Moody's highlights challenges low-income economies face in addressing climate finance gap
Date
11/3/2024 4:57:10 AM
(MENAFN) A recent report by Moody's, a US-based global credit rating agency, highlights the significant challenges low-income economies face in addressing the climate finance gap. The report emphasizes the urgent need for substantial investment to facilitate the transition to a low-carbon economy, enhance resilience, and adapt to the impacts of climate change. While investment in climate-related initiatives has surged since the 2015 Paris Agreement, achieving the goal of global net zero emissions by 2050 will require significantly more funding.
Moody's identifies considerable investment gaps in both climate mitigation—efforts aimed at reducing greenhouse gas emissions—and adaptation strategies designed to adjust to the effects of climate change. The agency estimates that countries are projected to spend nearly USD2 trillion on clean energy initiatives this year, covering areas such as low-carbon power, infrastructure, energy efficiency, and electrification. However, it warns of an annual climate mitigation investment gap of approximately USD2.4 trillion by 2030.
Furthermore, funding for adaptation measures has lagged significantly due to its more limited commercial potential. The report notes that adaptation investment currently stands at around USD72 billion for 2022, falling short of the estimated annual needs of about USD400 billion. This shortfall contributes to a cumulative annual climate investment gap of USD2.7 trillion by 2030, which represents roughly 1.8 percent of global GDP. The gap particularly jeopardizes vulnerable communities, especially in emerging markets where the investment needs are most pressing.
The implications of climate change extend beyond environmental concerns, posing serious credit risks for economies and businesses due to the physical impacts on livelihoods and infrastructure, as well as the transformations required to reduce carbon emissions. Moody's underscores the importance of early investments in clean energy as a means to mitigate potential economic losses stemming from climate change. The report concludes that accelerating climate-related spending not only preserves lives but could also drive higher growth and generate increased revenue for governments worldwide over the long term.
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