The energy transition
cover loss and damage costs (Lakhani, 2022). LICs, who have the fewest resources bear the greatest burden from climate change in terms of damages to health, food, water, education and loss of life, yet according to the World Bank, only one-tenth of emissions are released by the 74 lowest income countries (Bhargawa, 2023). However, because these LICs can do little about climate change, it is up to the more developed nations to lead the way in making a difference. The question two years on, at COP29, is whether, after the disastrous floods in Spain, and similarly the deadly hurricanes in the US, developed nations will conclude that it is also in their own best interests to provide the facilities needed to decarbonize the world economy (Mundy, 2024a). Rich countries should view climate-related financial support for poorer nations not as an ‘act of charity, or moral obligation’, but as ‘an act of economic self-interest’ (Bolton and Kleinnijenhuis, 2024). According to this paper, developing nations will need $958 billion a year from overseas funding to finance the low-carbon transition from the fossil-fuel reliant power sector in LICs, and build new clean power capacity (Bolton and Kleinnijenhuis, 2024). To finance these projects, developed governments will need to find the money from somewhere, which could mean more borrowing from the banks and taking on more debt, or potentially squeezing more taxes from the people, to generate the revenue needed to give as foreign aid. This is largely the problem that the climate-change issue brings, as so much money is required to fund the high cost of capital, proving a major roadblock in the pathway of the energy transition. COP29 delegates are working ‘to extract trillions of pounds in climate reparations from poor people in rich countries to send to rich people in poor countries’, claimed the Telegraph (Ridley, 2024). Although, finding the funding will be extremely challenging, if developed nations can provide the $2.8 trillion needed in grant-equivalent finance for emissions mitigations in developing countries over the next decade, they can expect economic benefits of at least $7.9 trillion, according to detailed research (Bolton and Kleinnijenhuis, 2024). This attractive 182% return implies that developed governments should rethink their national climate strategies to place far more emphasis on international climate finance, as it has a huge economic incentive for all parties involved. Making climate action investable Making climate action investable is fundamental to the objective of reaching net-zero. Governments and cooperations publish ‘Nationally Determined Contributions’ (NDCs) which outline their climate goals. A key focus for governments and corporations is making NDCs attractive for investment so as to enable financing for limiting global temperature rise to 1.5°C (Nuzzo, 2025). Some sovereign bonds, including ‘green bonds,’ are earmarked to raise money for climate related projects (Segal, 2024). Green bonds allow more money to be raised for green projects, and these projects reduce carbon emissions. Investors are increasingly supporting climate-safe infrastructure, and this boosts an economy into being more sustainable, highlighting the importance of these green bonds (Wigglesworth, 2024). Green bonds have become popular for investors who want to align their financial goals with positively impacting the climate. A major issuer of green bonds is the World Bank, where in 2022, they issued over $40 billion in bonds (World Bank Treasury, 2023). One of the bank’s first green bond sales financed the Rampur Hydropower Project, which provided low-carbon hydroelectric power to northern India’s electricity grid. Thanks to the financing from green bonds, it produces 2 megawatts of electricity per year, which has prevented 1.4 million tonnes of carbon emissions, and its combined projects lowered carbon emissions by 8.4 million tonnes in 2022 alone (Segal, 2024). This example highlights the impact that green bonds can have in incentivizing sustainable investment.
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