alarmingly short of actual needs. Introducing a grant-equivalent metric, we now see that developing nations require $1-1.5 trillion annually to confront the climate crisis—a figure far beyond prior assumptions. Particularly alarming are assumptions made regarding the energy sectors— we find the International Energy Agency understated the support needs for a just energy transition by a factor of five in some publications, inconsistent with its finance needs assessments in its other publications. Clearly, numbers put forward by the High Level Panel on Climate Finance cannot be the ceiling but rather the absolute minimum.”
Iskander Erzini Vernoit, author of the study and Director at the Imal Initiative for Climate and Development says:
“Many mainstream estimates on climate finance needs are based on questionable assumptions about the degree to which poorer countries should pay for a crisis they did not create, which may be unrealistic in the context of a debt crisis. This analysis underscores the need to look under the hood at the finer details of various climate finance estimates, with greater transparency and interrogation of assumptions in the public discourse.”
Needs Estimate Breakdown Summary
| Dimensions of Climate Finance | Estimated support need in grant equivalent |
| Adaptation | Approximately $400bn/year, only for implementing adaptation commitments in current national plans (NDCs and NAPs), which do not incorporate all adaptation aspirations and are not fully costed |
| Addressing Loss and Damage | $400-950 billion/year |
| Mitigation | Energy Transition $200+bn/year, of which approx $80-120bn for new energy systems, and at least $100bn for fossil phaseout and the just transition. Other critical mitigation sectors (including e.g. forests) $100bn/year |
| TOTAL | $1-1.5 trillion/year |
Media contact:
Mariana Abdalla, 350.org
+55 21 998823 5563
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