Climate change is leading to less and worse-tasting sparkling wine

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Key points:

  • Higher temperatures and more unpredictable and extreme weather events caused by climate change are posing increasing challenges for wine production, which relies on stable and specific conditions in wine-growing regions. 
  • Global wine production reached a historic low in recent years. Sparkling wine, which rose in popularity over the past 25 years, has also seen a slight decline.
  • Poor harvests and reduced sparkling wine production levels in France, Spain and Italy have been linked to climate-induced extreme weather events. 
  • Climate change is reducing the quantity of grapes, as well as impacting their quality, resulting in changes to the taste and characteristics of sparkling wine. 
  • Higher temperatures are speeding up the ripening process, but yields and flavour can also be impacted by droughts, heavy rainfall and wildfire smoke.
  • Adaptation measures, like shifting production to regions that will have more suitable climates and diversifying crops, can help reduce climate impacts on sparkling wine. 
  • However, adaptation measures can be costly and will not preserve the specific conditions sparkling wine production currently occurs under, leading to lasting changes in the flavour profiles.

Millions of people worldwide drink sparkling wine, particularly to celebrate important milestones and for special occasions, like New Year. However, sparkling wines are increasingly threatened by climate change, including the world’s most iconic labels.

Wine grapes are sensitive to their environment. Their characteristics, such as acidity, texture and flavour, depend on specific climates and a stable growing environment. Climate change is increasingly disrupting the balance of conditions like temperature, rainfall and sunlight, resulting in lower yields or altered flavour profiles.

Wine production has reached a historic low

Global wine production reached a historic low in 2024, down 4.8% from already low production in 2023, marking the lowest level in over 60 years. Production is estimated to increase slightly in 2025, but it is expected that the year will remain among the lowest production years. 

According to the International Organisation of Vine and Wine, climatic variability has been the dominant factor impacting global wine production in recent years. Impacts such as prolonged droughts, irregular rainfall, heatwaves, and unexpected frosts have reduced yields in large parts of Europe, South America, and Australia, contributing to a decline in production. The consumption of wine has also decreased, down 3.3% in 2024 compared to 2023 levels, which has also contributed to the decrease in production.

Sparkling wine has grown in popularity in recent decades. Both the export quantities and value of sparkling wine have increased by 3.7 times over the past 25 years. However, following a peak in 2021-2022, the production quantity and value of sparkling wine have decreased slightly. The export price for sparkling wine saw an annual decline of 3.7% in 2024, while volume exported saw a slight (0.3%) decline. The traded volume of sparkling wine dropped 2.5% between 2022 and 2024.

However, the change in production levels of sparkling wine varies significantly between regions. For example, production increased in Chile and South Africa between 2023 and 2024, while Spain and France saw slight declines.

Lower yields have been linked to higher wine prices

Reduced yields have led to price increases for some wine varieties. 2023 saw the average export price of wine increase to EUR 3.62 per litre, the highest ever recorded. Prices remained at this level in 2024. 

While the price of wine is influenced by various factors, there is clear evidence showing a price increase following years with climate-induced extreme weather for certain varieties of sparkling wine. 

In Spain, extreme drought in 2023 caused grape harvests in the worst-affected regions to fall by more than 45%. The following year, although rainfall improved slightly, unexpected hail and frost resulted in a similarly poor harvest. Low yields contributed to a price increase for Cava, a Spanish sparkling wine, which rose by an average of 20% internationally and 10% in Spain, according to the Cava producers’ organisation.

Grapes for prosecco, the sparkling white wine produced in northeastern Italy, are often grown on steep slopes. While ideal for producing high-quality grapes, the slopes become increasingly challenging to manage during periods of extreme rain and drought, meaning climate change poses a serious threat to this type of production. 

Analysis by UK-based think tank Energy & Climate Intelligence Unit suggests extreme weather in Italy had a knock-on effect on food imports to the UK, highlighting that in 2023 the UK imported 10 million kg less prosecco than the previous year, and the average price per kilo increased by 11%. 

In 2021, France saw the smallest harvest of Champagne since 1957 due to climate-induced extreme weather, costing the country roughly USD 2 billion in lost sales. Earlier than usual warm weather in early spring caused young leaves to unfold, which was followed by a severe frost that destroyed around a third of the harvest. However, Champagne’s status as a luxury good means that market manipulation – used to limit stocks and keep prices high – and the rising cost of living impact annual supply and demand, and climate fluctuations have less impact on final prices. 

At the same time, climate-induced reduction in the quality of premium wines may result in lower prices, as one study predicted for Napa Valley Cabernet Sauvignon from California, meaning less profit for producers.

Climate change may change the flavour of sparkling wine

Higher temperatures, unpredictable weather patterns and extreme weather events fueled by climate change also affect the flavour profile and characteristics of sparkling wines. The flavour of wine is dependent on the balance of sugar, acid and secondary components, like tannins, that develop as grapes grow and ripen. 

Too much heat accelerates ripening, causing sugar levels to spike and acids to break down, potentially leading to wines that are too alcoholic, lacking acidity or unbalanced. This shifts flavour profiles, producing cooked fruit notes over fresher aromas. Sparkling wines are particularly impacted by these changes as they are characterised by fresh flavour profiles that require lower acidity. Additionally, research suggests that the levels of alcohol in sparkling wine can affect the foam, with higher alcohol leading to a less fizzy sparkling wine.

If grapes are harvested earlier, before sugar levels increase and acids break down, grapes will not have fully developed other components, such as tannins and anthocyanins, that help to provide the layered aroma essential for quality wines. 

On average, wine-growing regions already experience almost 100 extra days each season where grapes can grow – characterised by temperatures over 10°C – since 1980. In most vineyards, harvesting has shifted two to three weeks earlier than 40 years ago due to higher temperatures. In Champagne, the harvest now takes place 20 days earlier than it did 30 years ago. Prior to 2003, no harvest began in August – since then, this has occurred eight times. 

In addition to heat, other climate change threats impact wine flavour. Droughts lead to a reduction in grape size, which can concentrate flavours and tannins, resulting in a more intense profile. In severe cases, droughts can completely halt ripening. Heavy rainfall can dilute grape flavours and promote fungal disease and uncontrolled rot, which can result in “unwanted off flavours”. 

Wildfires release smoke that can travel thousands of miles and be absorbed by the grapes, resulting in unpleasant flavours and aromas in the wine, like ashy and medicinal characteristics. Reports from Canada stated that some sparkling wine produced after the 2021 wildfires was rejected due to smoke taint. 

More extreme and unpredictable weather undermines the annual reliability that underpins premium valuations, forcing growers to adjust their practices year by year. This particularly affects the traditional character of wines that are produced in specific regions, such as Champagne and Prosecco. Shortened ripening periods and decreased water availability for the grapes used to produce the Spanish sparkling wine cava are also projected to worsen, depending on the level of warming.

Changing weather patterns could cut wine-growing regions by half

Recent studies highlight a significant shift in global wine-growing regions, driven by climate change. Globally, the number of suitable wine-growing regions could shrink by more than half if global temperatures increase by 2°C above pre-industrial levels – a threshold likely to be surpassed within this century unless significant action is taken to reduce fossil fuel emissions. 

Another paper that reviewed recent literature on climate change impacts and adaptation in wine predicts bigger impacts, finding that 70% of today’s wine-growing regions face a moderate or high risk of becoming unsuitable for growing beyond 2°C of warming. 29% of regions could see climate changes so severe that the production of premium wines would become impossible, and in a further 41% of regions viticulture would be possible only with extensive adaptation.

These impacts are particularly pronounced in southern Europe. The same review paper found that if global temperatures rise by more than 2°C, around 90% of traditional wine-growing areas in the coastal and low-lying regions of Spain, Italy, Greece and southern California could become unsuitable for producing wine in an economically viable way by the end of the century. Less than 20% of these losses could be mitigated by moving wine production to areas with higher latitudes. 

The Veneto and Friuli-Venezia Giulia regions in Italy and Catalonia, where Prosecco is produced, and the cava-producing regions in Spain, face a moderate risk of becoming unsuitable below 2°C of warming, and a high risk at 2-4°C of warming. Another study comparing European wine regions identified those in southern Europe as some of the most vulnerable. Higher-latitude regions, such as Champagne in France, are also facing significant climate-related risks.

The human cost of climate change on wine production

Harvesting grapes is a manual task that often takes place in high temperatures. Increasing temperatures are bringing forward the harvest season and accelerating ripening, resulting in shorter and earlier harvest windows. This risks exposing workers to even higher temperatures during harvesting and leads to more intense labour demands, such as working at night, which present additional safety hazards and stressors. 

The impact of heat is already taking a toll, with the deaths of four grape harvesters in the Champagne region in 2023 resulting from working in unusually hot weather. 

Working in heat means that there is a need for more time spent resting and rehydrating, reducing the hours spent in the field. A recent study estimates that labour time lost can increase by up to 2.1% for every degree of temperature increase for grape pickers. At temperatures of 36°C – which can occur regularly in some wine growing regions – up to 27% of labour is lost. A report on Australia calculated that at 2°C of global warming, there would need to be a 4% increase in labour in the horticultural industry to maintain current output.

The increase in wildfires poses an additional health threat when agricultural workers are exposed to the smoke. A recent survey in Sonoma County, known for its vineyards that are essential to California’s wine industry,  found that over 75% of agricultural workers have worked during wildfires. Over two-thirds of these workers experienced short-term health impacts, including headaches, sore throats and eye irritation. Another study in the same region used air quality monitors to show there were up to 16 days with unhealthy levels of smoke for everyone, or 27 days for sensitive individuals, during a three-month wildfire period in 2020.

Adapting sparkling wine production is expensive and has hard limits

As climate change progresses, winemakers may be forced to relocate vineyards further from the equator to maintain suitable growing conditions. Already, more sparkling wine is being produced in regions that do not traditionally produce it, such as in Germany and the UK. 

However, transplanting grape varieties from one region to another may still not yield the same distinct flavours that come from traditional wine regions, meaning the unique flavours that characterise speciality wines are at risk of disappearing. 

Plus, the traditions of wine-making are often deeply rooted in the local heritage and landscape of wine-growing regions. Such place-based cultural practices cannot simply be relocated and risk being lost if production is moved. 

Sustainability must also be considered when developing new production areas. Creating new vineyards may require converting wild land or farmland. Growing grapes can require a significant amount of water, which may not be readily available, and vineyards may compete with other uses for freshwater sources. 

Efforts to adapt viticulture through innovative approaches, such as breeding more resilient grapevine varieties and increasing crop diversity, could help maintain production in current wine regions. Irrigation systems can help address drought, although they are not necessarily sustainable in areas impacted by prolonged drought. For example, vineyard irrigation proved to be challenging in South Africa’s Cape Winelands when drought led to water sources being rationed. 

Measures to protect grapevines from weather extremes also push up costs for wineries. Electric heating cables to protect vines against harsh frost events – which are becoming more frequent – were tested in France, but can cost up to EUR 100,000 per hectare to implement. Installing shade nets to protect plants from higher solar radiation substantially increases production costs.

While these efforts may increase the sector’s resilience, they are unlikely to fully offset the impacts of climate change on wine, which is likely to fundamentally alter practices and flavours. As the climate continues to change, approaches become less effective, meaning the success of adaptation measures depends on limiting future temperature rise.

Temperature overshoot and tipping points

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Key points:

  • Under the Paris Agreement, countries committed to limiting global temperature increase to 1.5°C or ‘well below’ 2°C above pre-industrial levels. However, even in an optimistic emissions scenario, the chance of limiting warming to 1.5°C by the end of the century is now virtually zero.
  • Our journey to achieving Paris Agreement goals will likely entail ‘temperature overshoot’, where warming exceeds a specified level (typically 1.5°C to 2°C) for 10 years or more before returning to that level in the future. 
  • Ninety percent of the mitigation pathways in the IPCC’s Global Warming of 1.5°C report that limit warming to 1.5°C by 2100 include temperature overshoot.
  • Pathways that limit warming to 1.5°C with limited or no overshoot require deep, rapid, and sustained reductions in emissions, as well as some carbon dioxide removal to compensate for sectors that cannot be decarbonised.
  • Even temporary overshoot increases the risk of Earth systems reaching ‘climate tipping points’, catalysing large and often irreversible changes. For example, deforestation in the Amazon could trigger a deforestation-drought feedback loop, rapidly transforming the region into a savanna.
  • Every increment of avoided warming can make a difference. Keeping overshoot as short and at as low a temperature as possible is critical to avoid sudden, cascading and irreversible climate impacts.
  • Without rapid emissions cuts now, we will need to rely more heavily on large-scale carbon dioxide removal to bring temperatures back down after overshoot, which comes with risks and uncertainties. 
  • Other proposed large-scale climate interventions, known as geoengineering, fail to address the root causes of climate change and introduce additional severe risks. 
  • Strategically targeting ‘positive socio-economic tipping points’ – which are conditions that accelerate the deployment of technologies or practices to reach net zero – could help drive decarbonisation and allow us to meet the 1.5°C target.

Surpassing the Paris Agreement limits

Last year, the Earth’s average temperature reached around 1.5°C warmer than pre-industrial times. The average warming for the decade between 2015 and 2024 was 1.24°C above pre-industrial times. The heating is predominantly a result of human activities1Human-cased warming is estimated to have caused 1.36°C of warming in 2024, relative to 1850–1900., primarily the burning of fossil fuels. This warming has had widespread adverse impacts on people and nature, which will worsen as the climate continues to warm. 

The Paris Agreement was adopted at COP21 in 2015 by most countries worldwide – countries that are collectively responsible for 98% of human-caused emissions – with the primary goal of avoiding the most devastating impacts of climate change. The agreement aimed to limit “the increase in the global average temperature to well below 2°C above pre-industrial levels” and to pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels” by the end of the century. The US, currently responsible for 13% of global emissions, announced its withdrawal from the Agreement in January 2025.

It is now clear that achieving the Paris Agreement goals will mean stricter measures to reduce emissions. Net carbon dioxide emissions will need to fall by 48% by 2030 to keep warming to 1.5°C, according to the latest IPCC assessment, published in 2022. More recent estimates suggest emissions would need to fall >around 50% over the same timeline. The 2024 Emissions Gap Report finds that, even under an optimistic scenario where all NDCs and net zero pledges are met, the chance of limiting warming to 1.5°C by the end of the century is “virtually zero”. The 2023 Emissions Gap Report gave a 14% chance, as, at the time, there were more opportunities to scale down emissions. 

Countries had agreed to submit more ambitious national climate plans by 2025 as part of the Paris Agreement. However, as of October 2025, countries have only pledged to reduce their emissions by 1.6 billion tonnes more than in their previous NDCs, leaving a gap of 26.5 billion tonnes to stay within the 1.5°C limit.

The latest stocktake of the global carbon budget – the amount of carbon that can be emitted before we reach 1.5°C of warming – estimates that we will burn through the remaining carbon budget in about six years. Other estimates suggest that we may have only three years left to reduce emissions sufficiently to limit warming to 1.5°C, and that for a 50% chance of keeping warming to 1.5°C, greenhouse gas emissions would have needed to peak before 2025. Yet, emissions continue to rise and national commitments to reducing emissions remain insufficient. 

Every fraction of a degree of warming increases the odds of additional, and often extreme, impacts. As greenhouse gases build up in the atmosphere, heatwaves are becoming hotter and more frequent and rainfall is becoming more intense and variable. Consequently, droughts and floods are worsening globally, triggering crop failure, infrastructure damage and humanitarian crises.

As emissions continue to rise, it is increasingly likely that our journey to limiting warming will entail a period of ‘temperature overshoot’. Unprecedented efforts are needed, soon, to limit the amount of overshoot and the impacts of temperature rise. 

What is temperature overshoot?

Temperature overshoot is the term used by the Intergovernmental Panel on Climate Change (IPCC) to describe scenarios, or ‘pathways’, in which the Earth exceeds a specified global warming level, typically between 1.5 and 2°C, before returning to that level at some point in the future. 

The magnitude (how much the specified level is exceeded) and the duration (how long it is exceeded for) differ across pathways. In most overshoot pathways, the duration of the overshoot is at least one decade and can extend to several decades, while the magnitude reaches up to 0.5°C. However, in ‘high overshoot’ pathways where the temperature overshoots by as much as 0.5°C, it is unlikely that warming could be returned to ‘well below 2°C’ by 2100. If we follow these high-overshoot pathways, we will not meet the goals of the Paris Agreement.

Most IPCC scenarios foresee some degree of temperature overshoot

Pathways with temperature overshoot are not exceptional. In the IPCC’s Global Warming of 1.5°C report, published in October 2018, 90% of the mitigation pathways that limit warming to 1.5°C by 2100 include a period of overshoot. 
The pathways that limit warming to 1.5°C with limited or no overshoot require deep, rapid and immediate reductions in emissions, with carbon dioxide removal (CDR) only used to compensate for historical emissions and in sectors where no mitigation measures are available.‘2Limited-overshoot’ pathways overshoot 1.5°C by no more than 0.1°C. In comparison, pathways that delay emissions cuts and overshoot the temperature targets rely more heavily on large-scale CDR to bring global temperatures back down by the end of the century.

Explaining 1.5°C scenarios with and without overshoot

Figure 1 illustrates three hypothetical overshoot scenarios for pathways that aim to achieve the 1.5 °C target. In the upper panel, the grey line represents a scenario with no temperature overshoot. The blue line represents a scenario with a low magnitude and short duration of overshoot. The red line represents a scenario with a high magnitude of temperature overshoot that persists for a long time. In the blue and red scenarios, temperatures return to 1.5°C by the end of the century

The lower panel shows emissions trends in each of the pathways. The scenario represented by the grey line reaches net-zero emissions, at which point temperatures stabilise at 1.5°C, by rapidly reducing emissions and without the need for negative emissions solutions. In contrast, the scenarios represented by the blue and red lines require negative emissions solutions, such as large-scale CDR, to reach net-zero emissions. In the red scenario of high and long-lasting overshoot, negative emissions solutions will need to be deployed far beyond the end of the century. 

The greater and longer the overshoot, the more negative emissions solutions will be needed in order to stabilise temperatures at 1.5°C.

Figure 1: Illustration of 1.5°C scenarios with and without overshoot

Source: Reversing climate overshoot, Nature Geoscience 16, 467 (2023).

