The West’s unyielding failure in climate financing

Climate change is an undeniable reality, yet the financial resources necessary to combat it remain stubbornly out of reach for many of the world’s most vulnerable nations. As the climate crisis intensifies, the economic and human costs soar, with 2023 marking a year in which the global economic toll of climate-related disasters surpassed $300 billion. For the millions in the Global South, where the effects of climate change are felt most acutely, this is not an abstract issue—it is a dire, existential threat. Yet, despite the mounting evidence and urgent calls for help, the wealthiest nations have repeatedly failed to deliver the funds necessary to mitigate and adapt to this crisis.

The recent COP29 summit in Baku should have been a turning point. The pledges made during the event were hailed as a breakthrough, with an agreement to triple climate financing for developing countries, raising it from $100 billion to $300 billion annually by 2035. On the surface, this seems like progress. However, when set against the scale of the crisis and the urgent need for action, it remains woefully inadequate.

While the developed world crafts eloquent resolutions at climate summits, its actions betray the truth—altruism is replaced by delay, and words of concern mask the refusal to shoulder the cost of a crisis it has long fueled. Developing nations have been clear in their demands: $1.3 trillion annually is needed to effectively tackle climate change. Instead, the latest agreement barely scratches the surface of what is required. While the increase in financial commitments is welcome, it is far from sufficient to meet the immense challenges faced by the Global South.

The reluctance of wealthy nations to fully commit to climate financing can be understood in part through the prism of domestic political and economic pressures. In the developed world, climate finance is often framed as a zero-sum game, where resources are perceived as being taken away from domestic needs to aid foreign nations. The narrative of “climate justice” clashes with the perceived need to protect local jobs and industries, particularly in the aftermath of the COVID-19 pandemic and economic instability.

In the US, for example, the political influence of fossil fuel lobbies has long been a barrier to progressive climate policies. The rhetoric of climate finance, while sympathetic on paper, is often met with resistance due to fears of increasing taxes, burdening domestic industries, and exacerbating domestic inequalities. Moreover, with the incoming President Trump, who has consistently denied the reality of climate change, it will be fascinating to see how much his administration’s stance on climate action will reshape US policy. His decisions could have profound global consequences, as the world watches to see whether the US steps back from international climate commitments or doubles down on its role in climate finance and mitigation.

In the European Union, while there is a strong push for green policies and carbon-neutrality goals, the issue of climate finance remains contentious. Many European governments face significant opposition from powerful industries, such as agriculture, aviation, and manufacturing, who argue that climate finance commitments could undermine economic recovery, fuel inflation, or hurt competitiveness. These voices often point to their own financial pressures, from inflationary risks to the ongoing cost-of-living crisis, making climate financing seem like a luxury rather than a necessity.

The reluctance to meet climate financing promises also stems from concerns over accountability. There is a valid concern about the capacity of some governments to handle large-scale financial flows, particularly when corruption and inefficiencies are prevalent. These concerns, however, must not serve as an excuse for inaction. The failure to provide adequate resources and the insistence on loans instead of grants only deepens the existing vulnerabilities of developing countries, many of whom are already overwhelmed by the burden of debt.

However, these reservations cannot obscure the moral, economic, and political imperatives for developed nations to contribute meaningfully to climate finance. Climate change is not a problem confined to the Global South; it is a global crisis that affects everyone, regardless of borders. Developed nations are responsible for the vast majority of historical emissions that have contributed to the current climate crisis. It is only fair, therefore, that they take on the financial burden of mitigating the damage caused by their industrialisation. The continued delay in meaningful climate financing risks creating a world where the consequences of inaction are felt not just by those in the Global South, but by all of us. Rising sea levels, extreme weather events, and environmental degradation will have a direct impact on developed nations too. What happens in the Global South will inevitably affect the Global North, whether through migration crises, economic disruption, or the further exacerbation of global inequality.

The global community cannot afford to continue delaying action. Developed nations must see climate finance not as an act of charity, but as a necessary investment in the survival and stability of the planet. The argument that financial support for the Global South comes at the expense of domestic needs is short-sighted. A more sustainable future for all nations, rich and poor, depends on addressing the climate crisis now. Failure to meet the needs of the Global South will lead to greater instability, social unrest, and economic upheaval, which will reverberate globally.

The recent COP29 agreement may have been a step forward, but it is not nearly enough. The $300 billion pledge, though significant, is still a fraction of the $1.3 trillion that is needed. Moreover, much of the funding is tied to loans, which only further burden developing nations that are already crippled by debt. This is not the support that is needed to build resilience against climate change. What is required is a commitment to grants, investments in green technologies, and capacity-building that empowers nations to tackle climate challenges on their own terms.

The solution lies not in piecemeal promises or short-term political gains but in a comprehensive, long-term approach to climate financing that prioritises fairness, equity, and the urgent needs of those most affected. It is time for the developed world to acknowledge its historical responsibility and recognise that climate finance is not a favour—it is a shared responsibility. The refusal to provide the necessary funds now will have catastrophic consequences, not only for the Global South but for the entire world. The global climate crisis is a common challenge, and it requires a global solution. The question is no longer whether the wealthy nations can afford to act, but whether they can afford not to.

(Views are personal. The author is a Corporate advisor & Independent Director on Corporate Boards. He tweets as @ssmumbai)