Wealthy nations have committed to providing billions of dollars of “climate finance” to developing countries, as part of the global effort to tackle climate change.
At the COP29 climate summit, nations must decide on a new global goal to replace the existing target of $100bn each year.
Delivering this money is widely viewed as important for helping vulnerable nations in the global south and maintaining trust between countries in UN climate talks.
Yet, for decades, climate finance has been plagued by accusations of exaggerated numbers, poor transparency and money going to “questionable” places. Much of this stems from a lack of consensus on what counts as “climate finance”.
Most climate finance comes from the aid budgets of a handful of developed states, including western Europe, the US and Japan. Governments use their own criteria to assess “climate finance”, often prompting criticism from civil society groups and developing countries.
Most climate finance goes towards legitimate causes. However, analysis of the available data reveals examples of countries reporting funds going to, say, fossil fuels and airports. Some donors report finance that may never be spent and others hand out loans that, ultimately, see them making a profit.
These activities are all allowed under the UN climate finance system.
As countries gather to negotiate a new climate-finance target at COP29 in Baku, Azerbaijan, Carbon Brief – in no particular order – explores six of the issues that make climate finance such a “wild west”.
- There is no agreed definition of what counts as ‘climate finance’
- Climate-finance accounting is not consistent or transparent
- Some climate finance is not helping to tackle climate change
- Reliance on loans ‘overstates’ climate finance flows
- Countries are reporting money that may never get spent
- Climate finance is used to boost donors’ economic interests
1. There is no agreed definition of what counts as ‘climate finance’
There is no universal agreement on what should, or should not, count towards the international “climate finance” provided by developed countries to developing countries.
Unofficial definitions, including those of the UN Standing Committee on Finance (SCF) and the Organisation for Economic Co-operation and Development (OECD), broadly agree that climate finance should support activities that cut emissions or help adapt to climate change.
As for the types of finance that should count, nations decided that the $100bn target would cover “a wide variety of sources”, including public money, support via multilateral development banks (MDBs) and private investment spurred by public spending.
However, the kinds of activities and finance streams falling into these broad categories are open to interpretation. In practice, governments of developed countries use their own methodologies and set their own rules when reporting climate finance.
Developed countries also pledged to provide climate finance that is “new and additional” – a term often taken to mean extra funding on top of other aid programmes. However, this framing is contested and, in practice, much of the reported climate finance comes from existing development budgets.
Prof Romain Weikmans, an international climate-finance researcher at the Free University of Brussels, tells Carbon Brief that developed countries have “diverging understandings on what should count as climate finance and on how to count it”. He adds that reporting requirements negotiated at the UN “allow countries to remain vague”.
Many expert analyses have concluded that self-reporting by governments, facing political pressure to act on climate change, contributes to an “overestimation” of total climate finance.
While it was widely reported that, based on OECD data, developed countries met the $100bn target two years late in 2022, Weikmans says the lack of a universal definition “makes it impossible to assess whether the $100bn has been met or not”.
The chart below shows how different assumptions about “climate finance” by key financial organisations lead to divergent estimates of how much has been provided.
Igor Shishlov, head of climate finance at Perspectives Climate Group, tells Carbon Brief that the lack of clarity contributes to an “erosion of trust” in climate negotiations between developed and developing countries.
These tensions have existed since the start of UN climate negotiations in the 1990s. An attempt by COP presidencies in 2015 to “reassure” nations about progress towards the $100bn goal with a special OECD report ended up sparking more disputes.
(A response at the time from the Indian Ministry of Finance – reflected in the chart above – estimated that climate finance was 26 times smaller than the OECD estimate. This was based on money that had been paid out, rather than pledged, from climate funds deemed “new and additional”.)
Efforts since then to agree on a definition have failed. Joe Thwaites, a senior advocate on international climate finance at NRDC, tells Carbon Brief that both developed and developing countries contribute to this deadlock:
“Developed countries oppose a definition that would restrict climate finance to certain financial instruments, while petrostates oppose a definition that would exclude counting funding for fossil-fuel projects as climate finance.”
As countries negotiate the “new collective quantified goal” (NCQG) for climate finance at COP29, observers say it is unlikely that nations will make significant progress on a comprehensive definition.
2. Climate-finance accounting is not consistent or transparent
The systems for climate-finance accounting have been described as full of “inconsistencies” and “discrepancies”, as well as “prone to huge overestimations”.
Joseph Kraus, senior policy director at the ONE Campaign, which has attempted its own assessment of climate finance based on available data, tells Carbon Brief:
“Climate finance accounting is like the wild west: Every climate finance provider makes its own rules about what to count. Predictably, that makes it virtually impossible to get accurate numbers.”
Governments report their climate-finance contributions to three major international bodies: the OECD; the UNFCCC; and, in the case of EU member states, the European Commission.
