The United Nations Framework Convention on Climate Change (UNFCCC) has significantly revised its estimates on the amount of climate finance required by developing nations to meet their environmental targets. According to the second Needs Determination Report (NDR), released on September 10, 2024, between $5.01 and $6.85 trillion will be needed by 2030 to support the implementation of these countries’ Nationally Determined Contributions (NDCs).
This updated figure marks a substantial increase from the estimates provided in the first NDR, published in 2021 following discussions at the 24th Conference of Parties (COP24). At that time, the projected financial need was between $5.8 and $5.9 trillion, already a considerable leap from the $100 billion per year climate finance goal set for 2020, which was later extended to 2025.
The latest report underscores the financial burden on developing countries in their efforts to combat climate change, placing renewed pressure on developed nations to fulfil their commitments. This reassessment comes as the New Collective Quantified Goal (NCQG) on climate finance is set to be decided at COP29 in Azerbaijan later this year. The NDR provides a critical benchmark for those negotiations, helping align financial contributions with the actual needs of developing countries.
A Detailed Reassessment of Climate Finance Needs
The second NDR is based on an analysis of several reports submitted by developing countries under various processes of the UNFCCC and the Paris Agreement. The findings paint a stark picture: of the 142 nations that submitted NDCs, only 98 provided estimates of the costed needs for climate action. This suggests that the overall financial requirements for all developing countries are likely even higher than the report’s current estimates.
The report highlights that climate finance of between $455 billion and $584 billion will be required annually until 2030 to meet the stated goals. This figure is derived solely from NDC reports, and additional reports from developing countries are expected to push the total even higher.
Conditionality plays a significant role in these financial needs. Nearly half (48%) of the total costed needs, amounting to $2.4 trillion, are for conditional actions that depend on international support in the form of finance, technology transfer, and capacity building. In contrast, unconditional actions—those that developing countries have committed to undertaking independently—account for $882 billion (18%) of the total. An additional $1.8 trillion remains unspecified regarding conditionality.
These figures underscore the growing call for developed countries to take greater responsibility in providing financial assistance to their developing counterparts, especially as the majority of costed needs are contingent on such support.
Breakdown of Climate Action Needs by Sector
The NDR categorises the financial needs of developing countries into four primary areas: mitigation, adaptation, cross-cutting measures, and actions to avert, minimise, and address loss and damage.
Mitigation dominates the costed needs expressed in NDCs, accounting for 79% of the total. The energy sector alone represents approximately 60% of mitigation needs, highlighting the pressing requirement for a transition to cleaner energy systems. Other sectors with significant mitigation needs include forestry and biodiversity, waste management, and transportation.
In contrast, adaptation needs—which address the impacts of climate change—make up just 16% of the total. These needs are spread across various sectors, including agriculture and food security, ecosystems and biodiversity, water supply, health, and sanitation.
Cross-cutting measures, which span multiple sectors, represent 5% of total costed needs, while less than 1% has been allocated for efforts to avert, minimise, and address loss and damage. These needs include sectors such as disaster management, coastal zones, and water supply.
Geographic Distribution of Climate Finance Needs
The report notes that some regions have reported lower needs due to inadequate data and informational tools, cautioning against drawing premature conclusions about regional discrepancies.
Africa and Asia account for the largest portion of the reported needs, with Africa leading in both costed and non-costed needs, while Asia’s costed needs are the highest, estimated at between $3.3 trillion and $4.9 trillion.
In Asia, Latin America, and the Caribbean, most of the climate finance needs focus on mitigation, whereas in Africa and other regions such as Europe and Oceania, adaptation needs feature more prominently. However, in Africa, a significant portion of the costed needs remains focused on mitigation.
A Contentious Path Forward for Climate Finance
As negotiations on the NCQG continue, the debate over the quantum of climate finance and the responsibility of developed countries remains heated. The second NDR report seeks to provide clarity on the scale of financial needs required to support developing nations in achieving their climate goals, but the road ahead is fraught with challenges. With COP29 on the horizon, the hope is that this report will help forge a consensus that aligns the promises of the past with the realities of the present.
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