Filling the climate finance gap: holistic approaches to mobilise private finance in developing economies

Abstract Transitioning to a low-carbon economy requires over $8.4 trillion annually for the rest of this decade, but current efforts are insufficient, especially in emerging markets and developing economies (EMDEs). Using a theoretical model of the climate finance gap, we identify key factors needed to close this gap and examine how adjustments in carbon pricing could effectively mobilise the required investment. Our findings highlight the importance of strengthening two core elements: (1) Reframing ‘international carbon markets’ to focus on supporting comprehensive, equitable transitions in EMDEs and fostering large-scale systemic cooperation, and delivering real mitigation impacts. (2) Implementing holistic transition plans and cohesive packages of public, private, and market support to create economic, social, and political environments that enable credible and effective policy implementation, while providing the critical technology and skilled labour needed to make private financial flows more responsive to carbon price signals.