Most climate finance is drawn from developed countries’ aid budgets and they register their bilateral contributions in the OECD Creditor Reporting System (CRS). Officials then mark projects as being related to climate mitigation or adaptation.
This “Rio marker system” was implemented in 1998 to assess whether aid projects align with the three “Rio Conventions” on climate change, biodiversity and desertification.
The tags were never meant to define the amount of “climate finance” counted under the UN system. They have effectively filled the gap left by the lack of official guidance.
Most developed countries use the data submitted to the OECD CRS to guide what they report as “official” climate finance in reports to the UNFCCC. Only a handful, including the UK and the US, assess projects on a more case-by-case basis.
Governments use the Rio Markers to calculate climate finance in different ways. Most say they count 100% of the projects where climate has been marked as a “principal” objective towards their UNFCCC totals.
Projects where climate is deemed “significant”, implying a partial focus on climate, vary a lot more. Countries state that they report between 30% and 50% of these projects as climate finance.
Analysts have warned that the blanket application of fixed percentages is arbitrary and can lead to figures being inflated. They also note that, in practice, UNFCCC and OECD figures are difficult to compare and do not always match up in the ways countries report them.
The figures for bilateral climate finance that developed countries report to the UNFCCC are used as the basis for the OECD’s annual reports of progress towards the $100bn goal. They are combined with the OECD’s figures for MDBs, multilateral funds and the private sector.
(These are generally cited as the definitive figures for $100bn tracking, although they are contested. The OECD does not provide a breakdown of contributors to the target and its reports are released two years in arrears, making real-time scrutiny difficult.)
While the OECD screens projects reported in its system, it has no power to amend those that have been marked “incorrectly”. Analysis by Development Initiatives of climate-related aid projects found countries, such as France, Japan and Australia, frequently tagged projects that “deviated” from OECD guidance – those that include fossil fuels, for example.
Independent audits in Denmark, the Netherlands and the EU have all found significant evidence of “climate” projects being mislabelled, or their relevance overstated.
Reflecting on the wider state of climate-finance accounting, Thwaites tells Carbon Brief:
“I think understanding of climate finance is getting better, both through improvements in official reporting and through greater scrutiny from journalists and civil society. But as those third-party audits have shown, there is much room for improvement.”
All of this is further complicated by the lack of transparency from governments, when reporting their official climate-finance contributions to the UNFCCC. The lack of detail in submissions makes it difficult to assess the relevance of each project for tackling climate change.
For example, NGO FragDenStaat has documented its difficulties evaluating the German government’s claim that its climate finance reached a “record level” in 2022.
Poor transparency makes it difficult for those in developing countries as well. Turkish banks have received millions of dollars in climate finance from Germany and France, but there is little information provided either by the banks or the donors on how it is used.
“Citizens have no access to any information about these public funds,” Özgür Gürbüz, campaign director of the Turkish NGO Ekosfer, tells Carbon Brief.
Sehr Raheja, a programme officer specialising in climate finance at the Centre for Science and Environment in India, tells Carbon Brief:
“Implications…include the inability to clearly hold actors accountable, or even first understand the complete reality of the situation of climate finance for developing countries.”
Such scrutiny is important. The UK has traditionally been viewed as one of the more rigorous climate-finance reporters, but the government loosened its accounting system in 2023 to bring it more in line with those of less strict donors.
In doing so, an independent audit found that the UK added an extra £1.7bn ($2.2bn) to its projected climate finance spending without contributing any new funds, as the chart below shows.
3. Some climate finance is not helping to tackle climate change
Climate-finance databases contain details of tens of thousands of projects operating in developing countries around the world.
Most of these projects have clear links to tackling climate change. They might, for example, support solar power projects in Kenya, the construction of a train line in India, or improving the climate resilience of drought-prone farms in Guatemala.
However, among them are aid projects that may bring benefits to the target countries, but have little or no relevance for tackling climate change. Some could even undermine such efforts, by supporting fossil fuels and carbon-intensive sectors.
Stacy-ann Robinson, a climate-adaptation finance researcher at Emory University in the US state of Georgia, tells Carbon Brief that some climate finance “has been going to questionable places to support objectives that are clearly not related to…reducing vulnerability or increasing resilience”.
Some assessments indicate that “inaccurately” categorised climate projects are relatively common among the largest donors, notably Japan and France. NGOs have also identified many “troubling and high-emitting projects” reported as climate finance by MDBs.
Over the years, researchers and journalists have unearthed climate finance being used to, for example, buy uniforms for park rangers, support anti-terrorism programmes and fund luxury hotels.
However, the overall lack of transparency makes it difficult to ascertain exactly how much money from these “questionable” projects is feeding into the official totals reported to the OECD.
