Wealthy nations’ investment in global decarbonization imperative to economy, experts argue
March 13, 2025
In their own interest, “coalitions of the willing” of industrialized countries should now step up climate finance for developing countries. The aim: to make their climate commitments, which must be updated in 2025 according to the Paris Agreement, as ambitious as possible. Proven CO2 reductions in the Global South should be rewarded with massive public grants—which would be highly profitable for donor countries due to avoided climate damage. This is the message of an article published today in the journal Nature, co-authored by Ottmar Edenhofer and Johan Rockström, scientific directors of the Potsdam Institute for Climate Impact Research (PIK).
The article points to the inadequate results of the latest world climate summit in Azerbaijan, and puts the necessary amount of climate financing at 500 billion dollars annually between 2025 and 2035. That is how much is needed for developing countries to reduce their CO2 emissions in line with the 1.5-degree limit.
The article quantifies how this would pay off for donor countries, using the example of a coalition of EU states with the United Kingdom, Norway, Switzerland, Canada, Japan, Australia and South Korea. Their fair share would total 124 billion dollars (0.3% of economic output) annually. Based on a conservative estimate of avoided climate damage, the annual return would be 9%. Using a generous, scientifically-based estimate, the figure could be over 500%.
“Climate finance is not foreign aid—it is a high-return investment in global economic stability and climate security for the benefit of all,” the article states. In the past six months alone, climate-related damages from hurricanes Helene and Milton in the US, wildfires in Los Angeles and floods in Valencia in Spain are estimated to exceed 500 billion dollars.
And there is the threat of even greater climate damage: “Exceeding the 1.5-degree limit makes crossing planetary tipping points more likely, including collapses of ice sheets, ocean currents, coral reefs and permafrost,” warns the research team. “This would threaten the lives and livelihoods of billions of people.”
The article’s lead author is Alissa Kleinnijenhuis, a visiting professor at Cornell University in Ithaca, New York, and at Imperial College London. Other authors are Patrick Bolton, professor of finance at Imperial College Business School, and Jeromin Zettelmeyer, Director of the Brussels-based think-tank Bruegel.
More information: Patrick Bolton et al, Why it makes sense for wealthier nations to help others decarbonize, Nature (2025). DOI: 10.1038/d41586-025-00779-9
Provided by Potsdam Institute for Climate Impact Research
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