Increasing overshoot means increasing climate impacts

Every increase in the magnitude and duration of overshoot increases the severity, frequency and duration of climate impacts, such as heatwaves, droughts and floods. In one analysis, the frequency of agricultural drought increases from 24% in a 1.5°C scenario with little to no overshoot to 31% in an overshoot scenario that reaches just below 2°C by the end of the century. In the same scenarios, the frequency of major heatwaves increases from 29% to 44%. Brazil, North Africa, and southern Africa are projected to be the most severely impacted by heatwaves exacerbated by temperature overshoot. 

Sticking to the 1.5°C target also brings economic benefits – climate impacts from temperature overshoot will lead to higher mitigation costs and economic losses later in the century.3While higher initial investments are needed to keep temperatures down, this is outweighed by the economic benefits later in the century. 

For nature, exceeding a temperature threshold for even a short amount of time may push species beyond their tolerance limits, causing extinction, migration and knock-on effects for entire ecosystems. As different parts of the world warm and cool at different rates, species worldwide will be unevenly exposed to dangerous conditions. Temperature overshoot will be particularly critical for species already living close to their thermal limits, such as those in the tropics.

The IPCC estimates that the area of global land at risk of changing from one ecosystem type to another – such as a forest changing to a grassland – is 50% lower at 1.5°C of warming compared to 2°C. Some of the world’s most important ecosystems, such as the Amazon Basin, the Pantanal and the Coral Triangle, could be irreversibly transformed with just a few years of overshoot. 

In the ocean, overshoot is projected to decrease ecosystem habitability for centuries to come. If we do not curtail emissions now, marine ecosystems in the Indo-Pacific, Caribbean and West Africa could experience sudden collapse as early as the 2030s, with knock-on effects for the people who rely on these ecosystems for food and income from tourism. 

Every increment of warming counts

2025 has been hot. It is on track to be the second or third warmest year on record. It is also likely to be the second year since pre-industrial times where the average global temperature exceeded 1.5°C. This occurred for the first time in 2024, which was recorded as the warmest year on record since pre-industrial times and broke multiple heat records on land and in the sea. Although a breach of the Paris Agreement target would require average annual temperatures to be above 1.5°C for at least 20 consecutive years, the fact that we are increasingly seeing individual years surpass this threshold implies that we are getting closer. 

A ‘safe’ limit to global warming does not exist, and we are already seeing devastating impacts at current warming levels. IPCC scientists urge that 1.5°C shouldn’t be viewed as a guardrail. The target of 1.5°C was chosen as a threshold beyond which the impacts of warming become increasingly intolerable to humans and nature. This assessment was made based on criteria such as food security, extreme weather events, health, biodiversity loss, water supply and economic growth. 

But, what is considered an acceptable level of damage from global warming is highly subjective. At just 0.56°C of warming, 506 people died from climate change-induced heat stress in Paris during the summer of 2003. At 0.95°C of warming, wildfires in Australia in 2019-2020 led to the death or displacement of three billion wild animals and caused AUD 4-5 billion in losses to the Australian food system.     

While we have not permanently surpassed the 1.5°C target, we are already experiencing significant impacts of global warming. In 2024, climate change was responsible for an additional 41 days of dangerous heat, and extreme weather events worsened by climate change resulted in the death of thousands of people and billions in damages. These represent only a tiny fraction of all impacts resulting from human-caused warming.

We should do everything in our power to keep warming down as much as possible. As emphasised by IPCC scientist Prof. Mark Howden in 2018: “Every half a degree matters. Every year matters. Every choice matters.”

What are climate tipping points?

Overshooting temperature targets, even temporarily, risks the creation of positive feedback loops – self-perpetuating cycles that speed up warming. These positive feedback loops can trigger climate ‘tipping points’, after which an Earth system transforms into an alternative stable state, completely different to its original state. A single tipping point can have cascading and catastrophic effects at regional and global scales. 

For example, the Amazon is drying and burning due to human-caused warming, which reduces tree cover. Reduced tree cover, exacerbated by deforestation, causes further reductions in rainfall due to decreased evapotranspiration, whereby moisture is evaporated into the atmosphere from trees. Over time, this deforestation-drought feedback loop could pass a tipping point, transforming the region from a rainforest into a savanna. This would switch it from one of the most important global carbon sinks to a carbon source and could trigger potentially catastrophic changes to global rainfall patterns, impacting agriculture.  

The transformation of the Amazon is a fast-onset tipping point, in that when the tipping point is transgressed, the change in the climate system would occur rapidly – in a matter of decades. For these tipping points, overshoot could cause sudden and irreversible changes to the system. Scientists are uncertain when the Amazon’s tipping point might be crossed. Some estimates suggest this could happen at 40% forest loss, and around 26% of the Amazon was already deforested or degraded as of 2022. Some scientists believe that the first warning signals of this shift are already here. 

Other tipping points are slow-onset tipping points, whereby the change to an Earth system occurs over a much longer timescale, like over many centuries. For these tipping points, briefly overshooting temperature targets might not cause immediate and irreversible changes to the climate system, as long as the overshoot is not longer than the time needed for the system to recover. One example is the melting of the Greenland ice sheet. While we may be close to this tipping point, it is estimated that ice sheet loss could be mitigated as long as temperatures are brought back down to 1.5°C or lower relatively quickly once the tipping point is reached.Even temporary overshoot increases the risks of surpassing critical tipping points by 72% compared to scenarios with no overshoot. Keeping the magnitude and duration of overshoot as low as possible is critical and rapid decarbonisation is key: While delaying emissions reductions to beyond 2030 could still allow us to meet 1.5 °C by the end of the century, this would result in higher temperature overshoot over many decades, with the potential for adverse consequences.

Boundaries for keeping the Earth habitable

Humans have altered the Earth, such as by depleting the ozone layer, reducing biodiversity, changing land cover and warming the atmosphere. Scientists have tried to estimate how far these processes could continue to be altered until a global tipping point is reached, causing the Earth to transform irreversibly into a state that could endanger humanity and render the planet uninhabitable.

Planetary system boundaries

The concept of planetary system boundaries involves tracking changes to nine crucial processes, identified by scientists as responsible for keeping the Earth habitable (Figure 2). These processes are ranked on a scale from ‘safe operating’, meaning the process happens in a way that is safe for humanity, to ‘high-risk’, i.e. the process poses a high risk to humanity.Of the nine identified planetary boundaries, the Earth is now outside the safe zone for seven: Climate change, biosphere integrity (the quality of living organisms and ecosystems, impacted by, for example, decreasing species diversity), land-use change, biogeochemical flows (for example of nitrogen and phosphorous – aggravated by agribusiness and industry), novel entities (the release of novel chemicals such as plastics), freshwater change and ocean acidification. The safe space for ocean acidification was added as breached in September 2025, reflecting worsening trends.   

Figure 2: Planetary system boundaries 

Source: Seven of nine planetary boundaries now breached – ocean acidification joins the danger zone, Potsdam Institute for Climate Impact Research (2025)

There is great scientific uncertainty regarding how much longer we can continue to push these boundaries before the total collapse of the Earth’s system happens. However, if we rapidly decarbonise, we could reduce this risk and stabilise the Earth within a safe operating space. 

Earth system boundaries

Scientists have also proposed a set of ‘safe and just’ Earth system boundaries that quantify the safety of humans and the stability of the planet (Figure 3). Safe boundaries are those “where biophysical stability of the Earth system is maintained and enhanced over time, thereby safeguarding its functions and ability to support humans and all other living organisms”. Just system boundaries minimise the exposure of countries, communities and people to significant harm, including “loss of lives, livelihoods or incomes; displacement; loss of food, water or nutritional security; and chronic disease, injury or malnutrition”. 

This framework differs from previous frameworks in that the impacts on people are measured in comparable units to impacts on the planet. While other frameworks only assess how human activities have impacted Earth systems, using comparable units allows for a better understanding of the harm that changes to Earth system boundaries will do to humans. The framework focuses on all species, not just humans, attempting to “define the environmental conditions needed not only for the planet to remain stable, but to enable societies, economies and ecosystems across the globe to thrive”. The framework also incorporates information on climate, the biosphere, and other Earth system tipping points into the Earth system boundaries

Figure 3: Safe and just Earth system boundaries

Source: Safe and Just Earth System Boundaries published in Nature, Global Commons Alliance (2023).  

According to this framework, the ‘just’ Earth system boundary for climate is 1°C, while the ‘safe’ boundary is 1.5 °C. The Earth has already heated by more than 1.2 °C, meaning current global warming, while still in the ‘safe’ zone, is unjust (Figure 3), emphasising the need for urgent action. As the framework incorporates interspecies justice, intergenerational justice and intragenerational justice (including race, class and gender), it can be used to inform sustainability targets and practices. 

However, these frameworks have been criticised, with some suggesting that they are too simplistic or that they do not distinguish between thresholds, that can be breached, and hard limits, that cannot be breached. They may also shift political focus to the wrong areas or dampen political action. Others warn against allowing one group of scientists to define what constitutes a safe set of boundaries for everyone on the planet, which could be viewed as divisive. 

Relying on carbon removal is risky – emissions cuts must come first

To bring average global temperatures back down to between 1.5 and 2°C, overshoot scenarios rely to different extents on CDR. This includes nature-based solutions, such as afforestation (planting forests) and bioenergy with carbon capture and storage (BECCS). Other solutions include direct air capture (DAC) and storage, where CO2 is directly captured from the air and then stored for the long term. 

However, there are major risks and uncertainties with these approaches. With nature-based CDR and BECCS, there is a risk that ecosystems could be replaced with bioenergy crops or plantations, endangering wild plants and animals. Food crops could be supplanted, threatening food security. DAC technology is still in its infancy. These technologies are also not proven to be effective at the scale needed. 

These uncertainties and risks emphasise that climate action needs to be boosted in the near-term to reduce our reliance on these approaches for bringing temperatures back down later in the century. 

Geoengineering cannot replace rapid and deep emissions cuts

Rapid and deep emissions cuts provide the best chances of limiting temperature overshoot and avoiding tipping points. At the same time, approaches that remove carbon from the atmosphere can help to offset emissions that cannot be reduced and mitigate overshoot. 

Technologies that aim to intervene with Earth systems at a large scale to counteract the effects of a warming climate, referred to as geoengineering, have also been increasingly proposed in recent years.4CDR is also defined as a geoengineering approach by the IPCC. A prominent solution is solar radiation management (SRM), which aims to reduce the amount of sunlight absorbed by the Earth by reflecting it back into space or preventing it from reaching the Earth’s surface altogether. This would result in reduced warming, but would have no impact on greenhouse gases that are being released into the atmosphere or that are already there, meaning it does not tackle the underlying causes of climate change and instead introduces new and additional risks. 

Research remains in early and theoretical stages, with many unknowns and potential unintended consequences. Studies suggest that SRM would have significant impacts on water cycles, could modify monsoon systems, and could lead to drought in some tropical regions. SRM could also impact renewable energy generation, which is crucial for mitigating emissions. Additionally, as its deployment would impact the climate of the entire planet, SRM comes with substantial geopolitical risks. 

SRM approaches would have to be implemented continuously until emissions are reduced to safe levels to prevent warming. If they are stopped before this happens, this would result in very rapid warming, and “severely stress ecosystem and human adaptation”, according to the IPCC. The IPCC is very clear that, even in best-case scenarios, SRM is a supplement to rapid and deep emissions cuts. 

Positive tipping points can help us reach net zero

In contrast to climate tipping points, positive tipping points – otherwise known as positive socio-economic tipping points – occur when a set of conditions is reached that can accelerate the deployment of technologies or practices to achieve net zero. For instance, a new technology begins to outcompete an old technology. Sales of the new technology facilitate further development, which in turn reduces its costs, allowing the new technology to become widespread and replace the old. An example of this is the rapid development of renewable energy, where over just 10 years, solar and wind technologies have become the cheapest source of power in many parts of the world.   

Targeted interventions in socioeconomic, technological and political systems can be used to advance climate change mitigation, and strategic investment can help bring down the costs of technologies that facilitate decarbonisation. For example, oil and gas companies have been accused of having overly optimistic projections of long-term oil prices, resulting in an inflated picture of future economic performance. Updating the accounting standards or disclosure guidelines for these companies could cause prices to decrease, thereby curbing investment and catalysing investment into renewables. 

The focus on these positive tipping points should not distract us from the need to rapidly decrease emissions. Rather, these positive tipping points should be viewed in the context of driving strategic interventions to encourage decarbonisation.

This briefing was originally published in December 2023. This updated version was published in October 2025.

IPBES: Economic and financial systems must evolve to protect biodiversity and support transformative change

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Key points:

  • The IPBES Nexus assessment – a first-of-its-kind scientific assessment from an intergovernmental body on the interlinkages between biodiversity, climate, health, water and food – has significant findings on the risks to the financial and economic systems that these connections pose.
  • In parallel, the Transformative Change Assessment provides insights into the shifts in views, structures and practices needed for deliberate transformative change for a just and sustainable world. 
  • Financial and economic systems need nature to function. Around USD 58 trillion – or over half of the world’s GDP in 2023 – comes from sectors that are moderately or highly dependent on nature, meaning that the increasing degradation of natural resources is putting the way our economy functions at risk. 
  • The negative externalities arising from the fossil fuel, agriculture and fisheries sectors are estimated at USD 10 trillion–25 trillion annually, severely impacting biodiversity, water, food security, health and climate change.
  • In contrast, investment in biodiversity conservation remains critically low, with only between USD 135 billion and USD 200 billion directed toward improving the status of nature annually from both public and private sources. To tackle the biodiversity funding gap, the financial needs are estimated in the range of USD 300 billion–1 trillion per year.
  • To protect nature and biodiversity and address the risks posed by climate change, reforms in economic and financial systems are necessary. These will include increasing financial flows to biodiversity, addressing debt crises, fostering greater involvement of the private sector, pricing environmental degradation, reforming harmful subsidies and decreasing inequalities.

The Nexus Assessment, released by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES, sometimes called the IPCC for biodiversity) on December 17, 2024, is the most ambitious scientific assessment ever undertaken of the interlinkages between biodiversity loss, water availability and quality, food insecurity, health risks and climate change. At the same time, IPBES also produced the Transformative Change Assessment, which provides insights into the underlying causes of biodiversity loss and the shifts needed to affect deliberate transformative change for a just and sustainable world. The release of both reports followed negotiations between IPBES’ 147 member states after three years of work by experts and multiple consultations with Indigenous Peoples and practitioners.

The assessments make it clear that economies face substantial risk due to our high dependence on biodiversity and nature – which has largely been a blind spot in the global finance system. Scientists agreed that over half of the world’s GDP – USD 58 trillion in 2023 – is generated in sectors that are moderately to highly dependent on nature, exposing these economic activities to risks from biodiversity loss and ecosystem collapse. 

One of the key elements in both reports is the role of economic and financial systems, particularly public and private spending, in supporting or hindering transformative change and the challenges and crises of biodiversity loss, water availability and quality, food insecurity, health risks and climate change (also referred to as the nexus elements). This briefing draws on the findings to summarise how economic and financial systems impact the interlinkages between the nexus elements, and highlights the role finance and economic policy decisions play in securing deliberate transformative change for a just and sustainable world.  

The causes of the breakdown: how economic and financial systems contribute to erosion of biodiversity, water, food, health and climate

The Nexus and Transformative Change reports make clear that economic and financial activity is actively contributing to the deterioration of biodiversity and nature, with the Nexus Assessment stating that: “Dominant economic systems can result in unsustainable and inequitable economic growth”. 

Current policies and international agreements fail to address the substantial negative externalities and can contribute to harming nature. Societal, economic and policy decisions that focus on short-term financial returns without accounting for the broader costs to nature and other nexus elements lead to unequal outcomes for human well-being. For example, the Transformative Change Assessment points out that current market growth-driven paradigms, embodied by metrics such as Gross Domestic Product, limit our definition of development, ignoring other economic, social (including cultural) and environmental dimensions.

More than half of the global population lives in areas facing significant pressure on one or more nexus elements. These impacts are felt disproportionately by those living in low-income countries and small island developing states, as well as by marginalised groups and Indigenous Peoples. While different countries experience the economic impacts of biodiversity loss to varying degrees, developing countries face higher relative impacts due to financial barriers such as high debt burdens that make it more difficult for them to mobilise financial flows. 

The two reports put a value on the impact of economic and financial systems on biodiversity and other nexus elements:1Some figures from the Nexus Assessment and the Transformative Change Assessment vary slightly due to different calculation methodologies and definitions in the underlying literature upon which they are based. Multiple analyses coming to similar results supports the validity of the conclusions.

  • The Nexus Assessment calculates that USD 7 trillion per year is invested in economic activities that damage biodiversity. Of this, private sector financial flows directly harmful to biodiversity total about USD 5.3 trillion per year and public flows are around USD 1.7 trillion. 
  • The Transformative Change Assessment collates global public explicit subsidies to sectors driving nature’s decline, finding they stood between USD 1.4 trillion and USD 3.3 trillion in 2023. Agriculture received USD 520 billion-851 billion and fossil fuels received USD 440 billion-1.26 trillion.
  • The negative externalities arising from the fossil fuel, agriculture and fisheries sectors are estimated at around USD 10 trillion–25 trillion annually, according to figures in both reports, illustrating how severely consumption and production in these sectors affect biodiversity, water, food, health and climate change. 
  • Illegal resource extraction globally, including in the wildlife, timber and fish trades, is valued at USD 100 billion–300 billion or more each year, per Nexus Assessment figures.

In contrast to the trillions of dollars invested in or subsiding harm to the nexus elements, funding for biodiversity sits between USD 135 billion and USD 200 billion according to the Transformative Change Assessment and the Nexus Assessment (see Figure 1).

Figure 1: Financial flows harming biodiversity vastly outweigh funding to improve it
Source: Transformative Change Assessment Figure SPM. 7

Transforming the economic and financial system to preserve nature

Both reports lay out the importance of taking action to transform economic and financial systems to conserve and restore nature. Taking action now could have a business opportunity value of over USD 10 trillion and support 395 million jobs by 2030, according to a recent study cited in the Transformative Change Assessment. The reports outline a number of such actions, several of which are described below.

Increase financial flows to biodiversity, particularly to Indigenous Peoples and local communities

The current economic system fails to comprehensively capture biodiversity’s full value and relies on incentives that only consider how nature benefits humans directly, for example through food and water provision. Despite nature’s role in underpinning economic activity, investment in biodiversity conservation remains low. Only around USD 153 billion-200 billion in annual expenditure is directed toward biodiversity improvement efforts, according to both reports.