An investigation by Reuters in 2023 uncovered $3bn of finance reported to the UNFCCC that had gone towards “programmes that do little or nothing to ease the effects of climate change”. However, Reuters noted that its review only covered around 10% of countries’ submissions.
Carbon Brief has identified at least $6.5bn of finance attributed to projects involving coal, oil and gas that has been tagged as climate-related in the OECD’s climate-related aid database, over the decade from 2012-2021. If countries have followed their own guidelines for reporting climate finance, much of this money will have been reported to the UNFCCC.
Japan is frequently cited for labelling fossil-fuel finance as climate finance, including billions of dollars for coal- and gas-fired power plants in places such as Bangladesh and Indonesia.
However, Carbon Brief’s assessment of the data reveals that some European countries have also been reporting smaller amounts of fossil fuel-related “climate finance”.
For example, Sweden counted around €5m for a gas-fired power plant in Mozambique between 2012 and 2015, while Germany supported a gas power plant in the Ivory Coast in 2022. In both cases, the governments have confirmed to Carbon Brief that projects marked in the OECD registry were also reported to the UNFCCC.
Defenders of fossil-fuel finance argue that developing countries need investment in cleaner or more efficient fossil-fuel infrastructure – and that this does, in fact, reduce emissions. Others argue that these funds simply should not be labelled as climate-related.
Another example of questionable climate finance comes from the French development finance institution Proparco, which provided a €20m loan to Cabo Verde Airports in 2023, a subsidiary of French construction company Vinci Group.
This project was too recent to have been officially reported to the UNFCCC. However, Proparco has reported that 20% of its financing for the project would lead to “climate co-benefits”, such as “renewable energy investments, the installation of LED lighting and the replacement of air-conditioning systems”.
At the same time, Vinci Group says its other goal is to help Cabo Verde boost tourism through increased traffic at its airports. The company has celebrated “record passenger numbers” at its Cabo Verde airports, where traffic increased by 17% year-on-year in August thanks to rising passenger flows from western Europe.
4. Reliance on loans ‘overstates’ climate finance flows
Most climate finance is delivered as loans to developing countries and their institutions. This is one of the most contentious issues in international climate-finance reporting.
More than half of the bilateral finance committed by wealthy countries – and around three-quarters of the investments by MDBs – comes in the form of loans, as shown by the red bars in the figure below.
In fact, the nations that consistently rank among the largest climate-finance providers – Japan, France and the US – all provide the majority of their climate finance as loans.
Loans have to be paid back, leading to climate finance returning to contributor countries as profits, through repayments plus interest. This has led to accusations by civil society groups that developed countries “overstate” their climate finance by leaning heavily on loans.
Public climate-finance institutions generally offer loans at lower-than-market “concessional” rates, or else with longer repayment periods.
However, Carbon Brief analysis shows that at least $18bn of official climate finance reported by developed countries between 2015 and 2020 – roughly 10% of the total – was “non-concessional”, as the chart below shows. (While less desirable than loans officially described as “concessional”, these public institution loans are still generally offered at better-than-market rates.)
The reliance on loans is especially controversial amid the debt crisis facing many developing countries.
The world’s least-developed countries and small-island developing states collectively spent twice as much repaying debts in 2022 as they received in climate finance, according to analysis by the International Institute for Environment and Development (IIED).
There has been considerable pressure from civil society, researchers, developing countries and even UN climate chief Simon Stiell to increase the “concessionality” of climate finance.
NGOs, such as Oxfam, argue that climate-related loans should be reported as “grant equivalents”, rather than at face value. This is a measure of how much the developed-country government is subsidising the loan.
Since 2018, development aid reported in the OECD’s database has been expressed in grant equivalents in order to better communicate the “financial effort” being made by donors.
However, when the OECD reports progress towards the $100bn climate-finance goal, drawing from developed countries’ reports to the UNFCCC, it still uses face-value figures for loans. This is one of the key reasons that developing countries have disputed these figures.
Oxfam releases an annual report that drastically downgrades the OECD figures, primarily by using grant equivalent values. Rather than exceeding the $100bn goal in 2022, the NGO argues that developed countries’ true financial effort only amounted to around $28-35bn that year.
From 2024, countries will be able to start reporting loans in grant-equivalent amounts to the UNFCCC in the newly introduced “biennial transparency reports” (BTRs) that all nations must file under the Paris Agreement. However, they are not required to do so, meaning it is unlikely that an “official” total for grant-equivalent loans will be available.
5. Countries are reporting money that may never get spent
Climate finance only has an impact when it is provided – or “disbursed” – to people and institutions who can use the money.
Yet some countries, including France, Germany and Denmark, choose not to report the amount of climate finance they have actually provided to developing countries.
Instead, they record the amount they have “committed”, or else a mix of committed and provided sums. These numbers feed into the totals reported by national governments and they count towards the $100bn target, even if the money has not left the donor country.
