The Paris Agreement remains a critical treaty for progress. As part of the treaty, countries who specify finance goals within their Nationally Determined Contributions, collectively need a minimum of $400 billion annually to meet their climate goals between now and 2030.
However, these numbers are based only on countries that have outlined their own explicit financial goals. Broader projections for the kind of global investments needed for climate action each year until 2030 are as high as $6.7 trillion, with $2.3-2.5 trillion needed in emerging and developing countries.
Other landmark agreements, like those made at previous COPs, have seen countries commit not just to addressing their own emissions but promising billions to support the Global South to invest in the critical infrastructure and mitigation plans needed to lower global emissions and support sustainable development.
However, none of these promises are legally binding, and the delivery of the much-needed finance is well off-track, despite significant growth in recent years.
Only 15% of climate finance is going to emerging and developing nations, and as little as just 3% makes its way to the world’s least developed nations. And it is getting worse.
Global policy changes — including major freezes on climate finance and a withdrawal from global treaties — have created major setbacks, including the US cutting nearly a tenth of all global climate finance.
This rightward swing in several recent elections threatens to further undermine global ambitions, causing knock-on effects for everyone, but especially countries in the Global South.
Emerging economies cannot afford to wait for political tides to change back in their favour — we must leverage existing tools to bridge this growing financial gap.
Carbon markets are one such tool.
In opening remarks at the SEforALL summit last week, Prime Minister Mia Mottley reminded us that “we have to redouble our efforts in spite of those who would wish now to put breaks on access to financing.”
Already operational and directing finance where it's most needed, elevated by recent progress on Article 6, carbon markets, with the right support from policymakers, can be scaled up to help close the $6.7 trillion annual shortfall required to fund a sustainable transition across the globe.
Carbon markets are a market mechanism to mobilise climate finance, both from governments via Article 6.2 and the private sector. It has shown us how near-term progress can be made whilst we wait for countries to make good on their commitments and for policymaking to better reflect the kind of climate progress we need to see.
Through carbon markets, climate finance can be leveraged not only to fund a sustainable transition but also to identify projects uniquely tailored to each country's specific needs.
One example of this is the early decommissioning of coal-fired power plants. Through carbon markets, coal plants can be retired ahead of time and replaced with renewable energy, which supports emission reduction targets and broader environmental goals within a country whilst also improving the livelihoods of local communities.
In many cases the upfront costs to scale the development of green technologies in emerging economies is simply too high. Carbon finance can mobilise the investments needed to make the transition more affordable for developing countries and accelerate the deployment of low-carbon infrastructure while protecting and restoring nature.
Compliance markets are emerging at both national and state levels and are starting to converge with the voluntary market. This convergence is strengthening the market as a whole and creating a more robust system that is primed to address the most difficult aspects of decarbonisation.
Without the necessary financing to deliver national climate plans, emissions are poised to rise amid growing political uncertainty. A high-integrity carbon market is essential to avoid this and can unlock climate finance for where it is most needed.
Download the 2025 Buyer's Guide for expert insights on carbon credits and Article 6. Explore key carbon market trends, compliance, and integrity updates.