This funding is significantly lower than financial flows that cause direct harm to nature. According to the Nexus Assessment, bridging this gap requires additional resources estimated in the range of USD 300 billion–1 trillion per year,2The Transformative Change Assessment puts the financing gap at USD 598 billion to 824 billion, showing that these estimates are highly consensual if not exactly identical. with at least USD 4 trillion needed to meet the Sustainable Development Goals most connected to water, food, health and climate. Promising mechanisms such as green bonds or blue bonds remain underutilised, and other options such as payments for ecosystem services mobilise only USD 42 billion per year from both public and private sources, according to the Nexus Assessment. Likewise, establishing sustainability as a central tax principle and reducing tax avoidance can help generate funds for biodiversity.

Indigenous Peoples frequently experience degraded biodiversity, water, food, health and climate, have difficulty accessing financing and are excluded from decision-making processes. Despite this, Indigenous Peoples and local communities make successful contributions to biodiversity conservation and the sustainable management of resources, highlighting the importance of recognising their rights and roles in decision-making processes. Recognising and supporting Indigenous-led conservation activities and food system management leads to significant benefits across the nexus elements. Successful conservation projects must involve Indigenous Peoples and local communities in all steps of the process, including co-decision and governance. Yet, only a small fraction of biodiversity finance is spent in developing countries, and Indigenous Peoples face challenges accessing funding and finance.

Reform debt to enable highly indebted biodiverse countries to protect nature

Low- and middle-income countries are most likely to feel the economic effects of biodiversity loss and the degradation of water, climate, food, and health. Developing countries also face significant barriers in accessing finance to protect nature and address climate change. Reforms to the financial system, including addressing debt crises, taking into account the need to enable just and equitable transitions and tackling the cost of finance connected to perceived investment risks, could help these countries access adequate and affordable financing.

Foster greater involvement from the private sector

Private finance for biodiversity is lacking, with the private sector accounting for only 17% of investments in nature-based solutions, according to the Transformative Change Assessment. Additionally, what private finance there is gets skewed towards developed countries, with just 5% allocated to least-developed and other low-income countries, according to the Nexus Assessment. 

One option to incentivise private investment in biodiversity is to make nature a key financial factor for companies. Furthermore, coalitions with multiple actors, including the private sector, are more effective at creating transformative change in general, showing that they have a role to play beyond simply providing finance.

Put an accurate price on environmental degradation

The current economic and financial systems fail to account for negative externalities from the most polluting sectors, with environmental impacts costing trillions of dollars per year, according to figures from both reports. Different ways to internalise these costs – to ensure they are included in the cost of doing business and reflected in the final price of products and services – could be employed more widely. Examples include water pricing and natural capital accounting, which helps identify and value natural assets, and the application of taxes or fines on environmentally harmful activities.

Eliminate, phase out or reform subsidies to move towards more sustainable practices

Governments spend USD 1.7 trillion a year on subsidies that incentivise biodiversity-damaging activities, according to the Nexus Assessment, and these subsidies have increased by 55% since 2021, according to the Transformative Change Assessment. By eliminating, phasing out or reforming public subsidies that damage biodiversity, water, food, health or climate, business models could be moved towards sustainable practices, taking into account the differing needs of developing countries. For example, some agricultural subsidies support unsustainable food production practices and undermine the livelihoods of small-scale producers. These subsidies could be eliminated, phased out or reformed to better support the consumption and production of sustainable food.

Decrease inequalities to address underlying causes of biodiversity loss

The concentration of wealth and power is an underlying cause of biodiversity loss. These differences in wealth and power exist between countries and also within countries, with the wealthiest segment of the global population consuming and using more resources. Because of these unsustainable practices, the rich drive biodiversity loss both locally and globally. Current power dynamics create structural inequalities within economic and financial systems that act to increase distributional inequity and make justice more difficult. In response to these challenges, the Transformative Change Assessment points to revising multilateral cooperation agreements and trade policies to help overcome global inequalities and create coherent governance for just and sustainable development.

  • 1
    Some figures from the Nexus Assessment and the Transformative Change Assessment vary slightly due to different calculation methodologies and definitions in the underlying literature upon which they are based. Multiple analyses coming to similar results supports the validity of the conclusions.
  • 2
    The Transformative Change Assessment puts the financing gap at USD 598 billion to 824 billion, showing that these estimates are highly consensual if not exactly identical.

Promises and reality of climate finance flows in Latin America and the Caribbean

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This briefing is also available in Spanish.

Key points:

  • Developed nations pledged USD 100 billion annually by 2020 to support developing countries with climate initiatives. This goal was achieved only in 2022, primarily by adjusting existing development finance.
  • Latin America and the Caribbean (LAC) countries face severe climate impacts, including droughts, heat waves and rainfall variability, which affect key sectors like agriculture, mining, and tourism. Economic impacts are significant, with potential GDP losses between 0.8% and 6.3% by 2030, reaching up to 23% by 2050.
  • The Inter-American Development Bank estimates that 7% to 19% of LAC’s GDP (up to USD 1.3 trillion by 2030) is needed for sustainable, resilient growth.
  • Current climate finance flows to LAC are only 0.5% of GDP, requiring an 8-10x increase to meet commitments outlined in Nationally Determined Contributions (NDCs).
  • LAC received 17% of international climate finance between 2016 and 2020, mostly in loans rather than grants, increasing regional debt burdens.
  • Many LAC countries spend more on debt interest than on social and climate expenditures, complicating sustainable financing for climate adaptation and mitigation.
  • Brazil, Mexico, Costa Rica, and Colombia received nearly half of the climate finance directed to the region, focused on mitigation over adaptation.

A little bit of climate finance history and why it matters

As evidenced by the increasing frequency and intensity of extreme weather events worldwide, managing the impacts of climate change requires substantial financial resources, which are out of reach of Global South countries. 

To tackle the challenges associated with financing climate change mitigation and adaptation, developed nations pledged under the Copenhagen Accord (December 2009) and the Cancun Agreements (December 2010) to allocate new and additional funding for climate initiatives in developing countries. Through the Copenhagen Accord, developed economies committed to jointly mobilising USD 100 billion annually by 2020 for developing countries. 

In 2021, during the Parties to the Paris Agreement meeting, the New Collective Quantified Goal on Climate Finance (NCQG) was settled as an upcoming global target for climate finance, expected to establish a baseline of USD 100 billion per year by 2025. This last commitment is expected to be negotiated during COP29 in Azerbaijan in 2024.

These efforts resulted in approximately USD 30 billion through the Fast-Start Finance initiative between 2010 and 2012. In 2022, developed countries provided and mobilised USD 115.9 billion in climate finance for developing nations, according to figures from the Organisation for Cooperation and Economic Development (OECD), finally meeting their annual target of USD 100 billion for climate action two years later than initially planned.

However, there have been some challenges to the OECD’s figures, with other bodies pointing out that some financing was overstated or double-counted with other assistance. The Center for Global Development (CGD) estimated total climate finance in 2022 at USD 106.8 billion, noting that the target was partially met by incorporating climate objectives into existing development finance flows and therefore not “new or additional,” as outlined in the Copenhagen Accord.

According to Climate Policy Initiative (CPI), climate flows continue to “fall short of needs”, particularly in developing and low-income economies and those especially vulnerable to climate change. As of 2023, less than 3% of the global total went to or within least developed countries (LDCs), while 15% went to or within emerging markets and developing economies (EMDEs), excluding China. The ten countries most affected by climate change between 2000 and 2019 – Puerto Rico, Myanmar, Haiti, Philippines, Mozambique, the Bahamas, Bangladesh, Pakistan, Thailand and Nepal – received less than 2% of total climate finance.

Figure 1: Climate finance provided and mobilised between 2013 and 2022

Climate change poses significant challenges  in Latin America and the Caribbean

As a region, Latin America and the Caribbean (LAC) accounts for only 6.7% of global greenhouse gas emissions but is highly vulnerable to climate change. Most countries are located in geographical areas that are particularly exposed to extreme weather events caused by greenhouse gas emissions, including heat waves and significant variability in precipitation levels and patterns. 

The region is also highly dependent on economic activities at risk from climate change, such as agriculture, mining and tourism, creating further economic need for adaptation and mitigation financing. Studies estimate a decline in regional per capita GDP due to climate change impacts ranging between 0.8% and 6.3% by 2030. By 2050, this fall could reach 23%.

Agriculture is expected to be the economic sector most affected by climate change in LAC, facing challenges such as soil erosion, changing rain patterns and pest infestations. This is a significant problem for the region as the World Bank estimates that agriculture, fishing and forestry represent 5.9% of LAC’s GDP in 2023. 

Energy presents another major challenge, as LAC is projected to have one of the highest increases in energy consumption globally, driven by anticipated economic growth. This pending demand highlights the importance of adopting a low-carbon development pathway to supply electricity to the region’s people and industry.

The region’s financing needs are not being met

The region’s financial frameworks are ill-equipped to deal with these challenges. LAC has the lowest levels of public investment globally, hindering its ability to build dynamic, job-creating economies resilient to climate change.

The Inter-American Development Bank (IDB) indicates that addressing the climate crisis in LAC will require annual spending on infrastructure services amounting to 2% to 8% of GDP, alongside 5% to 11% of GDP dedicated to tackling social challenges. Altogether, this would mean redirecting 7% to 19% of annual GDP – equivalent to between USD 470 billion and USD 1.3 trillion by 2030 – toward sustainable, resilient, low-carbon development goals.

The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) estimates that annual investment needed to meet regional climate commitments, as outlined in the Nationally Determined Contributions (NDCs) under the Paris Agreement, ranges between 3.7% and 4.9% of the region’s GDP until 2030. 

ECLAC breaks this total down by type of financing. Mitigation actions related to the energy system, transportation, and deforestation reduction will require between 2.3% and 3.1% of regional GDP annually by 2030. Adaptation efforts, including early warning systems, poverty prevention, coastal protection, water and sanitation services, and biodiversity protection, will require investments of between 1.4% and 1.8% of regional GDP each year until 2030.

These financing needs translate to an annual flow between USD 215 billion and 284 billion between 2023 and 2030. However, climate finance flows to the region amounted to only 0.5% of regional GDP in 2020, requiring an increase of 8 to 10 times to close the funding gap. 

From 2016 to 2020, the region received an average of 17% of international climate finance each year, with 81% of this funding provided as loans rather than grants, further intensifying the region’s debt crisis. Climate action funding is nearly evenly split between public and private sources in LAC, highlighting a strong contribution from private sector players compared to other Global South regions. Africa, for example, gets nearly 90% of its climate financing from public sources.

Box 1: Climate change and debt, interrelated crisis?

According to the United Nations Trade and Development (UNCTAD), global public debt1According to the IMF, public sector debt “combines general government with public nonfinancial corporations and public financial corporations, including the central bank”. It also covers publicly guaranteed debt and external public debt. reached a record of USD 97 trillion in 2023, of which LAC countries account for 17% above the region’s share of the global population at 8.2%.  

The region faces significant debt-related challenges, particularly in light of the increasing financial demands of climate change – including adaptation, mitigation, and addressing loss and damage.

These issues are common across the Global South. Since 2022, interest payments on public debt have grown faster than public expenditures in developing economies: one out of every three countries spends more on interest payments than on social spending (which includes climate investment). 

In 2024, debt servicing is projected to consume 41.5% of expected budget revenue across developing countries. For context, this is a higher proportion than was seen during the debt crisis in Latin America in the 1980s before debt relief was provided.2The Latin American debt crisis was a financial crisis that began in the early 1980s when public debt of Latin American countries surpassed their capacity to generate income, making them unable to repay it. Debt service accounted for 35.3% of national incomes in Latin America in 1981, one year before the debt crisis began.

The reality of financing flows

Between 2013 and 2020, an annual average of just over USD 20 billion was mobilised in LAC to fund climate change mitigation and adaptation, which amounted to over USD 161 billion in this period. 

In 2020, the total reached USD 22.9 billion, representing a 14% increase from 2019 and a 32% increase from 2018, regaining much-needed upward momentum after falling from a 2017 peak. However, this represents only around 10% of the low-end annual total ECLAC estimates will be needed between 2023 and 2030 to meet climate finance needs, highlighting the inadequacies of financing provided and the gap left to fill going forward.

Of the 2020 total – which represented 0.5% of the region’s GDP – 90% came from multilateral development banks (MDBs) and green bonds, adding to the region’s debt burden.

Figure 2: Climate finance for LAC between 2013 and 2023

Climate Funds Update tracks multilateral climate funds, covering the period between 2003 and 2023. Though it does not capture the full financing picture, it is a useful tool to access regional financing over time and at the country level. 

With some exceptions, climate fund commitments have risen from USD 26.8 million in 2006 to USD 902.2 million in 2021, with notable jumps in 2009, 2014, 2018 and 2021, and a short period of declining commitments from 2014-2017. The most recent peak, in 2021, also marks the end of the growth trajectory for financing approvals, which have fallen to USD 311.5 million by 2023 (figure 3). 

The approval-to-disbursed ratio is notably higher during the first years of the analysis, largely tracking approvals through 2014 before falling off through 2017. Recorded disbursements rise in 2018 before tapering off again to very low levels by 2023. However, it should be noted that as well as a delay in disbursement, either as a result of slow contributor disbursal or slow recipient uptake, this may indicate a lack of information on the status of funds after approval.

Figure 3: Multilateral climate change funds for LAC per year

On a national level, climate finance in LAC is heavily concentrated in four countries – Brazil, Mexico, Costa Rica, and Colombia – that receive nearly half of the region’s funding. Mitigation activities – such as forest protection and reforestation – receive over five times the amount allocated to adaptation efforts from multilateral climate funds. Nearly all of this finance has been issued as concessional loans.

  • 1
    According to the IMF, public sector debt “combines general government with public nonfinancial corporations and public financial corporations, including the central bank”. It also covers publicly guaranteed debt and external public debt.
  • 2
    The Latin American debt crisis was a financial crisis that began in the early 1980s when public debt of Latin American countries surpassed their capacity to generate income, making them unable to repay it.

Climate change is driving natural systems beyond their limits

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This article is also available in Spanish.

Key points:

  • Emissions of greenhouse gases in the post-industrial era have significantly altered the planet’s climate, resulting in extreme weather anomalies across the globe.  
  • While extreme events such as droughts, storms, heat and unpredictable precipitation are natural phenomena, the increased severity and magnitude with which they are occurring under climate change exacerbates their impacts on humans and natural systems.
  • Changes in climate and land use are making animals’ and plants’ habitats unlivable, forcing them to migrate or adapt, or otherwise become extinct. This has knock-on effects for human livelihoods.
  • Natural systems face pressure from both climate effects, such as heat, and human effects, such as land-use change, with the combination of these stressors intensifying challenges.
  • Environmental changes in one system are triggering reactions in other systems, with cascading effects that threaten the stability of the planet’s climate systems. 
  • Scientists are increasingly worried that climate change is edging natural systems closer to dangerous positive feedback loops that fuel more extreme weather and environmental degradation, in turn accelerating the pace of global warming. 
  • Every increment of warming increases the chance of dangerous positive feedback loops, the effects of which – including the loss of crucial global carbon sinks and weather-modulating ecosystems – are often irreversible.
  • Atmospheric concentrations of greenhouse gases have reached unprecedented levels in recent years, and deforestation and land degradation continue to erode the capacity of the land to absorb carbon dioxide from the atmosphere. 
  • To reduce detrimental warming to humans and nature and meet Paris Agreement targets of limiting warming to 2°C or 1.5°C with little or no ‘overshoot’ – where temperatures temporarily exceed the target before dropping back – “rapid and deep, and in most cases immediate” reductions in greenhouse gas emissions will be needed across all sectors.

Climate change is intensifying weather anomalies

Since the discovery that burning carbon-rich materials such as coal, oil and natural gas can generate heat to power industrial activities, humanity has released billions of tonnes of carbon that had been stored in the Earth for millions of years into the atmosphere. This massive and continuous release of carbon dioxide and other greenhouse gases, including methane, has significantly altered the planet’s climate. Since the onset of the Industrial Revolution, the Earth’s average temperature has risen by approximately 1.2-1.3°C – driven largely by the continuous and unchecked accumulation of these emissions.1The range of 1.2-1.3°C represents a five-year average.

The speed of global warming has ramped up considerably over the last three decades, and particularly since 2015, attributed to increased fossil fuel emissions, deforestation and changes in land use. Despite pledges made to curb emissions in the Paris Agreement, where most countries worldwide agreed to limit “the increase in the global average temperature to well below 2°C above pre-industrial levels” and to pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels” by the end of the century, the last 10 years have been the hottest on record. 2023 is officially the hottest year on record since record-taking began. 

This planetary warming is intensifying weather anomalies across the globe, resulting in more frequent and severe storms, heatwaves and droughts, and unpredictable precipitation patterns. While droughts, storms, heat and extreme precipitation are natural phenomena, the increased severity and magnitude with which they are occurring under climate change exacerbates their impacts on humans and ecosystems (Figure 1). 

Extreme heatwaves are now occurring at almost five times the frequency they were occurring during pre-industrial times and are anticipated to further increase in frequency by 8.6 times at 1.5°C of warming, 13.6 times at 2°C of warming, and 27.4 times at 3°C of warming. Every increment of warming amplifies the climate risks to ecosystems and humans. 

Paris Agreement targets 

The 1.5°C target, endorsed by the Intergovernmental Panel on Climate Change (IPCC), marks a crucial threshold beyond which the impacts of global warming become increasingly severe for both humans and the environment. This target was determined based on the risks posed by increasing temperatures on a range of factors, including food security, extreme weather events, health, biodiversity loss, water supply and economic growth. 

February 2023 to January 2024 marked the first 12-month period in human history where average global temperature rise exceeded 1.5°C. Although breaching the Paris Agreement target would require average annual temperatures to stay above 1.5°C for at least 20 consecutive years, the fact that we are already seeing consecutive months exceed this threshold suggests that we are approaching this critical point.2The point where 1.5°C of warming is breached is measured as the midpoint of the first 20-year period where global average temperatures are 1.5°C higher than the pre-industrial average.