The OECD defines a commitment as a “firm written obligation by a government or official agency”. Over time, the amount of money provided should match the amount committed.
But between a nation committing money and handing it out, all sorts of things can change, as Mattias Söderberg, global climate lead at the NGO DanChurchAid, tells Carbon Brief:
“In some situations, projects are interrupted. Changes in the context or in the projects or within partners, for example, when there was a coup in Mali, means that committed funds may not be disbursed as planned.”
Climate projects could also collapse because a new government in the donor country decides to cancel the project for political or financial reasons. Other issues, such as shifting exchange rates, can also lead to divergences between committed and disbursed funds.
The reliance on commitments to meet climate-finance targets has drawn criticism. In its 2015 critique of progress towards the $100bn target, the Indian government said it needed “actual disbursements” rather than “promises, pledges or multi-year commitments about promised sums in the future”.
An analysis by ONE Campaign of climate-related aid reported to the OECD found that, of $616bn committed since 2013, data was missing for $69bn of disbursements and another $228bn had not yet been disbursed. (This data is not a direct reflection of “climate finance” under the UN, but it is a rough proxy.)
Some lag between commitments and payments is to be expected. Countries tend to commit to big climate-finance projects and then gradually pay out the money over time.
However, civil society groups have highlighted “significant differences” between committed and provided sums.
In recent years, EU member states have had to start reporting both commitments and disbursements. The chart below shows the sizable gap between the money Germany, France, the Netherlands, Sweden and Italy pledge and the amount they provide.
(It is worth noting that there is significant variability. Sweden sometimes provides more finance than it commits, whereas, in two years, France did not report disbursements at all.)
Identifying climate-finance projects that have completely failed to pay out is difficult. Governments are not obliged to report to the UNFCCC when they have provided finance and neither do they have to update the record to reflect any cancellations or changes.
Reuters identified three French climate projects between 2016-2018 – collectively worth half a billion dollars – that had been cancelled. This equates to 4% of France’s climate finance over this period.
“Commitments look better, so more effort is put into reporting them than into tracking actual disbursements,” Kraus from ONE Campaign tells Carbon Brief.
Civil society groups argue that all governments should start reporting disbursements to reduce the risk of “over-reporting”.
6. Climate finance is used to boost donors’ economic interests
Developed nations provide climate finance in a variety of different ways.
In projects that involve building infrastructure, such as windfarms and train lines, companies must be enlisted to work on the engineering and construction. Often, donor governments will work with firms based in their own countries to carry out climate projects.
The French Development Agency (AFD) has reported that the majority of its aid is entrusted to projects involving at least one French “economic actor”, resulting in significant economic benefits for the country.
Meanwhile, one-third of Japanese climate loans are given with the condition that Japanese companies are hired to work on the project, according to Reuters analysis of OECD data.
Stacy-ann Robinson of Emory University notes that this is not a “black-and-white” issue, as sometimes a company from the donor nation will be best placed to carry out the project. However, she notes that it has implications for capacity building in developing countries.
France has committed billions of dollars towards rail infrastructure in developing countries. Given France’s global leadership in the sector, a significant share of these projects have been implemented by French companies.
Project-level data about which companies are awarded contracts is not reported to the UNFCCC. However, one climate-finance project identified by Carbon Brief involves €230m worth of loans provided by AFD for an express regional train in the Senegalese capital, Dakar. This was co-funded with an extra €1bn from development banks.
While the project has clear benefits for the decarbonisation of transport in Dakar, it also helped several French companies expand their activities in the region.
These include Eiffage, which built the infrastructure; Systra, which provided engineering consultancy services; Thales and Engie, which together won a €225m project to design and build the electricity infrastructure for the train; and Alstom, which supplied trains.
Reflecting on this issue, Robinson tells Carbon Brief:
“Perhaps we need regulations around the conditionalities associated with [climate] finance that would reduce the possibility of only French companies, for example, being able to work on these climate-finance projects.”
Another way climate finance might benefit donor nations is through projects that involve hiring consultants and other experts based domestically. One paper notes how such projects can result in money “flowing back to developed countries”.
Previous Carbon Brief analysis found that one-tenth of the climate funds disbursed by the UK between 2010 and 2023 had gone to private consultancies, largely based in the UK.
This article was developed with the support of Journalismfund Europe. Carbon Brief worked with journalists based in France, Germany, Sweden and Turkey, and they provided input on how different countries have been providing international climate finance.
The post COP29: Six key reasons why international climate finance is a ‘wild west’ appeared first on Carbon Brief.
COP29: Six key reasons why international climate finance is a ‘wild west’
Bemnet Agata is a communications officer at the Tax Justice Network, where Alison Schultz is a research fellow.
We are entering an age of permanent volatility.
