The IMF has said that developing economies needed an investment of $1 trillion a year by 2030 solely in the renewable energy sector to stay on track to achieve the net-zero greenhouse gas emissions target by 2050.
Observing that emerging markets and developing economies account for two-thirds of global greenhouse gas emissions and many are highly vulnerable to climate hazards, the International Monetary Fund said these developing economies would need significant climate financing in the coming years to reduce their emissions and to adapt to the physical effects of climate change.
The investment needs of these economies solely in renewable energy could reach USD 1 trillion a year by 2030 if they are to stay on track to achieve net-zero greenhouse gas emissions by 2050, it said, adding that developing economies alone will require up to USD 300 billion a year by 2030 to adapt agriculture, infrastructure, water supply, and other parts of their economies to counterbalance the physical effects of climate change.
If efforts to reduce emissions fall short of global temperature objectives set by the Paris Agreement, the need for adaptation financing will rise sharply for emerging markets and developing economies.
Estimates range from USD 520 billion to USD 1.75 trillion annually after 2050 depending on the emission pathway, it said. Emerging markets and developing economies will need significant climate financing in coming years to reduce greenhouse gas emissions (mitigation finance) and adapt to the current and predicted physical effects of climate change (adaptation finance), the IMF said in a report released on Friday ahead of the annual meeting of the IMF and the World Bank here.
In a simultaneous blog post, three senior IMF officials Torsten Ehlers, Charlotte Gardes-Landolfini, Fabio Natalucci, and Ananthakrishnan Prasad said private climate financing must play a pivotal role as emerging markets and developing economies seek to curb greenhouse gas emissions and contain climate change while coping with its effects.
Estimates vary, but these economies must collectively invest at least USD 1 trillion in energy infrastructure by 2030 and USD 3 trillion to USD 6 trillion across all sectors per year by 2050 to mitigate climate change by substantially reducing greenhouse gas emissions, they wrote.
While private sustainable finance in emerging markets and developing economies rose to a record USD 250 billion last year, the blog post said that private finance must at least double by 2030, at a time when investable low-carbon infrastructure projects are often in short supply and funding of the fossil fuel industry has soared since the Paris Agreement.
The IMF in its report said that scaling up private climate finance in emerging markets and developing economies calls for a multi-pronged approach with improvements across various dimensions, including support from multilateral development banks (MDBs), the IMF, and the public sector.
This reflects both the scale of financing needs and the variety of investments needed to achieve material climate change mitigation and adaptation. Innovative financing instruments can help overcome some of the challenges faced by the private sector in emerging markets and developing economies, such as credit and political risks and lack of scale, it said.
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