Even though the 1.5°C target has not yet been breached, we are already experiencing the consequences of global warming. Though substantially less risky than higher global warming levels, the target of 1.5°C should not be viewed as a definitive ‘safe’ limit – there is no universally ‘safe’ level of global warming. What is considered an acceptable level of warming will be highly subjective. For example, extreme heat in 2024 alone has had tragic consequences for people and nature: in Saudi Arabia, during the Hajj pilgrimage to Mecca, 1,300 people collapsed and died as temperatures soared in June, while almost 40 monkeys drowned in a well in India in a desperate effort to reach water as lakes have dried up the same month. 

Current policies place us on a trajectory to reach 2.7°C of warming by 2100. The expected impacts would not increase linearly, with certain effects becoming disproportionately severe. For example, the chance of having a major heatwave increases to 30% under 1.5°C of warming, but more than doubles to 80% at 3°C. At local levels, the impacts of a warmer world are also non-linear: as the global temperature reflects an average from across the world, actual temperatures in specific locations vary significantly, from much lower to much higher than the global average. 

This variation means that the impacts of warming are unequally distributed – ​​actual temperatures in specific regions can vary greatly – some places may warm much faster or slower than the global mean. For example, average July temperatures in 2023 for parts of northern and eastern Canada – which experienced record-breaking forest fires that year – were up to 7°C higher than the 30-year average. 

Fig. 1: Risks to land and ocean systems with increasing levels of global warming
Source: Figure SPM.3, IPCC Sixth Assessment Report, 2022. Circles from least to most indicate increasing levels of confidence. Colours from palest to darkest indicate increasing risk. 

Climate and land-use changes are critically altering ecosystems and affecting species in a number of ways, resulting in biodiversity loss (Fig. 1). Estimates suggest that wildlife populations have declined by 69% over the past five decades due to human impacts. Future climate change could cause abrupt and irreversible species loss this century, affecting marine ecosystems as early as 2030 and land ecosystems around mid-century. 

Reduced biodiversity weakens ecosystem resilience to climate impacts and also reduces ecosystem services – i.e. the benefits that humans derive from natural ecosystems – such as food security, climate regulation and carbon sequestration. Though difficult to quantify because of the innate complexity of natural systems and their interactions, ecosystem services worldwide are estimated to be worth USD 150 trillion a year – or twice global GDP in 2021, and at least 1.5 times 2023 GDP.

The relationship between climate and biodiversity is deeply intertwined  

The impacts of climate change on natural systems are complex and interconnected, making them difficult to predict and manage. Ecosystems face pressure from both climate effects, such as heat, and human effects, such as land-use change, with the combination of these stressors intensifying challenges for natural systems. Climate change is driving species to shift their geographic ranges as they seek more suitable habitats in response to changing temperatures, altered precipitation patterns and disruptions to their ecosystems. 

As temperatures rise, marine and land species are moving poleward or to higher elevations to find the conditions they need to survive, or otherwise risk extinction. Shifts in species’ distributions can lead to new interactions between species and their environments, with potential knock-on effects for human livelihoods. 

Marine migrations and mortality: lobsters, sardines, cod and anchovies

For example, climate change-driven increases in ocean temperatures are pushing American lobsters northward along the US coast, disrupting local fishing industries. Warmer waters along the coast of Northwest Africa are driving sardines northwards, presenting a risk to millions of people in the region that rely on these fish for food security. On the west coast of South America, warmer ocean temperatures are shifting anchovy populations, thereby threatening a globally important commercial fish industry. In these situations, fishing pressure under climate change could exacerbate the stress on fish populations that are already struggling to adapt to new environments, potentially leading to overexploitation and further declines in fish stocks. 

For extreme events with a sudden onset, such as heatwaves, some species may not be able to migrate or adapt quickly enough as they are pushed beyond their thermal tolerance limits, i.e. the temperature range within which a species can survive and function. Marine heatwaves in 2014-16 and 2019 in Alaska drastically disrupted Pacific cod populations, resulting in the closing of the fishery – Alaska’s second-largest commercial groundfish fishery – in 2020. 

In the Mediterranean Sea, climate change is increasing the frequency and intensity of marine heatwaves, leading to widespread mass mortality events of marine organisms. From 2015 to 2019, the Mediterranean Sea experienced five consecutive years of mass mortality events, affecting a vast range of marine habitats and species, posing a severe threat to the functioning of its ecosystems. 

Coral bleaching: too hot to recover

One of the most striking examples of climate change-induced mass mortality is warm-water coral reefs, which are increasingly facing mass mortality from human-caused marine heatwaves (Figure 1). Between 2009 and 2018, around 14% of corals from the world’s reefs had been lost, an amount larger than Australia’s coral reefs, largely due to bleaching, where corals expel the symbiotic algae that they depend on for existence in response to high water temperature, ultimately resulting in death if the warm water conditions persist. 

Though corals can recover if water temperatures cool quickly enough, the increasing frequency of  heatwaves due to climate change means that the corals’ windows for recovery between heatwave events are getting smaller, potentially leading to extinction. At 1.5°C of warming, estimates suggest 99% of coral reefs could be lost, with no coral reefs existing at 2°C. 

For humans, this means the loss of critical ecosystem services, such as coastal protection, food resources and recreation. Coral reefs reduce wave energy by up to 97%, safeguarding 5.3 million people and USD 109 billion in GDP per decade. Reef tourism is valued at USD 35.8 billion a year,3In 2017. while reef-associated fisheries are valued at USD 6.8 billion.4In 2011.  

Heat on land: mass mortality of flying-foxes, birds and howler monkeys 

On land, mass mortality events from heatwaves have been recorded in flying-foxes – bats that eat fruits and nectar. Flying-foxes play a crucial role in ecosystems by pollinating plants and dispersing seeds over large distances in their native habitats across South and Southeast Asia, Australia and East Africa. This helps maintain plant biodiversity and regenerate forests. They are also critical pollinators for commercially valuable foods, such as durian fruit. Despite their mobility, flying-foxes  are extremely sensitive to heat stress: during the 2019-2020 summer in Australia – one of the hottest on record, made worse by climate change – at least 72,175 flying-foxes died from heat stress. 

Mass mortality events on land have also been recorded elsewhere: an extreme heat event in South Africa in 2021 killed more than 100 wild birds and bats. Heatwaves in Mexico in 2024 caused the death of over 200 howler monkeys in the wild. Howler monkeys are important seed dispersers, particularly in forests disturbed by humans where they help to restore degraded habitats. 

Drought: mass animal mortality induced by complex, additive effects

Prolonged dry spells are becoming more common in South America: over the 10 years between 2005 and 2015, three once-in-a-century droughts – or megadroughts – occurred in the region. Severe drought in Colombia in 2014 is reported to have caused the mortality of at least 20,000 animals, including wild pigs, deer, crocodiles and tortoises. The interplay of land-use change – particularly deforestation – and human-caused climate change is intensifying the impacts of the drought: deforestation in Brazil and Bolivia has aggravated drying in Colombia by changing the patterns of moisture cycling by forests across the region.  

Declining pollination: a threat to food security

Pollination is a critical ecosystem service for humans, with the annual contribution of pollinators to global agricultural production and food security estimated at more than USD 500 million. Changes in climate are also disrupting the finely tuned relationships between insect pollinators and the plants they pollinate by altering the timing of flowering and pollinator activity. This creates a mismatch that can reduce pollination efficiency, with impacts on food security and prices. 

Bumblebees in Europe and North America are declining due to climate change, among other factors. This decline is threatening essential pollination services and could lead to an ‘extinction vortex’, where the loss of bumblebees negatively impacts the plants they pollinate, further endangering both species. Further studies indicate that bumblebees will continue to face declines with climate change. More widely, a study on 38 globally distributed insects projects that up to two-thirds could become extinct this century. According to the IPCC, three times the number of insects will lose more than half of their climatically suitable ranges at 2°C of warming compared to at 1.5°C. 

Dangerous feedback loops that perpetuate warming 

Environmental changes in one system may trigger reactions in other systems. For example, climate change is increasing the likelihood of wildfires by creating hotter, drier conditions and extending the fire season, all of which make ecosystems more vulnerable to burning (Fig. 2). Forests, which are estimated to cool the earth by 1°C, play a crucial role in global carbon storage and are increasingly threatened by wildfires. 

Climate-induced drying is transforming forests into highly flammable tinderboxes, increasing their vulnerability to wildfires. As prolonged droughts and elevated temperatures reduce soil moisture and dry out vegetation, forests are becoming less efficient at sequestering carbon and more prone to fires. These fires not only devastate vast areas of forest, thereby reducing their ability to absorb carbon, but also release stored carbon back into the atmosphere, further amplifying global warming. This creates a dangerous positive feedback loop, where rising temperatures fuel more extreme weather and environmental degradation, which in turn accelerates the pace of climate change.

Fig. 2: Illustration of a forest fire feedback loop
Source: World Resources Institute, 2020.

If the feedback loop is not stopped, the system could reach a critical threshold where a small change can trigger a significant and potentially irreversible shift in the system’s behavior or state, called a ‘tipping point’. Once a tipping point is reached, the system may undergo rapid changes that are difficult or impossible to reverse, even if the original trigger is reduced or removed (see fig. 3).  

Fig. 3. Visualisation of a tipping point
Source: Rate-induced tipping in natural and human systems, 2023. 

Figure 3 represents a landscape where the trough shows the stable ‘base state’ or natural condition of the system, the ball shows the system’s current state and the vertical red line shows the threshold. If the  ball, which represents the system, is to the left of this threshold, it rolls into the trough and returns to its stable natural state. If the ball rolls over the hill to the right and crosses the threshold, it rolls away towards a new state.

Tipping points can occur either quickly or slowly depending on the system. Fast-onset tipping points happen within years or decades after crossing a critical threshold. For example, the transformation of forest into savanna due to wildfires and drought. Slow-onset tipping points develop over much longer timescales, such as centuries. Here, a system might exceed a critical threshold without immediately transitioning into an alternative stable state, but the change eventually becomes unavoidable over time. An example of a slow-onset tipping point is the thawing of permafrost or ice sheets.

Runaway wildfires in Canada

Though wildfires are natural phenomena, they are becoming larger and more frequent – fires are burning almost double the amount of forest that were burning two decades ago. Canada experienced devastating forest wildfires in both 2023 and 2024, with 2023’s extreme wildfires found to have been made more than twice as likely due to climate change. The 2023 forest fires are believed to have released around 640 million tonnes of carbon, or about the same annual emissions from fossil fuels in a large industrialised nation.

Drought, fire and beetles in the US

A warming climate is causing more tree mortality in the western US from increased fire, drought and insect outbreaks. Warm conditions during the 2012-14 drought in California – aggravated by human-caused warming – not only reduced tree resilience but also increased populations of bark beetles, which infested ponderosa pine trees and increased their mortality by almost 30%. This highlights the intricate interplay between climate and ecosystems and how climate-induced changes can disrupt ecosystem balance and have cascading effects. It is estimated that every 1°C increase in local average temperature increases ponderosa pine mortality by 35-40% due to the additive effects of climate and beetles.   

Fire in the Brazilian Pantanal

Wildfires in 2024 in South America’s Pantanal Wetland – the world’s largest tropical wetland and one of the most biodiverse regions on earth – have burnt more than 13% of the biome. The fires were fuelled by climate change, estimated to have made these fires 40% more intense and 4-5 times more likely. If global warming reaches 2°C, fire conditions like these in the region will become twice as likely. In addition to threatening species survival and human livelihoods, the cascading effects of disruptions such as these threaten the stability of the planet’s climate systems.

Deforestation, fire and drought in the Amazon

Scientists are increasingly worried that the effects of drought, wildfires and deforestation in the Amazon – the earth’s largest rainforest – may cause it to enter a dangerous positive feedback loop, potentially leading to a sudden tipping point, transforming into an alternative state such as a savanna. 

This change would result in the irreversible loss of a major carbon sink – as once a certain level of damage is done, the forest will not be able to regenerate and recover – potentially releasing up to 90 billion tonnes of carbon dioxide, more than double annual emissions from fossil fuels. 

In some parts of the Amazon, particularly in the eastern region where deforestation rates are highest, the forest is already releasing more carbon than it can absorb. An Amazon tipping point would also mean the loss of a critical modulator of regional climate, with every country in South America, apart from Chile which is shielded by the Andes, benefitting from the moisture generated by the Amazon.  

Alarmingly, the Amazon has already lost up to 15% to 17% of its forest area. Scientists estimate that the Amazon could reach a tipping point once 20-25% of native forest is lost. Other estimates suggest that a tipping point could be reached by 2050, corroborated by another analysis that suggests that the region could experience severe ecological disruption by mid-century, compromising the capacity of the forest to store carbon.

Glacier melt in the Andes 

Glaciers gradually form as snow accumulates and compacts over centuries. They typically grow during winter and melt in warmer seasons, with the meltwater providing a water source that is replenished during glacier growth. However, rising global temperatures are causing glaciers to shrink faster than they can regenerate. As glaciers retreat, the meltwater volume increases until reaching a tipping point, beyond which it declines until it stops as the glacier eventually disappears. 

Tropical glaciers in the Peruvian Andes are highly sensitive to climate change. Between 2000 and 2016, the area covered by glaciers in Peruvian Andes shrank by almost a third, attributed to a combination of climate change and the intense El Niño of 2015/16.5El Niño events are becoming more intense as a result of climate change. Meltwater from glaciers is a critical resource for drinking, irrigation and hydroelectric power and therefore has wide-ranging consequences for both urban and rural populations in the region. 

Permafrost and ice sheet melt in the Arctic, Greenland and the Antarctic

The Arctic is warming almost four times faster than the global average. This is leading to the melting of permafrost – a layer of soil rich in organic materials that has been frozen for many years – potentially causing a dangerous positive feedback loop. As permafrost thaws, microbial activity causes the significant release of greenhouse gases, including carbon dioxide and methane, which have been trapped in the frozen ground for millennia. 

The release of these gases contributes to further warming of the atmosphere, which in turn accelerates the thawing of permafrost. This cycle can lead to increasingly rapid permafrost degradation, amplifying global warming and exacerbating climate impacts worldwide – it is estimated that Arctic permafrost holds up to 1,600 billion tonnes of carbon, about twice the amount of carbon present in the atmosphere today. 

Of particular concern is the release of methane from permafrost, which is a potent greenhouse gas with a global warming potential that is 28-36 times higher than carbon dioxide.6This refers to the amount of heat a greenhouse gas traps relative to carbon dioxide, evaluated over a 100-year period in this example. At just 1.5°C of warming, there is high confidence that the risk of permafrost degradation is ‘high’, increasing to ‘very high’ at just over 2.0°C of warming. Permafrost thaw also comes with an additional risk: it releases pathogens that may pose significant health risks to humans and animals, as was the case with an outbreak of anthrax disease studied in 2020. 

The Arctic is also experiencing a reduction in sea ice extent due to rising global temperatures. This loss of sea ice contributes to a dangerous feedback loop: ice reflects sunlight, but as it melts, the darker ocean absorbs more heat, thereby accelerating warming. Scientists estimate that an Arctic sea ice tipping point could be imminent – at between 1°C and 3°C of global warming. Similar estimates have been made for the Greenland ice sheet and West Antarctic ice sheet. 

The collapse of these ice sheets will increase sea levels globally, devastating coastal areas in the absence of concerted adaptation efforts. With anticipated warming this century, the ice sheets are expected to continue melting, but as these sheets grow much slower than they melt, this could result in a lag response – meaning they will continue to melt even once temperatures stabilise. Their melting may not be reversible this century and we are likely to still be locked into several meters of sea level rise.

The collapse of a critical Atlantic Ocean current 

Another example of a crucial tipping point is the collapse of the Atlantic Meridional Overturning Circulation (AMOC) – a critical ocean current system that modulates global climate by transporting heat, freshwater and carbon. If the AMOC slows down and collapses, it would result in an irreversible change to global climate, including disrupting rainfall patterns in the Amazon, with catastrophic consequences for global carbon cycling as well as agricultural production and food security from decreased ocean productivity and changes in weather patterns. According to climate scientist Tim Lenton, a collapse would cause changes to the earth’s climate that would be “so abrupt and severe that they would be near impossible to adapt to in some locations”. 

The AMOC has weakened since industrial times – with a significant contribution from human-caused warming – and is likely to continue weakening this century. However, it is debated how soon a complete collapse could occur. One analysis estimates that it is concerningly close – by 2057 – with another analysis also suggesting that the AMOC is on course for reaching a tipping point in a century’s time or potentially even sooner.  

Overshooting Paris Agreement targets

The term ‘temperature overshoot’ is used by the IPCC to describe scenarios where global warming temporarily surpasses a target level, typically 1.5°C to 2°C, before eventually declining back to that level. Temperature overshoot scenarios are common in climate models: according to the IPCC’s “Global Warming of 1.5°C” report, 90% of the pathways that aim to limit warming to 1.5°C by 2100 involve a period of overshoot. 

Scientists warn that temperature overshoot poses a risk to species through prolonged exposure to temperatures beyond their historical tolerance limits – that is, the environmental limits within which they have adapted over many years. This extended exposure can lead to increased stress, reduced resilience, and, in some cases, irreversible damage to ecosystems and extinction of species – even once global temperatures begin to decline back to a target temperature following a peak in warming during an overshoot. The risks are especially high for tropical ecosystems, such as the Amazon and the Pantanal, and tropical coral reefs, where species are particularly sensitive to temperature changes. 

Achieving a 1.5°C limit with minimal or no overshoot requires rapid and significant reductions in emissions, with limited carbon dioxide removal (CDR), such as reforestation or bioenergy with carbon capture and storage (BECCS). On the contrary, pathways that delay emissions reductions are more likely to overshoot the target, necessitating greater reliance on large-scale CDR to lower global temperatures by the century’s end – which comes with various risks and uncertainties.  

The IPCC warns that climate-related risks are higher if global warming overshoots 1.5°C compared to if warming gradually stabilises at 1.5°C. The longer emissions cuts are postponed, the more we risk exposing ecosystems and human populations to severe climate impacts over the coming decades, sometimes with irreversible consequences.

Solutions are available to limit catastrophic warming 

Limiting detrimental warming to humans and nature to meet Paris Agreement targets of keeping warming to 1.5°C with little or no overshoot, or to 2°C, requires “rapid and deep, and in most cases immediate” reductions in greenhouse gas emissions in all sectors. 