Climate change is making extreme weather more destructive. Geopolitical tensions are disrupting energy markets and supply chains. Governments are expected not only to decarbonise their economies, but to protect them against an increasingly unpredictable world. That requires sustained public investment at precisely the moment repeated shocks are placing ever greater pressure on public finances.
Governments are rightly debating how to mobilise the trillions needed for the energy transition. Yet one of the largest untapped sources of climate finance requires neither higher corporate tax rates nor new international funds. It lies in correcting one of the oldest assumptions underpinning the international corporate tax system.
One of the stranger features of the modern economy is that we no longer disagree about what a multinational corporation is—until the conversation turns to tax.
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Investors value Apple as a single global business. Consumers experience it as a single company. Its executives manage it as an integrated enterprise, allocating capital, production and marketing across continents according to commercial strategy rather than national borders. Nobody seriously believes its subsidiaries are independent businesses negotiating with one another as though they were unrelated companies.
Yet this is precisely the legal fiction upon which the international corporate tax system was built—and continues to rest.
That legal fiction does more than misdescribe how multinational businesses operate. It enables profits to be shifted away from the places where real economic activity takes place and into jurisdictions where little or no tax is paid. This not only erodes public revenues, but also undermines the level playing field by giving multinational corporations tax advantages that purely domestic businesses cannot replicate.
$500 billion a year
Taxing multinational corporations as the integrated businesses they actually are could generate around $500 billion in additional corporate tax revenues every year. That’s almost 40% of the $1.3 trillion in annual climate finance that, two years ago, governments agreed should be mobilised by 2035. That is exactly what governments are negotiating this week under the United Nations Framework Convention on International Tax Cooperation in New York.
Imagine Apple sold one million iPhones in Kenya. Few people would dispute that those sales depend on the Kenyan economy. Every iPhone arrives through Kenyan ports, travels on Kenyan roads, is sold by Kenyan workers, connects through Kenyan telecommunications infrastructure and is protected by Kenyan courts. Apple’s success depends not only on its own innovation, but on the public investments and institutions that make economic activity possible.
The negotiations underway under the United Nations Framework Convention on International Tax Cooperation would replace this legal fiction with a system known as unitary taxation with formulary apportionment. Rather than allowing multinational corporations to pay tax where they say their profits arise, it would allocate taxing rights according to where they undertake genuine economic activity—where they employ workers, manufacture goods, provide services and sell to customers. It would replace today’s pay where you say model with one based on pay where you play
This is not about increasing corporate tax rates. It is about deciding where multinational corporations should pay tax on the profits they already earn. Allocating taxing rights in this way would benefit countries across the income spectrum. While higher-income countries would gain the most in absolute terms, lower-income countries would see the largest proportional increases.
France, for example, would collect an additional US$25.5 billion each year, while Kenya would increase its corporate tax revenues by 406%. At a time of mounting climate costs, those revenues could help governments drive the transition to clean energy while investing in the resilience needed to withstand future shocks.
An overdue correction
The strongest argument for reform, however, is not the scale of the projected revenue gains. It is that the proposal corrects a century-old foundational error by bringing international tax rules into closer alignment with how the modern economy actually works.
Every successful market depends on foundations that no company creates alone: public investment, functioning institutions and the participation of millions of workers and consumers. If multinational profits are generated collectively across many countries, the rules governing where those profits are taxed should recognise that reality rather than the legal and accounting artifices that determine where profits appear on paper.
The international tax system remains an outlier. Every other area of economic governance has long since recognised multinational corporations as integrated global businesses. Tax rules remain the last custodian of the legal fiction that multinational corporations are not, in fact, multinational.
The debate taking place in New York is therefore about much more than tax. It is about whether the rules underpinning the global economy still reflect the economy they are meant to govern—and whether they equip governments with the fiscal capacity to confront the defining challenges of the twenty-first century.
Energy sovereignty without fiscal sovereignty is an unfinished transition. Countries cannot build a more secure and resilient future if the wealth generated within their economies continues to escape taxation where it is created.
Recovering those revenues would strengthen public finances, giving governments not only the resources to accelerate the energy transition but also the fiscal capacity to plan, coordinate and sustain it over the long term. In an age of permanent volatility, that capacity may prove to be every country’s most important climate adaptation strategy.
The post A legal fiction blocking billions in climate finance will be challenged this week appeared first on Climate Home News.
A legal fiction blocking billions in climate finance will be challenged this week
Leaders of the Santa Marta coalition – a group of governments, businesses and civil society organisations seeking to transition away from fossil fuels – hope it can withstand the loss of one of its founding members as a far-right, pro-fossil fuel government takes office in Colombia this week.
In April, Colombia hosted 57 governments in the Caribbean city of Santa Marta for the first conference on transitioning away from fossil fuels – a voluntary meeting outside of official UN climate talks. In June, far-right candidate Abelardo de la Espriella won a general election, and is set to take office on Friday.
De la Espriella has pledged to ramp up coal exports and begin fracking for methane gas, reversing a ban on all new hydrocarbon exploration enacted by the current government of Gustavo Petro since 2022. The soon to be environment minister Fabio Arjona said the Santa Marta conference was an “absolute waste of time and money”.
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He will replace Irene Vélez Torres, who co-chairs the Santa Marta coalition. Torres told a press briefing last week that the initiative was created in a way that made sure “it could live without Colombia because we knew [a change in government] was a risk”.
“It’s a coalition of countries but also subnational governments, civil society, scientists… so there is a lot more than just Colombia. It’s a shame that Colombia cannot continue with its international leadership, but it doesn’t mean that what we created as a global legacy will not continue,” she said.
Dutch environment minister Stientje van Veldhoven, also a co-chair in the initiative, told Climate Home News in a statement that “the organization is set-up in a way that progress does not depend on one or two countries”, and highlighted the role of incoming co-chairs Ireland and Tuvalu.
The new co-chairs will officially take the lead after COP31 and are set to host the second Conference on Transitioning Away from Fossil Fuels in Tuvalu next year. Van Veldhoven said the two countries are already involved in preparing for this transition.
Priorities: roadmaps, debt and trade
After meeting in Santa Marta to kickstart work on phasing out fossil fuels, governments agreed to focus on three priorities: developing national roadmaps to phase out fossil fuels, decoupling trade from coal, oil and gas, and reducing global finance’s dependence on fossil fuels.
At last year’s COP30, a group of around 80 countries led a failed push for the UN to adopt a global roadmap to phase out fossil fuels. To keep talks from collapsing, Brazil proposed to draft a voluntary roadmap instead, which has received suggestions from dozens of countries.
In June, Vélez Torres told journalists that Colombia and the Netherlands would seek for COP31 to reflect the work of the Santa Marta coalition, something the co-presidency of Türkiye and Australia was “open” to consider, she added.
Last week, she stressed that the workstreams are also set up independently from the Dutch and Colombian governments, and that each area of focus will have its own “madrina”, which translates as “godmother”, a contact point that will oversee progress and support countries.
Van Veldhoven noted that, while the coalition is open to new members, the current priority is “setting up the organisation with the current involved countries and stakeholders”. The Dutch government noted that “several countries” have expressed interest, but could not disclosed which ones.
Colombia’s fossil fuel shift
While the coalition is set up to withstand changes in government, Colombia’s shift to a pro-fossil fuel government represents an important blow to global initiatives seeking to phase out fossil fuels, said Andreas Malm, author and professor of human ecology at Lund University.
“The gap that we have after this defeat is charismatic political leadership that makes the necessary links and arguments on the global stage. For the moment, I don’t see who could replace Colombia in that role,” he said. “But who knows… perhaps some miracle will happen somewhere in the world and you will have someone to pick up that mantle that is now on the ground.”
Colombia not only leads the Santa Marta coalition, but is also one of the few fossil fuel producers in the group to actually halt new exploration licenses. Coal and oil derivatives account for about a third of the country’s exports, but both industries have followed a downward trend over the last decade.
De la Espriella’s government will also have to start from scratch, as Petro’s government halted all oil and gas exploration pilots in the key Magdalena and Cesar-Ranchería regions. Both areas are also home to indigenous communities who are likely to challenge any projects in court.
Vélez Torres said that halting all new coal, oil and gas exploration licenses “was not easy” and led to “violent reactions” from national elites, including “violent threats”, but that it came with the deep belief that “it is needed, it is urgent, and it cannot be delayed”.
At an international level, she added that more countries need to show “political bravery” to take similar decisions, and that the global discussion to phase out fossil fuels “cannot be delayed” because the time window for humanity to act is shrinking.
“We decided to go against the current. That has been one of the bravest decisions, and I hope that other governments and particularly civil society can get to lead that conversation forward”, she said.
The post Santa Marta coalition tested as co-chair Colombia turns back to fossil fuels appeared first on Climate Home News.
Santa Marta coalition tested as co-chair Colombia turns back to fossil fuels
When heavy storms triggered a fault on a major power line in Indonesia’s Sumatra in late May, blackouts plunged homes and businesses across the island into darkness, leaving millions to cope without power in the humid heat for up to a day.
Failed traffic lights caused chaos on the streets of Medan, one of the country’s biggest cities, and restaurants and shops had to shutter or throw out food after fridges stopped working. Four people were reported to have died from carbon monoxide poisoning from generators.
A power outage caused by damage to cables on a high-voltage transmission line, the first of two to strike Sumatra in a fortnight, highlighted the huge challenge facing Indonesia and much of neighbouring Southeast Asia – the maintenance and upgrading of inadequate grid capacity that industry analysts say is proving an obstacle for billions of dollars in planned clean power investments.