Energy-related carbon dioxide emissions reached unprecedented levels in 2023, and atmospheric carbon dioxide concentrations in recent years were at their highest in 4.5 million years. Methane concentrations in the atmosphere have been rising “dangerously fast” since around 2007, and have reached record levels in recent years. As the earth continues to warm, the ocean and land will become less effective sinks for slowing the rate of increase of greenhouse gases in the atmosphere, undermining the planet’s natural ability to mitigate climate impacts.

Deforestation from land-use change – primarily from agriculture – and rising temperatures means that forests are losing their capacity to sequester carbon – an ecosystem service valued at up to USD 135 trillion. If uncurtailed, deforestation and land degradation will continue to release carbon dioxide and erode the capacity of the land to absorb carbon dioxide from the atmosphere. At the same time, land-use change, including deforestation, accounts for around 10% of global greenhouse gas emissions,7In 2010. making it a significant contributor to climate change. 

The most efficient and affordable way to cut emissions is by reducing dependence on fossil fuels and transitioning to renewable electricity. To meet the 1.5°C target, the IPCC recommends that coal usage must be eliminated, and oil and gas consumption reduced by 60% and 70%, respectively, by 2050.8Compared to 2019 values. Increased electrification with nearly all power from zero or low-carbon sources is essential. 

Reducing emissions from methane, a short-lived gas with a high global warming potential, is one of the quickest and most effective ways to slow global warming. Addressing methane sources such as pipeline leaks and abandoned oil and gas wells, and introducing technologies for mitigating livestock methane, could cut human-caused methane emissions by up to 45% by 2030. This could prevent nearly 0.3°C of warming by the 2040s, leading to significant health benefits and savings. To keep warming below 1.5°C, the IPCC recommends a 34% reduction in methane by 2030. Existing technology can reduce methane emissions from fossil fuel operations – which contribute around 40% of human-caused methane – by 70%, according to the International Energy Agency (IEA). 

If countries and companies do not reduce their fossil fuel production, they risk increasing the costs of achieving a just and equitable energy transition as well as diminishing returns on investments and USD 1.4 trillion in stranded assets. 

Renewable power is becoming more and more accessible: costs from wind and solar have been falling since 2010, reaching record-low levels in recent years and making them increasingly competitive with fossil fuels. In 2022, 85% of added global utility-scale wind and solar capacity was more affordable than fossil fuel alternatives. In 2023, additions of renewable energy – particularly solar photovoltaic – grew at the fastest rate in the past two decades, by almost 50% compared to 2022. To meet the 1.5°C target, rapid renewables deployment of around 1,000 GW per year until 2030 will be necessary. 

Restoring degraded lands, preventing further deforestation and planting forests can significantly enhance carbon sequestration, improve resilience to climate impacts and help stabilise the global climate​. For example, forests managed and protected by Indigenous People in the Amazon between 2001 and 2021 removed 340 million tonnes of carbon dioxide from the atmosphere each year – more than the fossil fuel emissions of the UK in 2022. Forest restoration and protection are recognised by the IPCC as key to limiting global warming to 1.5ºC or well below 2ºC and come with various co-benefits, including supporting biodiversity, improving air and water quality, flood control and reversal of land degradation, if managed properly.

  • 1
    The range of 1.2-1.3°C represents a five-year average.
  • 2
    The point where 1.5°C of warming is breached is measured as the midpoint of the first 20-year period where global average temperatures are 1.5°C higher than the pre-industrial average.
  • 3
    In 2017.
  • 4
    In 2011.
  • 5
    El Niño events are becoming more intense as a result of climate change.
  • 6
    This refers to the amount of heat a greenhouse gas traps relative to carbon dioxide, evaluated over a 100-year period in this example.
  • 7
    In 2010.
  • 8
    Compared to 2019 values.

Finding economic value in nature beyond carbon

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Key points:

  • Rates of biodiversity loss and nature degradation are alarming, with regions around the world at risk of long-term economic instability, worsened climate change and weakened natural systems.
  • Though hard to quantify because of the complexity of natural systems, ecosystem services – the benefits humans receive from nature, such as food and climate regulation – are estimated to be worth more than USD 150 trillion a year, or around one and a half times global GDP. 
  • Biodiversity loss is currently costing the global economy more than USD 5 trillion a year. USD 5 trillion is roughly the same amount it would cost Europe to transition to renewable energy by 2050.
  • Economies around the world are highly dependent on nature. China, the EU and the US have the highest absolute GDP exposed to nature loss – a combined USD 7.2 trillion.
  • Conservative estimates suggest that nature loss could cost the global economy at least USD 479 billion per year by 2050.
  • The negative consequences or costs associated with the destruction of nature can be greater than any economic benefits or value added from activities causing the destruction.  
  • The destruction of nature in one region can ripple across natural systems, with far-reaching consequences beyond local borders. For example, deforestation causes droughts and elevates temperatures far beyond the site of deforestation, threatening food security and economies in other regions.  
  • Nature adds ‘free’ value to society by providing essential ecosystem services that support life and economic activity without direct costs. For example, conserving  natural habitats near farms boosts production.
  • Fortunately, estimates suggest that conserving biodiversity and ecosystems is much more affordable than destroying them.
  • Restoring and preserving biodiversity is substantially less expensive than building a net-zero emissions energy system – the required annual investment in biodiversity is only 15% of that needed for energy system transition.
  • The funding gap for biodiversity conservation is approximately USD 830 billion per year, comparable to the size of the global tobacco market. 

Human societies are fundamentally dependent on nature 

Nature provides a host of valuable ‘ecosystem services’ – the benefits humans receive from natural ecosystems, such as food, medicine, resources, clean air, climate regulation, climate change mitigation and disease control. These services are essential for sustaining life. 

Biodiversity – the variety of species, genes and ecosystems on earth – is key to supporting nature’s ecosystem services and the value they bring. Biodiversity helps maintain ecosystem balance by supporting species interactions that regulate nutrient cycling, water filtration and climate regulation. It ensures resilience to environmental changes, since diverse ecosystems are better able to recover from disturbances such as extreme weather events. Biodiversity is also important for preserving the genetic diversity that is crucial for the adaptation and evolution of species.

Rates of biodiversity loss and nature degradation are alarming – 50% of natural ecosystems are in decline, over 85% of wetlands are lost, and 25% of species are at risk of extinction. More than three-quarters of essential ecosystem services have decreased over the past 50 years. Additionally, there has been a significant decline in per person ‘natural capital’ – the world’s stocks of natural assets. The stock of natural capital per person declined by almost 40% between 1992 and 2014, while produced capital per person doubled over the same period.

Nature-related risks like deforestation, habitat destruction and resource depletion can lead to long-term economic instability, worsened climate change and weakened natural systems resilience. For example, the diversion of rivers for cotton farming has depleted the Aral Sea in Central Asia, causing an economic crisis as well as increased local and regional temperature extremes due to the impact on the sea’s climate regulating function. 

Nature-related risks are interconnected, meaning that a disruption in one area can amplify risks in other areas. For example, moisture from the Amazon helps generate rainfall in the region and in surrounding areas. Deforestation reduces this function, causing drought in neighbouring regions and impacting agriculture, water availability and overall climate stability across most of South America.
Five human-caused drivers are responsible for 90% of nature loss over the last 50 years: land- and sea-use change, climate change, natural resource use and exploitation, pollution and alien invasive species.

It pays to protect nature

Financial value of nature 

Though hard to quantify because of the complexity of natural systems, ecosystem services globally are estimated to be valued at more than USD 150 trillion a year, or at least one and a half times global GDP in 2023. The ocean economy alone has a value of up to USD 3 trillion a year, or 3% of global GDP. 

The knock-on effects of current biodiversity loss are costing the global economy more than USD 5 trillion a year. USD 5 trillion is roughly the same amount of investment needed for Europe to transition to renewable energy by 2050. Conservative estimates suggest that a collapse of essential ecosystem services, including pollination, marine fisheries and timber provision in native forests, could result in annual losses to global GDP of USD 2.7 trillion by 2030.1This model includes various tipping points, which are changes in an ecosystem that push it into an entirely different state, such as the transition of forests into savanna due to land degradation and climate change, with potentially catastrophic changes for global climate regulation. The model baseline is a scenario where these services do not collapse. Similarly, biodiversity loss is believed to be costing the global economy 10% of its output every year.   

The global economic costs of eroded ecosystem services between 1997 and 2011 alone resulted in up to USD 20 trillion in annual losses to the value of these services due to land-use change, and as much as USD 11 trillion in losses due to land degradation. 

A World Economic Forum (WEF) analysis suggests that USD 44 trillion of economic value generation – just under half the GDP of the world – is moderately or highly dependent on nature and its services and is therefore highly vulnerable to nature loss. Construction, agriculture, and food and beverages are the three largest sectors that are highly dependent on nature, the report said. These sectors generate a total of USD 8 trillion in gross value added (GVA) – about twice the size of the German economy.

Analysis of industry-wide GVA at national or regional levels reveals the extent to which economies depend on nature. In some of the world’s fastest-growing economies, such as India and Indonesia, around one-third of GDP is linked to nature-dependent sectors, while Africa generates 23% of its GDP from these sectors. Globally, larger economies including China, the EU and the US have the highest absolute GDP exposure to nature loss – a combined USD 7.2 trillion.

Cost of nature destruction exceeds value of exploiting it

The negative consequences or costs associated with the destruction of nature are in many cases greater than any economic benefits or value added from the activities causing the destruction. For example, deforestation for palm oil production was a key driver of fires in Indonesia in 2015, which on some days released more carbon emissions than the entire US economy. These fires cost the economy USD 16 billion – more than the value added from Indonesia’s palm oil exports in 2014 (USD 8 billion), and more than the entire value of the country’s palm oil production in 2014 (USD 12 billion). 

In Europe, fertiliser runoff is one of the most pressing environmental challenges, with nitrogen pollution from agricultural runoff estimated to cost the EU between EUR 70 billion and EUR 320 billion annually. This is more than double the estimated value that fertilisers add to EU farm income.      

Commodity supply and demand can trigger different environmental impacts in different regions, where extraction might lead to deforestation in one area while consumption worsens pollution in another. In the Netherlands, much of the feed for intensive livestock systems comes from soy, predominantly sourced from Brazil, including from regions linked to deforestation. 

Demand for soy puts immense pressure on the Amazon’s ecosystems, driving deforestation, which leads to biodiversity loss and a reduction in the forest’s ability to capture and store carbon. This not only disrupts local ecosystems but has global consequences, as the loss of the carbon-sequestering capacity of forests accelerates climate change, while the degradation of biodiversity undermines global ecosystem stability. The environmental and health impacts of livestock farming in the Netherlands are estimated to cost EUR 9 billion a year – making the damage by the sector three times higher than its added value. This estimate does not account for environmental impacts outside of the Netherlands.

Costs of inaction

Highly conservative estimates suggest that a reduction in six essential ecosystem services – namely pollination, coastal protection, water yield, timber, fisheries and carbon sequestration – could cost the global economy at least USD 479 billion per year by 2050, or cumulatively almost USD 10 trillion,2Between 2011 and 2050. with a 0.67% drop in global GDP every year.3This is under a ‘Business-as-Usual’ scenario, which is a high-emissions scenario aligned with the RCP8.5 pathway used in the IPCC’s Sixth Assessment Report. The economic model does not include impacts from tipping points, such as the collapse of rainforests or pollination. Land degradation, desertification and drought are anticipated to cost the global economy USD 23 trillion by 2050. 

Global GDP could contract by USD 2.7 trillion as early as 2030 if the timber, pollination and fisheries industries partially collapse as a result of environmental destruction.4As the analysis only considered a narrow set of risks, the authors of the report warn that this estimate should be viewed as a lower bound. Credit rating firm Moody’s also identifies eight sectors, including protein and agriculture, with ‘high’ or ‘very high’ inherent exposure to natural capital and with almost USD 1.6 trillion in rated debt. Increasing environmental pressures will erode the capacity of these sectors to pay their debts.

Companies involved in nature destruction face increasing financial risks. For instance, a palm oil company was fined USD 18.5 million for fires that destroyed forested land on its concession in Borneo in 2015. Similarly, the world’s largest meat company JBS received USD 7.7 million in fines in 2017 for sourcing cattle from deforested areas in the Amazon. 

New regulations and shifts in demand as societies respond to climate change could mean that 40 of the world’s largest food and agricultural firms, together worth more than USD 2 trillion, lose up to 26% of their value by 2030. This equates to a loss to financial institutions connected to these firms of USD 150 billion – comparable to the value of financial institution losses following the 2008 financial crisis. A 2023 report found that the total financial impact of deforestation for 1,043 companies that disclosed their deforestation risks in 2022 is nearly USD 80 billion, emphasising the need for urgent and effective management of deforestation risks.

Nature has value beyond carbon

Natural systems, such as forests, are often valued primarily for their role in carbon capture and storage – global forests are estimated to be worth at least USD 150 trillion, almost twice the value of global stock markets and over 10 times the worth of all the gold on Earth. While carbon sequestration accounts for a substantial portion of this value, forests are invaluable beyond this.

Global human health is intricately tied to tropical rainforests, which host an immense variety of plant species, many with medicinal properties. Between the 1940s and 2006, almost half of anti-cancer pharmaceutical drugs originated from products of natural origin. 

It is estimated that every new pharmaceutical drug discovered in tropical forests is worth USD 194 million to a pharmaceutical company and USD 927 million to society as a whole. With almost 90% of pharmaceutical drugs originating from tropical forests still yet to be discovered, the total value to society could be as much as USD 303 billion.5Values have been adjusted from 1995 values to 2024 values based on the Consumer Price Index and have not taken into account any industry-specific changes such as changes in market dynamics or production costs.

In the cosmetics sector, the supply of shea butter, used in various topical products, comes from a tree that is threatened by deforestation and pollinator loss.

The value of nature extends beyond the extraction of goods. Mangrove forests, which are valued for their vast carbon sequestration ability, also offer significant economic benefits from flood protection, including for the US, China, India and Mexico. It is estimated that mangroves reduce damage to property from floods by more than USD 65 billion per year and protect more than 15 million people.

The costs of nature destruction transcend borders 

The destruction of nature in one region can ripple across natural systems, with far-reaching consequences beyond local borders. Deforestation in the Amazon, Congo and Southeast Asia has been linked to significant reductions in both local and regional rainfall. This can negatively impact agriculture and hydropower generation, posing threats to food security and energy generation beyond local borders.  

Deforestation in Brazil and Bolivia has altered regional rainfall patterns, exacerbating droughts in neighbouring regions. In Colombia, the 2015-2016 megadrought was intensified by these disruptions in moisture recycling. This drought caused a national energy crisis as hydropower – responsible for over 70% of Colombia’s energy – became unreliable due to plummeting river water levels. As a result, energy prices soared nearly tenfold, showcasing how environmental damage in one country can exacerbate economic consequences in another. 

The impacts of deforestation go beyond drought. In Southeast Asia, logging and the conversion of forests to palm oil plantations causes soil erosion and results in increased soil sediment in rivers. This sediment is carried downstream and is eventually released into the ocean where it settles on coral reefs, threatening their survival. An estimated 41% of coral reefs globally are impacted by sediment export. 

Coral reefs provide a wealth of ecosystem services, such as coastal protection, food and recreation. By reducing wave energy by up to 97%, they protect up to 5.3 million people on coastlines and USD 109 billion in GDP per decade from flooding and erosion impacts. Coral reefs are an important food source, with global reef-associated fisheries valued at USD 6.8 billion.6 In 2010. Additionally, coral reef tourism is valued at USD 36 billion a year, which is more than 9% of total coastal tourism value in the world’s coral reef countries. 

Forests keep people and the atmosphere cool both locally and regionally by providing shade and releasing water vapour, acting as a natural air conditioner and alleviating heat illness. In the Amazon, deforestation can increase temperatures by up to 4.4°C7Note that absolute temperature change can be expressed in Kelvin (K). A change of 1°C is equal to a change of 1 K. as far as 100 km away. Similar estimates have been made for other forested regions around the world. 

Pollution, such as fertiliser and animal waste runoff from unsustainable farming, can have widespread impacts on nature. Runoff from agricultural fields flows into water bodies, leading to excessive nutrient levels, which depletes oxygen in water and harms aquatic life. The Gulf of Mexico’s dead zone – an area of low to no oxygen that can kill marine life – occurs every summer and is mostly caused by nutrient runoff from excessive fertiliser application and livestock on Midwestern US farms, carried to the gulf via the Mississippi River and its tributaries. In August 2024, the dead zone reached approximately 6,705 square miles – an area almost the size of Kuwait – potentially making 4 million acres of habitat unavailable to marine species. 

The yearly costs of the dead zone to fisheries and the marine environment were estimated at up to USD 2.4 billion between 1980 and 2017. Studies have found that the dead zone reduces the size of large shrimps relative to small shrimps, with prices for large shrimps driven up as a consequence, impacting consumers, fishers and seafood markets.

Pollinators ensure our food security 

The agriculture and food and beverage sectors are highly dependent on pollination – a critical ecosystem service of immense economic value that is essential for human well-being through its impact on agricultural production and food security. Pollinators impact about 35% of global crop production by volume, with 87 out of 115 major crops worldwide depending on pollination by animals, such as insects, birds and bats, to some extent. The contribution of pollinators to global agricultural production and food security is estimated at USD 235 billion to USD 577 billion annually. In the UK alone, the value of pollination services from nature is GBP 430 million.8In 2011.

Pollinators are facing a significant threat from habitat loss, pesticide use and land-use changes. More than 40% of insect pollinators worldwide are facing extinction. In the short-term, the costs of a ‘pollinator collapse’ are valued at a mid-point range of USD 1 trillion or around 1-2% of global GDP. 

Native bumblebees in North America are critical pollinators of blueberries. The value of fresh cultivated and wild blueberry exports from the US in 2023 exceeded USD 127 million, with key export markets in Canada, Taiwan, Japan and South Korea. Yet bumblebees are in decline in North America due to habitat loss, pesticide use and climate change, posing a threat to blueberry production.

Pollinator loss is anticipated to continue on an upward trend in the future, with projections indicating that pollinator decline could cause annual crop production losses of more than USD 50 million for the US, around USD 125 million for Brazil, and around USD 225 million for China by 2050.