Experts told Climate Home News the Galang–Simangkuk transmission line, which was relatively new and only began operating seven years ago, should have been able to withstand the storms that caused transmission towers to collapse in early June.
“It should not have had these grid failures,” said Wai-Shin Chan, Hong Kong-based head of research at Asia Research & Engagement, a consulting firm, warning that climate change would bring more frequent episodes of extreme weather.
“The grid resilience is really not there,” Chan said.
The Indonesian Air Force helped state-owned utility PT Perusahaan Listrik Negara (PLN) transport emergency power towers to restore electricity supplies within 24 hours, but the two incidents could cause longer-lasting damage to investor confidence – hurting the delivery of much-needed reliable clean electricity supplies.
PLN did not respond to a request for comment.
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Indonesia’s failing Just Energy Transition Partnership is a cautionary tale
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EU, UK lead push for electrification as “powerful weapon” against fossil fuels
A group of dozens of countries seeks to build momentum for a COP31 pledge to electrify 35% of global energy use by 2035 as an alternative to fossil fuels
Grid bottlenecks and projects stuck on hold
With electrification high on the agenda of the COP31 climate talks later this year, there is growing global focus on the need to bolster grid infrastructure to cope with increased electricity use and more renewables in the power mix.
In Southeast Asia, energy experts say inadequate grid capacity and maintenance is already proving a major factor in the region’s stuttering rollout of new clean energy projects.
About 50% to 60% of renewable energy projects in Vietnam, Thailand and Indonesia were cancelled or stalled between 2021 and 2025, according to a recent report by consultancy Bain & Company and Standard Chartered. In Indonesia, 48% of announced projects were subsequently dropped or delayed during that period.
Progress in the region is also being hampered by issues ranging from unclear power purchase agreement (PPA) structures, a failure of power policies to keep up with investor needs, permitting and licensing approval delays, grid connection constraints, limits to private sector involvement in electricity markets, and policy and tariff uncertainty, energy experts said.
Some renewable energy projects have also faced opposition due to their environmental impact and issues related to land rights.
But Bain researchers found grid infrastructure was the biggest bottleneck for Southeast Asia’s energy transition, with about $18 billion per year needed in investment for modernisation and upgrades.
The International Energy Agency (IEA) has warned that electricity grid and storage investment in the region was higher in 2015 at $15 billion compared with $12 billion in 2025, even as electricity demand and renewable energy growth accelerated.
“It’s a concern for long-term power development in the region,” Chan said.
“If these risks – grid curtailment, policy uncertainty, permitting and PPA – are not adequately addressed, investors just don’t have the confidence to hit the final investment decision button,” he added.
A stuttering energy transition
Ramping up progress on solar, wind, hydro and geothermal projects is vital for Southeast Asian nations to hit their targets on cutting planet-heating carbon emissions.
Indonesia has pledged to reduce emissions by 31.9% by 2030 compared with business-as-usual levels, or by 43.2% with international support, on the way to reaching net zero by 2060.
Renewables accounted for about 18% of Indonesia’s energy mix in April 2026 according to local media reports, falling short of the country’s initial 23% target for 2025, with the majority of its energy needs met by coal, oil and gas. In 2025, a new National Energy Policy postponed achieving the target to 2030.
“The region carries significant weight in global terms, given its share of world population and energy consumption,” said Joseph Jacobelli, an impact investor and author of Asia’s Energy Revolution and Powering the Unstoppable Green Shift.
“Every delay in renewable energy deployment extends dependence on fossil fuels and pushes net zero targets further out of reach,” he said.
There are cost benefits of increasing renewables in the overall power mix, too.
In many parts of the region, new renewable power – especially solar and onshore wind – is cheaper than building new fossil fuel generation. The global energy shock unleashed by the Iran war has highlighted the energy security benefits of renewables, though it also raised concerns about coal backsliding in countries including Indonesia.
Surging oil prices exposed Southeast Asia’s vulnerability to fossil fuel supply disruptions, causing energy prices to soar and widespread fuel shortages that led the World Bank to downgrade the region’s growth projection.
“This situation pushes us to accelerate [the energy transition], we must move faster,” Indonesian President Prabowo Subianto said in March, adding that the government was focused on solar projects that would deliver a total installed capacity of up to 100 GW.
At the same time, progress on moving away from coal has been sluggish. Both Indonesia and Vietnam signed up for Just Energy Transition Partnerships (JETPs) – a funding initiative set up by the G7 to help developing nations shift away from coal – though a lack of favourable financing is holding back these plans.
The US withdrew from its JETP deals with the two countries last year, reflecting President Donald Trump’s wider energy policies, and Indonesia abandoned plans to close a major coal power plant.
Lack of finance, or lack of faith?