Nature adds ‘free’ value 

Nature adds ‘free’ value to society by providing essential ecosystem services that support life and economic activity without direct costs. These services are often overlooked in economic calculations, yet they are fundamental to human well-being and environmental sustainability. The destruction of these natural systems can lead to significant financial costs in the long run as humans are forced to replace or mitigate these services.

In Northern California, wild bee species were found to significantly increase tomato production both in terms of size and numbers. Tomatoes are able to self-pollinate, meaning they don’t rely on pollinators to produce fruit, but this example demonstrates the added value from pollination services in nature. 

In Costa Rica, pollinators from forests increased coffee yields by 20% within 1 km of forests and improved coffee quality by reducing poor-quality berries by 27%. The study estimated that pollination services from two forest patches generated around USD 62,000 per year for a single coffee farm, representing approximately 7% of its total income. For both the coffee and tomato examples, simply being in close proximity to forested or natural habitats benefitted production on farms.

The natural flood control function of wetlands offers another example. During Hurricane Sandy in 2012, which devastated the Caribbean and east coast of the US, wetlands are estimated to have saved more than USD 625 million in avoided flood damage.

Solutions and distractions

Conserving biodiversity and ecosystems is estimated to be much more affordable than destroying them. By 2030, an estimated USD 996 billion9In 2021 USD. annually will be required to sustainably manage biodiversity and maintain ecosystem integrity. This represents less than 1% (0.7-0.9%) of global GDP in 2023. It is also substantially less than the amount spent annually on subsidies that accelerate the production or use of natural resources or that undermine ecosystems, which are estimated at USD 1.8 trillion to USD 6 trillion – or around 6% of global GDP. Nature-smart policy interventions, which already have demonstrated success and could achieve further impact and value, can substantially reduce the risk of ecosystem services collapse by 2030, with economic gains of up to USD 150 billion.

Protecting and restoring biodiversity is crucial to achieving net-zero goals – it enhances ecosystem resilience, supports agricultural systems and increases carbon sequestration. At the same time, estimates suggest that restoring and preserving biodiversity is substantially less expensive than building a net-zero emissions system – the annual funding needed to protect and preserve biodiversity is only 15% of the investment needed to transition to a net-zero emissions energy system.

Biodiverse ecosystems like forests, wetlands and grasslands store significant amounts of carbon, helping to offset emissions. They also provide critical services such as regulating the water cycle, supporting pollination and improving soil health, all of which are necessary for sustainable agriculture and climate resilience. It is estimated that a transition to deforestation-free operations, entailing a 75% reduction in deforestation rates by 2025 and the restoration of 300 million hectares of forests, could result in an economic gain of USD 895 billion by 2030 through a reduction in annual environmental costs of USD 440 billion.

Closing the funding gap

The funding gap for biodiversity conservation is approximately USD 830 billion per year, comparable to the size of the global tobacco market in 2022. About 73% of the funding is needed to manage productive landscapes and seascapes, with a significant focus on transitioning agriculture to sustainable practices. 

There are various financial mechanisms for closing this funding gap for biodiversity conservation. Public finance presently plays a significant role, with government budgets and tax policies supporting biodiversity projects. It is estimated that 80% of biodiversity financial flows – around USD 133 billion per year10Value is from a 2022 report. – are from domestic and international public finance.

The private sector contributes around USD 29 billion per year to biodiversity through various sustainable debt products. The largest contributor is payments-for-ecosystem services, where financial incentives are given to landowners or resource managers to adopt practices that conserve or enhance ecosystem services that derive value from nature. These schemes contribute around USD 9.8 billion a year. However, they are often vaguely defined and suffer from issues such as payment volatility and high project costs. 

Debt-for-nature swaps allow countries to cancel portions of their foreign debt in exchange for committing to fund local conservation projects. Estimates suggest that as much as a third of the USD 2.2 trillion of developing country debt could be eligible for debt-for-nature swaps. However, the impact of this on debt levels has been very small: between 1987 and 2023, these swaps offset only ​​around 0.11% of debt payments by low- and middle-income countries. Critics also argue that these swaps sometimes commodify nature and could undermine the sovereignty of local communities if not properly managed.Carbon offsets and credits aim to compensate for greenhouse gas emissions and environmental impacts by investing in projects that reduce or remove carbon from the atmosphere, such as reforestation or afforestation. However, they have been criticised for allowing companies to continue emitting carbon while relying on offset projects that may not always deliver long-term or verifiable climate benefits.

  • 1
    This model includes various tipping points, which are changes in an ecosystem that push it into an entirely different state, such as the transition of forests into savanna due to land degradation and climate change, with potentially catastrophic changes for global climate regulation. The model baseline is a scenario where these services do not collapse.
  • 2
    Between 2011 and 2050.
  • 3
    This is under a ‘Business-as-Usual’ scenario, which is a high-emissions scenario aligned with the RCP8.5 pathway used in the IPCC’s Sixth Assessment Report. The economic model does not include impacts from tipping points, such as the collapse of rainforests or pollination.
  • 4
    As the analysis only considered a narrow set of risks, the authors of the report warn that this estimate should be viewed as a lower bound.
  • 5
    Values have been adjusted from 1995 values to 2024 values based on the Consumer Price Index and have not taken into account any industry-specific changes such as changes in market dynamics or production costs.
  • 6
     In 2010.
  • 7
    Note that absolute temperature change can be expressed in Kelvin (K). A change of 1°C is equal to a change of 1 K.
  • 8
    In 2011.
  • 9
    In 2021 USD.
  • 10
    Value is from a 2022 report.

Unnatural disasters: The connection between extreme weather and fossil fuels

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Key points:

  • Rising temperatures have increased the likelihood and intensity of extreme weather events, and individual extreme weather events can now be directly attributed to the effects of climate change.
  • Fossil fuels are responsible for around 70% of carbon dioxide emissions that lead to climate change since the industrial revolution, with the rest resulting from farming and deforestation. One third of fossil fuel emissions since 1965 have been caused by the output of just 20 fossil fuel firms.
  • Fossil fuel companies have known about their impact on climate change for decades while proactively working to oppose climate action.
  • Litigation is increasingly being used to hold fossil fuel companies accountable for their impacts on the basis of climate science connecting extreme weather events to their emissions, and claims they misled the public in denying responsibility for climate change.
  • Profits of fossil fuel firms over a 30-year period stand at more than USD 21 trillion – are more than a quarter larger than the damages related to climate change they are estimated to be responsible for, calculated at USD 15 trillion.
  • Reducing supply and demand of fossil fuels is necessary to limit global temperature rise and its impact on extreme weather events. Most of the technologies needed are available and already cheaper or close to it.
  • Progress in decarbonising energy systems and transportation show it is possible to phase out fossil fuels.

Explaining extreme weather

Rising global temperatures impact the frequency and intensity of extreme weather events outside the boundaries of natural variability. While not the sole cause of the intensification of extreme weather, recent events such as heatwaves, droughts and floods would not have happened at the same frequency and intensity without the fossil fuel-driven influence on climate change.

More than 500 attribution studies have linked individual extreme weather events to climate change. Attribution science compares models of a world with and without increased greenhouse gas emissions using observed climate data to assess the extent to which climate change impacts extreme weather.

These studies have confirmed that heatwaves are now stronger and more likely due to human-caused climate change. Studies have also shown that climate change has driven the occurrence of compound events, including simultaneous heatwaves and floods, which have been particularly damaging to people and crops in affected regions.

With nearly 20 years of attribution studies to refer to, and evidence on the physical science behind climate change, it is now possible to link many extreme weather events to climate change without undertaking a dedicated study on a specific event (Table 1).

A larger proportion of attribution is certain in the Global North due to limited data in the Global South, where climate impacts are felt more severely. Researchers warn this may lead to underestimating the role of climate change in data-poor regions.

Table 1: Attributing climate change impact on extreme weather event based on body of research
Fossil fuels are responsible for bulk of global warming

Climate change is caused by the emission of greenhouse gases which absorb energy, slow heat loss to space and act as a blanket trapping heat in the atmosphere. Human-caused greenhouse gas emissions get released into the atmosphere through burning fossil fuels (coal, oil and natural gas), deforestation and farming.

Fossil fuels account for around 69% of global carbon dioxide emissions since the industrial revolution. Of this, 80% is the output of the Carbon Majors.1 Carbon Majors is the name applied to 122 large oil, gas, coal and cement firms whose production data has been tracked from the start of the industrial revolution in 1854.

Fig 1: Total carbon dioxide emissions by source, 1850-2021 (% total)

In 2018, researchers reported that just 20 fossil fuel companies were responsible for over a third of global carbon dioxide (CO2) and methane emissions – 480 billion tonnes of CO2 equivalent – since 1965, when it is documented that the environmental impacts of fuels were known to industry leaders.

Without significant efforts to stop burning fossil fuels, we risk exceeding the Paris Agreement target of 1.5 degrees celsius, which will increase the prospect of earth systems reaching a climate tipping point, catalysing large and often irreversible changes to the climate. The United Nations Environment Programme’s (UNEP) 2023 production gap report found that more than double the amount of fossil fuel production is planned in 2030 than would be consistent with limiting warming to 1.5 degrees celsius.

Living with the impacts of climate change: Who foots the bill?

The impacts of an increasingly warming world and the extreme weather events that come with it are experienced globally, but are particularly onerous for low-income countries. Research has found that “global warming has very likely exacerbated global economic inequality”. GDP per capita in tropical countries has fallen by a quarter since the 1960s relative to a world without climate change. Globally, a 1 degrees celsius increase in temperature could lead to a 12% decline in GDP.

The polluter pays principle is a widely accepted practice of placing the responsibility of negative externalities2 A negative externality is when one party incurs the costs of a negative effect resulting from actions taken by another. In the last 20 years, moves have been taken to impose the costs of externalities on the producer onto emitters, that is the fossil fuel companies whose products emit greenhouse gas. The principle can be applied through different approaches. One approach is a “carbon price”, which is leveraged through policy instruments such as a carbon tax or emissions trading system. Other approaches can include windfall taxes on excessive profits and legally mandated payments to cover loss and damage costs.

Based on the social cost of carbon (using an estimate of USD 185 per tonne), climate science and policy think tank Climate Analytics finds that the “dirtiest dozen” Carbon Majors are responsible for around USD 15 trillion in economic damages for production between 1985 to 2018, a period in which they earned USD 21 trillion in profits.3 The methodology conservatively estimates that producers are responsible for one third of damages caused by fossil fuels’ greenhouse gas emissions.

The profits of fossil fuel companies are such that earnings in 2022 of seven of the largest carbon majors – including Aramco, ExxonMobil and Shell – were almost twice the calculated damages for that year, at USD 497 billion against USD 260 billion. And earnings continue to grow. In the aftermath of the 2022 gas crisis, Saudi Aramco’s CEO claimed the company had “probably the highest net income ever recorded in the corporate world”, with operational cash flow of USD 186 billion.

Table 2: Estimated climate damages linked to emissions from the 12 highest-emitting (MtCO2e) fossil fuel companies and their respective financial gains (2020 USD trillions), 1985-2018

Legal routes to hold fossil fuel companies accountable

While research continues linking the emissions of the fossil fuel industry to estimates of monetary climate damages, the approach of holding the industry accountable is being put into practice through legal routes. More and more legal connections are being made between extreme weather and the fossil fuel industry, litigating and legislating to demand payments for loss and damage.

Legislating polluter pays

In May 2024 the US state of Vermont, hit by extensive flooding in 2023, passed a law that aims to force the fossil fuel industry to pay into a fund for climate damages that have hurt public health, agriculture, housing and other areas. The state could collect money from companies that emitted more than 1 billion tons of CO2 around the world from 1995 to 2024.

Those companies with a certain threshold of business activity in Vermont would be charged according to their percentage of global emissions, with the funds to be used to rebuild and upgrade infrastructure such as stormwater drainage systems, roads and bridges. Other states reportedly considering a similar approach include Massachusetts, Maryland and New York.

Litigating loss and damage

According to the LSE Grantham Research Institute on Climate Change and the Environment, liability for damages sustained in extreme weather events based on the polluter pays principle is an area of growing climate litigation. It cites the ongoing case Municipalities of Puerto Rico v. Exxon Mobil Corp, which makes “extensive arguments about the ‘compounded losses’ sustained by Puerto Rican communities as a result of Hurricane María in 2017 and Hurricane Fiona in 2022” to argue that fossil fuel companies are liable for losses incurred during these storms as well as ongoing economic impacts.

In May 2022, after a seven-year investigation into whether 47 of the world’s largest fossil fuel companies in the world had violated the human rights of Filipinos, the Philippines Commission on Human Rights found that climate change is a human rights issue and that the world’s largest fossil fuel companies knew about the impacts of climate change and attempted to obstruct efforts to address climate change.

A case filed in 2015 by a Peruvian farmer against RWE, one of Germany’s largest electricity producers which has used coal-burning power stations, alleges the power company is liable for climate damages in Peru caused by a melting glacier. The case appears to be nearing conclusion, though no verdict has been issued as of mid-2024.

Alongside this there are over 20 lawsuits from states and municipalities in the United States seeking damages for extreme weather events from large oil companies for allegedly concealing their own scientific knowledge about climate change and thus deceiving the public about the danger of global warming caused by their products.

There is momentum building in this area. In June 2024 California’s attorney general announced it was seeking damages from large oil companies under a new state law that allows the administration to claim profits earned by companies that violated unfair competition and false advertising laws.

And in the same month, the Supreme Court asked the US solicitor general for its opinion on whether a legal case from Hawaii suing the oil industry for deceptive advertising can be heard under federal or state law. In 2023 the Hawaii state supreme court ruled the case could go to trial under state law, but this was appealed by the oil industry, including companies such as ExxonMobil and Chevron. The final decision on where to try the case could lead to the other 20+ lawsuits going to trial.

Fossil fuel industry awareness of climate change and opposition to action

There is a growing body of evidence that the fossil fuel industry knew decades ago that the burning of fossil fuels was a driver of climate change. Newly released documents indicate the oil industry funded climate change research as early as 1954. Shell’s scientists internally warned about the dangers of climate change in the 1980s, according to media reports.

Peer reviewed academic research has found that Exxon knew about climate change in the 1970s but continued to make public statements regarding climate science that were in direct contradiction to its own scientific data, which closely matched global warming forecasts of independent academic and government models. Other studies find that Total also knew about climate change in the 1970s but engaged in denial of climate science in the 1980s and 1990s.

Despite its early knowledge about climate change, the fossil fuel industry has used a range of strategies to oppose government-led efforts to reduce greenhouse gas emissions for decades. One of the most well known was to fund and promote the denial of climate change as an urgent threat that needs addressing.

Trade associations in particular have lobbied to undermine the conditions that would have enabled rival green technologies to flourish. In the United States and Europe new evidence shows oil and gas industry trade associations have lobbied since the 1960s to delay the uptake of solar and wind energy, and electric vehicles. In Asia the fossil fuel industry has pressured the Japanese government to prioritise fossil fuel technologies such as coal, LNG and ammonia co-firing. In the US the oil industry is suing the federal government for emission standards that seek to advance the adoption of clean technologies.

Research by the US Senate into the scale of this agenda culminated in a May 2024 hearing to discuss the oil and gas industry’s “Campaign of Climate Denial, Disinformation, and Doublespeak”. Based on internal documents from industry firms, the staff report found that:

  • Historically fossil fuel companies “understood since at least the 1960s that burning fossil fuels causes climate change and then worked for decades to undermine public understanding of this fact and to deny the underlying science”.
  • There has been a shift in emphasis as “the industry’s outright denial of climate change has evolved into a green-seeming cover for its ongoing covert operation – a campaign of deception, disinformation, and doublespeak waged using dark money, phony front groups, false economics, and relentless exertion of political influence – to block climate progress”.
  • For example, the industry has put resources into portraying natural gas as a clean green fuel “while internally acknowledging that there is significant scientific evidence that the lifecycle emissions from natural gas are as harmful to the climate as coal and are incompatible with scientific emissions reduction targets”.
  • One tactic has been to “privately lobby – either directly or through their trade associations – against pro-climate legislation and regulations that they publicly claimed to support”.

Fossil fuels must be phased out to slow temperature rises

The world’s preeminent authority on climate change science – the UN’s Intergovernmental Panel on Climate Change (IPCC) – has stated clearly that global greenhouse gas emissions need to peak before 2025 and be reduced by 43% by 2030. Fossil fuel companies are moving slowly or obstructing climate action. Government policies to reduce supply and demand of fossil fuels would be required to achieve this reduction.

Reducing supply of fossil fuels

The contribution of fossil fuels to global warming was finally recognised by all countries at COP28 where nations agreed to “Transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, so as to achieve net zero by 2050 in keeping with the science”.

Action needs to be taken on fossil fuel supply to stay inside the 1.5°C carbon budget threshold. To achieve this, almost 40% of already developed reserves of oil, gas and coal needs to stay in the ground and new fields should not be opened. Looking ahead, the International Institute for Sustainable Development finds that by 2030 oil production needs to fall by 15% and gas production by 30% (compared to 2020 levels) to stay within the 1.5°C budget, based on the International Energy Agency’s (IEA) Net Zero Emissions by 2050 (NZE) scenario.

Fig 2: Oil and gas production from new and existing fields vs a 1.5°C aligned pathway

Some countries are already leading the way in this area. Colombia has stopped approving new exploration licences for oil, gas and coal since 2023. In Europe, France, Ireland, Spain and Denmark have banned the exploration and extraction of fossil fuels. These countries, alongside sub-national administrations such as the Canadian province of Quebec and the US state of Washington, have joined together to create the Beyond Oil & Gas Alliance, which advocates for more countries to follow their lead in reducing production towards a just, equitable and managed phase out. Another approach being championed by a number of national governments, cities and civil society leaders is the Fossil Fuel Non-Proliferation Treaty.

Reducing demand for fossil fuels

Alongside supply measures, demand for fossil fuels must be curtailed and replaced with other technologies. The IEA Net Zero Roadmap recommends achieving the following milestones:

  • By 2025 no new sales of fossil fuel boilers
  • By 2030 increasing renewables capacity threefold, all new buildings are zero-carbon ready and 60% of global car sales are electric
  • By 2035 no new internal combustion engine car sales and net zero emissions electricity in advanced economies

Along these lines, governments have acted to reduce future demand by announcing they will phase out the sale of internal combustion engine vehicles and water heaters. According to the IEA 20 countries have announced they will ban the sale of internal combustion engine vehicles. There are also a growing number of EU countries that have committed to phase out the sale of fossil fuel powered water heaters.

Governments are deepening policies to reduce demand for fossil fuels, including by accelerating the use of solar and wind energy for electricity generation through subsidies, enabling access to land, and research and development to increase efficiencies and lower costs. This has been a factor in the tumbling costs of solar panels, wind turbines and batteries that have helped make solar and wind energy some of the cheapest options for new electricity generation. Together these have contributed to the increasing share of renewable energy in electricity generation in a number of countries. In 2023 global renewable capacity additions reached almost 510 GW, which is the fastest growth rate in the last two decades.

In the European Union ever more ambitious directives on the binding renewable energy target (currently at 42.5% by 2030) are contributing to the rising use of renewable energy. This has increasingly displaced fossil fuels for electricity generation, resulting in a 24% reduction in emissions from power plants across the bloc in 2023.

Advances in reducing the use of fossil fuels can be seen in the generation mix across a number of high-consumption countries. The Energy Institute tracked generation across 21 countries that collectively account for 80% of global consumption and found that of the ten most decarbonised electricity systems, 40% generate less than a third of their power from fossil fuels. In Brazil, that figure falls to less than 10%. Germany, the Netherlands and Spain generate roughly a third of electricity from solar and wind power.

Fig 3: Top 10 decarbonised electricity systems among high-consumption countries

China in particular has vastly accelerated its use of renewable energy, although the significant size of China’s energy use means that it still relies heavily on fossil fuels. Between 2014 and 2023 China’s solar capacity increased from 28 GW to close to 610 GW and wind energy from 96 GW to 4,441 GW. To give an idea of the scale of this shift, in 2023 China commissioned the same amount of solar PV as the rest of the world did in 2022. This meant that by 2023 China accounted for 14% of installed solar PV capacity globally.

In the area of transportation, policies such as subsidies in China and stricter auto emissions standards and tax credits in the US through the Inflation Reduction Act (which also apply to clean energy and buildings), promote the use of electric vehicles (EVs) to reduce oil demand. This has led to a jump in the number of EVs from around 300,000 in 2013 to just over 28 million in 2023. Globally, the sales of EVs displaced around 0.9 million barrels per day (Mb/d) of oil in 2023, when total oil demand grew by 2.1 Mb/d.

Fig 4: Global electric vehicle sales by region, 2013-2023

Looking ahead, another area of focus are the reforms needed to reduce the size of global fossil fuel subsidies, which amounted to over USD 1.5 trillion in 2022, according to the Organisation for Economic Cooperation and Development (OECD) and International Institute for Sustainable Development (IISD).

Reducing the scale of worsening extreme weather events

The impacts of climate change are set to worsen as global temperatures rise. Extreme weather events are likely to continue to get more frequent and more severe as a result. Climate science is clear that fossil fuels, and the emissions from the largest fossil fuel companies, are responsible for these changes. Only reducing the supply and use of fossil fuels can limit the rise in global temperatures and the extent to which these impacts worsen.

  • 1
    Carbon Majors is the name applied to 122 large oil, gas, coal and cement firms whose production data has been tracked from the start of the industrial revolution in 1854.
  • 2
    A negative externality is when one party incurs the costs of a negative effect resulting from actions taken by another. In the last 20 years, moves have been taken to impose the costs of externalities on the producer
  • 3
    The methodology conservatively estimates that producers are responsible for one third of damages caused by fossil fuels’ greenhouse gas emissions.

What to expect from La Niña 

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Key points:

  • La Niña is a natural, reoccurring climate phenomenon whereby cold, deep water moves to the ocean surface and cools the central and eastern Pacific Ocean, and warmer water moves to the western Pacific Ocean.
  • There is an 85% chance of a transition from the current El Niño state to neutral conditions between April and June this year, and a 60% chance of La Niña developing by June to August.
  • La Niña strongly influences rainfall and weather patterns in various regions of the world and has been responsible for catastrophic droughts and floods, which have severely threatened agricultural production and food security, and caused major economic losses.
  • La Niña episodes usually last nine to 12 months, but may last for years. The frequency of multi-year La Niña’s has risen in the past several decades, and the longer duration increases risks from weather extremes. The previous La Niña, which lasted from 2020-2023, had devastating consequences for several regions of the world.
  • Human-caused climate change is at least partly responsible for increases in the variability and frequency of extreme La Niña events.
  • Some regional trends that can be associated with La Niña include:
    • Drier than usual conditions in Ethiopia, Somalia, northwestern and eastern Kenya, northeastern Tanzania, southern and southeastern US, southern Brazil, Uruguay, northern Argentina and southern Bolivia, potentially leading to drought and crop failures.
    • Wetter than usual conditions in eastern South Africa, Mozambique, Zimbabwe, Botswana, northern and eastern Australia, southeast Asia, India, northern Brazil, Colombia and Venezuela, with potential for flooding.
    • Increased Atlantic hurricane activity, with potentially severe consequences for the southeast coast of North America.

The El Niño-Southern Oscillation cycle

The El Niño-Southern Oscillation (ENSO) cycle – entailing periodic fluctuations in sea surface temperature and atmospheric pressure over the tropical Pacific Ocean – is a natural, reoccurring climate phenomenon that strongly influences rainfall and weather patterns in various regions of the world. La Niña is the cool phase of the ENSO cycle, while El Niño is the warm phase, with a neutral period following these phases.

During La Niña, trade winds – the east-to-west winds that blow along the earth’s equator – intensify, which causes cold, deep water to move to the ocean surface and cool the central and eastern Pacific Ocean, and warmer water to be pushed to the western Pacific. During El Niño, roughly the opposite happens, with weakened trade winds causing central and eastern Pacific ocean water to warm up.

El Niño and La Niña episodes usually last nine to 12 months, but may last for years. While the transitions among various phases occur irregularly, the cycling between the warm and cool phases takes place every two to seven years and brings about predictable changes to ocean temperatures, wind and rainfall patterns.1A cold phase does not always immediately follow a warm phase, and vice versa. In many cases, a cool phase follows from a cool phase, with a varying number of neutral condition months in between. ENSO events are described as Eastern Pacific (EP) or Central Pacific (CP) events depending on where the maximum warming or cooling is located.2CP events may also be referred to as ENSO ‘Modoki’. Some impacts of EP and CP events differ. For example, CP El Niño events are associated with more severe droughts in Australia than EP events. There has been an increase in the frequency of CP events in the last four decades.

Based on changes in sea surface temperatures and atmospheric conditions in the tropical Pacific, the National Atmospheric and Oceanic Administration is confident that there is an 85% chance of a transition from the current El Niño state to neutral conditions between April and June this year, with a 60% chance of La Niña developing by June to August. Long-range models predict an EP La Niña event this year.

How are La Niña and El Niño predicted?

Scientists use a combination of climate models and observational data, such as sea surface temperature and trade wind strength data from satellites and ocean buoys, to predict the onset of ENSO events several months in advance. Models can forecast La Niña events up to two years’ in advance if the La Niña follows a strong El Niño rather than any other state.3There have been significant improvements in models’ ability to forecast ENSO events, but these models still face some challenges – for example, they generally overestimate La Niña and El NIño strength.

La Niña and El Niño events are characterised as weak to strong based on the sea surface temperature anomaly – the deviation from the average or baseline – with cooling or warming of 1.5°C or more considered strong. Figure 1 shows the values of the Nino-3.4 index – a measurement of sea surface temperatures in the equatorial Pacific Ocean – from 1950 to 2024. The grey dashed line shows when the sea surface temperature anomaly meets the requirement for an El Niño or La Niña event, generally defined as an anomaly of 0.5°C or more. The red dashed line shows strong La Niña and El Niño events. However, multi-year events that do not exceed this threshold can also have severe consequences, leading to increased risks from droughts, floods and weather extremes due to their long duration – as observed with the 2020-2023 ‘triple-dip’ La Niña. The grey solid line is the global land-ocean temperature index and shows the change in the global surface temperature from 1950 to 2023.

Fig. 1: Sea surface temperature anomalies in the equatorial Pacific and global land-ocean temperature index from 1950-2024
Data source for Niño-3.4 index: US National Weather Service. Data are three-month running averages with a centered baseline. Data source for global land-ocean temperature index: NASA’s Goddard Institute for Space Studies. Values are annual means in reference to a 1951 to 1980 baseline.

By forecasting when El Niño or La Niña will occur, better predictions can be made about possible extreme weather events, helping people to prepare for and mitigate against potential damage associated with these events.

Multi-year La Niña’s are becoming more common

The frequency of multi-year La Niña’s has increased – five of the 10 multi-year La Niña’s over the last 100 years happened in the last 25 years. Multi-year La Niña events have longer-lasting impacts compared to single-year events, such as prolonged above-average rainfall over Australia, Indonesia, tropical South America and southern Africa, and below-average rainfall over the southern United States, Equatorial Africa, India and southeast China.

A study found that multi-year La Niña events are more likely to follow a ‘super El Niño’, which is a particularly strong El Niño – such as the current El Niño, or a CP El Niño. The previous ‘triple-dip’ La Niña event – which lasted from 2020 to 2023 – was a scientific anomaly because it did not match the conventional scientific theories of how prolonged La Nina events develop. Experts reported that it was one of the strongest La Niña events in the past half century. The impacts of this triple-dip La Niña were devastating and included severe flooding in northern Australia, extreme drought in the Horn of Africa – creating one of the worst food security crises in the region for decades, widespread drought in the southwest US, record-breaking hurricane activity, one of the worst droughts on record in South America and heavy rainfall and flooding in Pakistan and northwestern India, with around 15% of the population of Pakistan negatively impacted by the rainfall.4Climate is complex and influenced by multiple processes. For instance, the extreme rainfall in Pakistan was also attributed to human-caused climate change.

La Niña and the Indian Ocean Dipole

The Indian Ocean Dipole (IOD), which is thought of as the Indian Ocean counterpart of El Niño and La Niña, refers to sea surface temperature anomalies in the Indian Ocean that show a ‘dipole pattern’. When the western Indian Ocean is cooler than usual and the eastern Indian Ocean is warmer than usual, this is referred to as a negative IOD. When the eastern Indian Ocean is cooler and the western Indian Ocean is warmer than usual, this is referred to as a positive IOD. Though independent of La Niña, the IOD is frequently triggered by ENSO events, with negative IOD events typically accompanying La Niña events. Negative IOD events have been linked to extreme rainfall in Indonesia and Australia, and drought in East Africa. Stronger negative IOD events have also been found to make La Niña stronger, and CP La Niña events are also typically linked to stronger IOD events. However, the relationship between ENSO and the IOD is complex due to the diversity and substantial variation in regional feedbacks of ENSO.

Influence of human-caused warming

While ENSO events are natural phenomena, they are occurring against a background state of a warming world, which likely influences their characteristics and impacts. Some changes in ENSO characteristics have been observed over the last few decades, including an increase in the frequency of extreme events and an increase in the variability of events. Similarly, one analysis projects that extremely positive IOD events – linked to drought and wildfires in Indonesia and Australia and flooding in East Africa – will become almost three times more frequent in the 21st century due to climate change. As ENSO is naturally a highly variable phenomenon, determining with certainty whether its characteristics are changing as a result of human-caused climate change is complex – especially as sea surface temperature records have only been available since the 1950s. However, the scientific consensus is that human-caused climate change is at least partly responsible for changes in ENSO variability. Climate change may also be making it less easy to predict extreme El Niño and La Niña events, making it more difficult for people to prepare for potential negative impacts.

Cooler conditions under La Niña do not offset global warming

Though La Niña does cause a decrease of around one tenth of a degree Celcius in the earth’s average surface temperature, this cooling is temporary and is only a fraction of the total average warming of the earth by human-produced greenhouse gases – since industrial times the earth’s average temperature has risen about 1.36°C. To put this number into context, average global temperatures during recent La Niña years have been higher than the average temperatures during El Niño years in past decades, highlighting how much the planet has warmed over the last century (Figure 1). In fact, recent La Niña years have been in the top 10 hottest years ever. Despite the decreased average global temperatures under the upcoming La Niña, 2024 will still likely be one of the top five hottest years on record.

Potential regional impacts of La Niña

As weather patterns around the world are influenced by multiple climate drivers, experts warn against concluding what the impacts of an event will be based on one climate driver alone. However, as La Niña brings about predictable changes to ocean temperatures, wind and rainfall patterns, some general trends can be anticipated (Figure 2).

Fig. 2: Regional impacts of La Niña on rainfall and temperature
Source: National Oceanic and Atmospheric Administration, 2016.
Africa

La Niña is typically associated with drier conditions over December-January in East Africa, including in Ethiopia, Somalia, northwestern and eastern Kenya, and northeastern Tanzania, with implications for crops harvested in February and March and negative effects on livestock. In South Sudan, above-average rainfall could be expected, which might increase crop yields or cause flooding.

La Niña is associated with above-average summer rainfall in eastern South Africa, Mozambique, Zimbabwe and Botswana. In terms of agricultural productivity, South Africa tends to see higher yields of maize, sorghum and wheat, whereas Zimbabwe tends to experience increased maize and soybean yields.

Oceania

In Australia, CP El Niño events tend to bring above-average rainfall to the northern and eastern regions and is linked to severe flooding.

North America

The increase in cold water in the Pacific during La Niña pushes the polar jet stream – a fast air current in the polar region of the Northern Hemisphere – northwards, which tends to cause drier winter and spring conditions in the southern and southeastern US and heavy rains and stormy weather in Alaska, western and central Canada, and the northern US.

Generally, the effects of La Niña in the northern hemisphere are most felt during winter, as it brings colder and wetter winters. There is also an increase in the frequency and strength of Atlantic hurricanes.

The arrival of La Niña around September could benefit maize production in the corn belt of the US but could also reduce water levels in Midwest rivers, with implications for grazing pastures.

Asia

Southeast Asia, including Indonesia, Malaysia and the Philippines, experiences above-average rainfall during CP La Niña events, potentially causing severe flooding. However, rice and palm oil production in the region could be boosted. Due to increased rainfall and cooler conditions, La Niña tends to have a net positive impact on grain yields in China.

In India, La Niña will likely cause above-average monsoon rainfall from July to September and may result in decreased production of pulses, sugarcane and wheat in the Indo-Gangetic Plains, but could increase rice production.

South America

Southern Brazil, Uruguay, northern Argentina and southern Bolivia tend to experience below-average rainfall, potentially leading to drought. Crops such as soybean and maize could be negatively impacted. Northern Brazil, Colombia, Venezuela, and parts of Ecuador and Peru typically experience wetter conditions, with potential for flooding.

Bangladesh’s reliance on LNG increases heat stress, finance and energy risks

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Key points:

  • Bangladesh has increased reliance on LNG since starting imports in 2018, relying on the fuel for 22% of the country’s gas demand. Since then, Bangladesh has failed to meet its targets for increasing renewable generation, which now accounts for just 2% of the country’s electricity.
  • This reliance on imported LNG means the impacts of the current energy crisis have been acute, with widespread power cuts hitting both industrial production and the availability of air conditioning during hot weather.
  • The energy crisis is set to continue, with LNG prices forecast to remain high throughout 2023 and up to the late 2020s, with similar consequences. 
  • The global LNG industry is accelerating climate change, to which Bangladesh is highly vulnerable. 
  • Heat stress from fossil fuel expansion will have severe impacts on human health, labour productivity, income and overall economic growth of the country. 
  • Extreme weather and rising sea levels are already affecting the country and, by 2050, there could be nearly 20 million internally-displaced climate migrants.
  • Bangladesh has the potential for major expansion of renewable generation, but is not on track to increase capacity in the near-term. To provide cheaper, cleaner, more reliable power, the government of Bangladesh and international finance should prioritise scaling up renewable power.

LNG has boomed while renewables have stagnated 

Bangladesh has traditionally relied on gas as its main source of electricity generation, supplied from domestic extraction since the early 1960s. Gas made up 59% of Bangladesh’s energy supply in 2020 and fuels more than two-thirds of electricity generation. However, the country’s reserves of gas are declining, while electricity demand is increasing – in 2022, the government estimated that domestic gas supplies would last for less than 11 years.

In 2016, the government set out a plan to address this shortfall, laying out a vision for a huge growth in imports of liquified natural gas (LNG). The plan set a target of starting LNG imports in 2019 at a level that would meet 17% of the country’s gas demand, rising to 40% in 2023, 50% in 2028 and 70% in 2041.

The first stage of this vision was largely achieved, with the country signing two long-term contracts to import gas from Qatar, with LNG imports starting in the 2018/19 financial year and nearly doubling in 2020/21. In 2021, Bangladesh also started buying LNG from the spot market – where gas is bought for immediate delivery and prices are far more volatile than those bought under long-term contracts. By 2022, LNG imports accounted for 22% of the country’s total gas demand.

While the government achieved ambitious targets for increasing LNG, it was nowhere near as successful in meeting its targets for renewables. In 2008, the government set a target of meeting 10% of electricity demand with renewable sources by 2020, with similar targets included in the 2016 power plan. By 2022, renewables generated just 2% of Bangladesh’s electricity, according to analysis by the Centre for Policy Dialogue, making up just 3.75% of installed capacity.

Reliance on LNG left Bangladesh exposed to the energy crisis

The country’s increased reliance on imported LNG, combined with very low domestic renewable generation, has left Bangladesh highly vulnerable to global energy supply shocks. This risk became a reality in 2021 and 2022, when global LNG prices increased dramatically, first as Russia reduced gas exports to Europe and again following Russia’s invasion of Ukraine. 

In the year running up to the invasion, Asian LNG prices rose by 390% before rising a further 48% in the five months after the invasion – reaching a peak more than ten times higher than prices in the same month in 2020. The benchmark price for LNG averaged USD 34 per million metric British Thermal Units (MMBtu) in 2022, compared to USD 15/MMBtu in 2021. 

As well as facing significantly higher prices for LNG imports, Bangladesh also saw reductions in the LNG supplied through its long term contracts from Qatar, according to analysis by the Centre for Policy Development.

Faced with such high prices, Bangladesh stopped making spot market purchases of LNG in July 2022. As a result, the country faced widespread power cuts in the second half of the year. In mid-July, 20% of the country’s electricity demand was not met due to gas shortages, with the country cutting power on 85 of the 92 days up to the end of October, according to analysis by Reuters. At its worst point in October, blackouts affected 75%-80% of Bangladesh, leaving 130 million people without power, as a third of the country’s gas power units faced a gas supply shortage. The electricity that could be supplied also came at a huge cost – electricity generation costs rose by 47% from financial year 2020-21 to 2022.