But a shortage of financing to bring new renewables projects online is not the cause of foot-dragging in Indonesia, where installed solar capacity reached only about 20% to 30% of the government’s 2020-2025 target, Bain researchers said.
Of an estimated $540 billion in green capital expenditure announced across Southeast Asia’s power and electric vehicle value chains between now and 2030, only about $315 billion is on a credible path towards deployment under current conditions, according to the report.
Between 2022 and early 2026, more than a quarter of the 452 new solar projects announced in Southeast Asian countries were postponed or cancelled, according to Global Energy Monitor‘s Global Solar Power Tracker.
In Indonesia, the Batam Bintan Karimun solar farm was initially expected to come online by 2024 but was cancelled in 2023 for unknown reasons, Kasandra O’Malia, a project manager at Global Energy Monitor, told Climate Home. The project also included plans for Southeast Asia’s largest associated battery storage facility.
Another high-profile Indonesian development that has stalled is a 3,500 MW solar and storage project proposed on Riau Island to export clean electricity to Singapore. While not formally abandoned, there have been few updates to this project since April 2022.
“This execution gap is not really to do with money – there is available capital – but the finance is not being deployed effectively because the risks have not been adequately redressed,” Chan said.
In a bid to foster investor certainty, Indonesia’s government approved a new 2025-2034 Electricity Supply Business Plan (RUPTL) for PLN in May 2025, replacing years of delays over the country’s power development roadmap.
As well as aligning government policy, streamlining permitting, simplifying purchase procedures and targeting 70 GW of new generation, with renewables accounting for the vast majority of additions, the plan includes the construction of about 47,800 kilometres of new transmission lines and substations with a total capacity of 108,000 megavolt-ampere, spread across Indonesia.
The Ministry of Energy and Mineral Resources, several domestic and international renewable energy developers, and the Indonesia Renewable Society, did not respond to requests for comment.
Another way to soothe investors’ nerves would be for governments to use public money to de-risk investments, but there is little appetite for this approach in the region, Chan said.
A more effective tool would be ensuring stable, investment-friendly energy market policies and regulations, said Alnie Demoral, a Manila-based energy analyst at climate think-tank Ember who previously worked with solar developers and investors.
Renewable energy developers, investors and authorities can spend years negotiating the project’s costs, permitting and whether grid connection will be available to bring clean power online, she said.
Often the longest discussions focus on the power pricing tariffs that governments set for renewable energy producers. Changing policies or disagreement on underlying cost assumptions can stall or delay a project before it reaches financial close, she added.
“Governments have to do their part by making sure the investment environment is stable,” Demoral said.
“But this is a two-way process. The private sector and developers must also ensure that their assessments of the project are based on robust assumptions.”
AI data centres add to the strain
At the same time, rapid growth in power-hungry AI data centres is putting extra strain on the region’s overstretched grids.
AI data centres, which use much more power than regular data centres, are becoming one of the largest drivers of new power demand in Southeast Asia as governments in the region jostle for more multibillion-dollar investment in the sector.
-
Explainer: Will AI data centres make or break the energy transition?
As grids struggle to meet soaring electricity demand for AI data-crunching, big tech is under pressure to cover the costs of boosting power supplies – which may be dirty or clean -
UN asks AI companies to reveal full environmental impacts
UN chief António Guterres says big AI firms should disclose the emissions, water and energy use of their data centres amid community opposition
The slow pace of renewable energy deployment and grid modernisation, coupled with ongoing reliance on fossil fuels in the electricity mix, will make it difficult for the region to meet a new, fast-growing source of additional demand without increasing emissions.
Emissions from data centre power use in Indonesia are expected to quadruple between 2024 and 2030, according to Ember.
AI data centres operate around the clock and will often use any power that is available – be it renewables or fossil fuels, said Chan, urging policymakers to first ensure they can meet the power needs before courting data centres.
Many new AI data centres are planned for areas with insufficient high-voltage transmission capacity, according to the Bain report, suggesting that countries should focus on new high-voltage lines, larger substations and stronger interconnections between regions.
The researchers note that AI data centres also typically take about one to three years to build, while major electricity transmission lines and grid updates can take five years or more, adding that power grid investments must happen before renewable energy or AI projects.
“Growth in data centres and AI is already adding pressure to constrained grids,” said Christina Ng, the Kuala Lumpur-based co-founder of Energy Shift Institute, an Asia-focused, independent energy finance think-tank.
“The risk is that new demand is met through high-emitting electricity if clean power and clean grid investment do not keep pace.”
Main image: A technician walks next to solar panels that partially provide electrical power to the Grand Mosque of Istiqlal in Jakarta, Indonesia (Photo: REUTERS/Willy Kurniawan)
The post Southeast Asia’s fragile grids threaten billions in clean energy investment appeared first on Climate Home News.
Southeast Asia’s fragile grids threaten billions in clean energy investment
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