The impacts of this on Bangladesh have been significant. Industrial production, including the garment sector, fell by a reported 25%-50%, placing further pressure on the country’s balance of payments. 

Up to a quarter of the country’s power demand comes from air conditioning, so cutting off power supplies left people – particularly older people, disabled people and children – at greater risk of heat stress, with temperatures in places exceeding 40°C. 

Bangladesh’s energy crisis is set to continue

Asian LNG importers such as Bangladesh are currently experiencing a reprieve from the record high prices of 2022, with regional prices currently lower than all of 2022 and on a par with mid-2021. In February, the country re-started purchases on the spot market with a purchase from TotalEnergies at USD 19.78/MMBtu, with the country aiming to keep purchases below USD 20/MMBtu this year.

But this drop in prices is not forecast to last. After a steep drop in 2022, Asian gas demand is expected to rise by around 3% in 2022 due to the lifting of China’s zero-Covid policy, which, combined with Europe’s increased demand for LNG, will put upward pressure on prices:

Fig. 1: Historic and forecast Asian LNG prices
Source: International Monetary Fund, S&P Global, Reuters

Global LNG prices are set to remain high at least until 2025 or 2026, when new LNG supplies are set to come onto the market. Bangladesh is reported to be looking for new long term LNG supply contracts, however there is very limited availability and competition from European buyers prepared to pay high prices. Until then, maintaining or growing Bangladesh’s recent levels of LNG imports will have to rely on expensive and highly volatile spot markets.

The impacts of such high prices on Bangladesh look set to continue. In January 2023, the government increased gas prices to commercial users by between 14% and 179% (household prices were left unchanged). This presents a significant challenge for the garment sector, which makes up more than 80% of the country’s export earnings. Producers must either pass on higher production costs to international buyers or face falling sales and profits. Power sector subsidies reached BDT 297 billion (USD 2.74 billion) in the financial year 2021-22, and are likely to rise further in 2023. It is highly likely that Bangladesh will experience further blackouts due to a shortage of LNG, with knock-on impacts on the availability of air conditioning during heatwaves and the productivity of the economy.

Despite the outlook for LNG prices, Bangladesh is planning to double its LNG import capacity with a more than 150% increase proposed, according to Global Energy Monitor (GEM). LNG imports are forecast to rise by more than 350% between 2020 and 2030, according to analysis by the Centre for Policy Development. This increase goes hand in hand with an expansion of gas power installation. The country has 11.5 GW of gas power currently installed, another 2.3 GW under construction and further 33.3 GW proposed, according to GEM.

LNG investment: Finance and stranded asset risks

Asia is expected to witness a surge in gas infrastructure investments, with the total investment in proposed projects reaching USD 379 billion. Bangladesh has one of the most extensive expansion plans, with USD 16.5 billion of investment in new gas infrastructure. This investment includes the construction of LNG terminals, pipelines and new power plants.

Table 1: Bangladesh planned investment for fossil gas infrastructure
Source: Global Energy Monitor, 2021

The reliance on gas for energy development raises concerns about the country’s large and unsustainable debt burden. Building additional gas infrastructure for the power sector, often under the guise of a ‘bridging fuel’, entails high financial risks to a developing country, particularly as the levelized costs of electricity from renewable energy are lower than for gas and will continue to fall. As the competitiveness of renewable energy prices persists, Bangladesh’s pivot toward gas will result in a poor investment and wasting valuable capital. For example, Bangladesh is reportedly currently facing a hefty debt bill of USD 2 billion every year from the power sector’s mega projects, specifically fossil fuel development. Amidst the global transition towards clean energy, gas infrastructure could potentially become stranded assets, posing a significant financial risk to Bangladesh, leading to broader and more severe socio-economic problems.

LNG expansion is accelerating climate change

While the lack of power increases the health risks from heatwaves in Bangladesh, increasing the use of LNG is also accelerating climate change, which will make extreme weather events in the country more severe and frequent.

Natural gas is the fastest growing source of CO2 emissions from fossil fuels, responsible for more than half the increase in the last five years. Worldwide, a 173% increase in LNG export capacity is in development, an expansion that puts the Paris Agreement climate goals at serious risk. The Intergovernmental Panel on Climate Change (IPCC) has found that emissions from existing and planned unabated fossil fuel infrastructure would push the world past 1.5°C of warming, unless they are phased out early.

The extraction and transportation of gas emits methane, a powerful greenhouse gas that is responsible for around a quarter of the 1.1oC of warming the world has already experienced since pre-industrial times. Transporting gas as LNG is also emissions intensive due to the energy required to super-cool the gas. In the US alone, the seven LNG terminals currently operating have the equivalent emissions to almost nine coal power stations. 

If all LNG terminals globally had the same emissions intensity as those in the US, together they would have the same emissions as 46 coal power stations, with emissions greater than Malaysia’s and the Philippines’ coal fleets combined. An analysis of multiple studies of US LNG shipped to Europe found that “emissions from the extraction, transport, liquefaction, and re-gasification of LNG can be almost equal to the emissions produced from the actual burning of the gas, effectively doubling the climate impact of each unit of energy created from gas transported overseas.

Increasing impacts of climate change

Bangladesh is widely recognised as being one of the most vulnerable countries to the impacts of climate change, largely due its natural geography on a low-lying delta with a high risk of cyclones, extreme rainfall, flooding and droughts, combined with high population density. Fifty-six per cent of the population – more than 90 million people – live in areas with a high exposure to climate change, compared to a global average of 14%. Thirty-three per cent of the population – more than 53 million people – face very high exposure to climate change, compared to just 6% globally.

These risks are not just a future possibility, but are already impacting Bangladesh. Between 2000 and 2019, the country experienced 185 extreme weather events due to climate change. Tropical cyclones are estimated to cost Bangladesh USD 1 billion annually, and around 20 million people are already having their health affected from saltwater-polluted drinking water linked to sea level rise. In 2022 alone, over 7.1 million Bangladeshis were displaced by climate change, according to the World Health Organisation.

Fig. 2: Proportion of population exposed to climate risks
Source: USAID

These impacts are set to get worse as the climate warms. The IPCC has found that wind speeds and rain rates of tropical cyclones will increase as global temperatures rise. By 2050, Bangladesh could have up to 19.9 million internal climate migrants, according to the World Bank, almost half the projected internal climate migrants for the whole of South East Asia. By 2100, one third of the population of Bangladesh could be at risk of displacement. 

The extent of these impacts will be determined by the speed at which the world can reduce greenhouse gas emissions – the science is clear that an immediate and rapid reduction in the use of gas is required to avert the worst impacts of climate change.

Impacts of heat stress due to fossil fuel and LNG expansion in Bangladesh and around the world

Bangladesh is predicted to experience more frequent and severe heatwaves, which have been shown to increase mortality rates by as much as 31.3% for every 1°C increase in the universal thermal climate index. 

Heat stress can exacerbate respiratory problems, such as asthma and chronic obstructive pulmonary disease (COPD), which are already common in Bangladesh due to air pollution. These can result in reduced productivity, increased absenteeism and long-term health issues.

Vulnerability to heat-related diseases is exceptionally high among people over 65, who often have underlying medical conditions. Children are also vulnerable to heat events, due to their susceptibility to vector-borne diseases, as are individuals with low literacy levels who may not be fully aware of the dangers of extreme heat events.

Vulnerable communities are also more likely to experience economic impacts from heat stress, such as lost wages from illness or decreased productivity. Low-income households may also struggle to pay for cooling, or live in housing without adequate ventilation or insulation, increasing the risk of heat stress and heat-related illness.

Psychological impacts of heat

Recent research has highlighted the impact of climate change on mental health in Bangladesh, revealing a link between elevated temperatures and mental health-related morbidity and mortality. A Lancet Countdown report projected deadly heat problems for densely populated areas, such as Dhaka and Chattogram, where the urban heat island effect exacerbates the vulnerability of residents. 

Vulnerability to mental health impacts is particularly acute for older populations, women, individuals with physical disabilities or illnesses, and households experiencing economic shocks. 

Heat impacting productivity at work

The warming planet will increase the health and well-being risks associated with working in hot and humid conditions. This is especially true for low and middle-income tropical countries like Bangladesh, where a significant proportion of the population are manual workers in agriculture and construction. Workers exposed to heat stress are at risk of a range of health impacts, including dehydration, heat exhaustion, heat stroke and other heat-related illnesses. 

Extreme heat exposure is also affecting working hours, resulting in a significant loss of labour. The International Labour Organization (ILO) has identified Bangladesh as one of the South Asian countries that faces a high risk of lost working hours due to heat stress, especially in the agricultural sector. At present temperatures, the country loses 254 hours of labour per person annually due to heat exposure. This figure increases significantly to 573 hours of labour loss per person annually if the temperature rises by 2°C.  

Workers are less able to perform physical tasks in high temperatures and humidity, leading to decreased output, increased downtime and reduced economic efficiency, which in turn can reduce income and economic growth. Additionally, the costs of providing medical care and preventative measures to reduce heat stress can be significant. 

Fig. 3: Heat exposure and working hours lost
Source: Parsons, L. A., Shindell, D., Tigchelaar, M., Zhang, Y., & Spector, J. T. (2021).
Table 2: Working hours lost to heat stress, by sector and country, southern Asia, 1995 and 2030 (projections)
Source: ILO, Working on a Warmer Planet (2019)

According to the ILO, heat stress caused more than 5% of GDP loss in Thailand, Cambodia, and Bangladesh in 1995. By 2030, heat stress could have a similar impact on GDP in Thailand, Cambodia, India and Pakistan. Bangladesh is projected to lose around 4.9% of its GDP to heat stress by 2030 – a potential loss of USD 95.75 billion. The significant impact of these losses on the country’s population and economy underscores the urgency of implementing measures to mitigate the effects of extreme heat on working conditions and productivity.

Renewable energy offers a better alternative

In contrast to the huge growth in LNG import capacity and gas power generation, the pipeline for renewable energy projects in Bangladesh is very limited. In its 2021 climate submission to the UN Framework Convention on Climate Change (UNFCCC), Bangladesh aimed to increase renewable energy capacity by just 0.9 GW by 2030 and only 4.1 GW if the country receives international financial support. This would lead to renewables generating just 4% of the country’s electricity by 2030. In the same submission, Bangladesh proposed increasing gas capacity by 5.6 GW with international financial support, reaching a total capacity over three times higher than that for renewables.

Fig. 4: Proposed gas and renewable capacity by 2030
Source: Bangladesh 2021 Nationally Determined Contribution submission to the UNFCCC

Unless significant policy changes are introduced, the growth in renewables in Bangladesh is set to be very limited. According to the National Solar Energy Roadmap, under a business-as-usual scenario, the country would only have 2.4 GW of solar power installed by 2030 and 6 GW by 2041, with solar making up the majority of the country’s renewable generation.

Despite the limited pipeline for new projects, Bangladesh has the potential to greatly increase the deployment of renewable energy. In 2021, the government launched the Mujib Climate Prosperity Plan (MCPP), setting out a vision of how the climate-vulnerable country could become resilient and prosperous through adapting to and mitigating climate change. The MCPP laid out different scenarios for the potential deployment of renewable energy. In the most ambitious, the country would reach a 30% share of renewable energy by 2030, with a capacity of 16GW, rising to 40% in 2040 with a capacity of 40GW. The Sustainable and Renewable Energy Development Authority (Sreda) has also reportedly proposed a target of generating 5 GW from wind power by 2030, up from virtually none today.

Renewable energy represents a far better alternative to gas to meet Bangladesh’s growing electricity demand. Renewable energy is cheaper than gas – in late 2022, the Institute for Energy Economics and Financial Analysis (IEEFA) estimated that the cost of energy from rooftop solar and utility scale solar are BDT 5.5 and BDT 7.6, well below the current average electricity generation cost of BDT 10. Worldwide, new solar is estimated to be between 11% and 40% cheaper than the cost of new gas plants. Renewable energy is also more reliable than bidding for LNG supplies in a volatile and competitive international market, where buyers in richer regions like Europe can outbid Bangladesh. 

Despite these advantages of renewable energy, the country is well off course to meet the ambitious targets in the MCPP. If the country had followed the most ambitious pathway in the MCPP for solar power deployment, Bangladesh could have reduced the volume of its spot market LNG imports by 25% between 2022 and 2024 compared to the current trajectory, saving USD 2.7 billion, according to analysis by Ember.

Fig. 5: Solar power projection and Bangladesh’s spot LNG purchases
Source: Ember

Bangladesh has now set a target of achieving 40% renewable energy by 2041, but is not currently on course to grow its share of renewable energy in the near future. Expanding LNG imports and gas power generation is set to come at a significant cost to Bangladesh, and is far from guaranteed to be able to supply reliable power to the country. The costs of these projects would be better spent supporting an immediate and rapid increase in the deployment of solar and wind power, to provide cheap reliable power to the country. International donors and financial institutions should also dramatically increase the level of financing available for renewable energy projects – between 2000 and 2020, renewables only received 17% of the USD 10.9 billion in public finance for electricity generation in Bangladesh.

In March 2023, the government of Bangladesh is expected to publish its Integrated Energy and Power Master Plan, updating the 2016 power sector plan. This review gives Bangladesh the opportunity to learn the lessons of the ongoing global gas price crisis, revise down the planned expansion of gas power and LNG imports and instead focus on rapidly scaling up wind and solar power.

An introduction to loss and damage

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Key points:

  • Loss and damage refers to those inevitable impacts of climate change that have not been avoided through mitigation and adaptation, or that cannot be avoided because it is impossible to do so
  • Despite being responsible for emitting the majority of greenhouse gas emissions since the Industrial Revolution, rich nations have fiercely hindered negotiations on loss and damage financing and are reluctant to make any commitments
  • A dedicated loss and damage financing facility is high on the agenda for the Global South at COP 27 and would help ensure that funds are collected and distributed equitably and to the most vulnerable communities
  • Attribution science is important for linking human-caused emissions to increases in the likelihood or magnitude of climate disasters and has a key role to play in assigning culpability for climate impacts
  • Climate justice movements argue that loss and damage is a restorative justice issue. It is imperative, they say, that the Global North accepts responsibility for loss and damage and actively works to redress and repair the social injustices and direct impacts of climate change.

What is loss and damage?

Loss and damage refers to those inevitable impacts of climate change experienced by the Global South that have not been avoided through mitigation and adaptation due to socio-political or economic constraints, or that cannot be avoided because it is impossible to do so. It may encompass a wide range of circumstances, including:

  • Extreme weather or rapid-onset events, such as storms, cyclones, heatwaves and floods
  • Slow-onset events, such as drought, desertification, increasing temperature, land degradation and sea level rise 
  • Non-economic impacts, such as the loss of cultural heritage, animals, plants and tradition 
  • Economic impacts, such as loss of lives, livelihoods, homes, agriculture and territory.  

Some of these risks can be addressed through adaptation measures. If the measure is not yet available but could become available in the future, the risk is considered to be a ‘soft adaptation limit’. An example of this might be the development and implementation of an early warning system for floods in a region that is becoming increasingly flood prone. However, some risks have a ‘hard adaptation limit’, meaning that the available technologies and actions for averting this risk are not feasible. An example of this might be when an island becomes uninhabitable because of sea-level rise. 

It is helpful to think about climate risks as being situated along a continuum (see Fig. 1, adapted from here) of avoided risks (risks that have or will be avoided through mitigation), unavoided risks (risks that cannot presently be avoided or reduced due to socio-economic constraints) and unavoidable risks (hard adaptation limits). Loss and damage is centered around unavoided and, particularly, unavoidable risks.

While the debate around what loss and damage is, and who should compensate for it, has gained a lot of coverage recently, it has actually been a point of discussion for several decades. The first mention of loss and damage in international fora was in 1991 when the Alliance of Small Island States (AOSIS) proposed an international insurance pool that would compensate low-lying islands for loss and damage associated with sea-level rise. The first time loss and damage was mentioned in UNFCCC documents was in the 2007 Bali Action Plan. This initiated formal UNFCCC activities in the 2010 Cancun Adaptation Framework for advancing technical work on loss and damage.

Historical responsibility and polluters must pay

Loss and damage is a contentious and highly politicised topic. This is because while rich nations are responsible for most of the greenhouse gases in our atmosphere emitted since the Industrial Revolution, the warming caused by these emissions is disproportionately impacting less developed countries that have contributed the least to global warming. For example, Africa is responsible for just 3% of all carbon dioxide emissions over the last few centuries but is the most vulnerable continent to the impacts of climate change. By 2030, vulnerable nations may face USD 290-580 billion in annual loss and damage, and this figure could increase to USD 1-1.8 trillion by 2150. By 2050, up to 216 million people may be forced to leave their homes due to climate impacts. UN Secretary General Antonio Guterres describes climate justice as “a case study in moral and economic justice” and believes “polluters must pay” because “vulnerable countries need meaningful action”. 

Communities across the Global South make up the vast majority of the 3.6 billion people considered ‘extremely vulnerable’ to climate impacts by the UN. Climate justice movements argue that the major emitters in the Global North bear the primary responsibility and a financial obligation for addressing loss and damage, thereby owing huge ecological debt to the vulnerable nations of the south. Emissions from the richest countries caused an estimated USD 2.3 trillion in damages between 1961 and 2000, and it is estimated that the total amount of climate debt could be as high as USD 34 trillion. This debt reflects the financial burden that the industrialised economies of the Global North have imposed on the Global South to mitigate and adapt to climate impacts.

This financial burden extends to the devastation caused by colonial extraction. For the first time since its inception, the IPCC mentioned the word ‘colonialism’ in its sixth assessment report in 2022. Extractive industries established by colonial powers helped pave the way for the establishment of the modern world order characterised by global social and economic inequality. These global power imbalances create vulnerability to loss and damage, and so loss and damage is deeply linked to colonial histories.     

Much of the climate justice debate has focused on who is responsible for the impact of climate change and how the burdens of climate change can be distributed fairly and equitably. In every climate disaster, the poorest are the most vulnerable and hardest hit. However, Global North countries have fiercely hindered progress on loss and damage financing negotiations and are reluctant to commit to loss and damage funding due to concerns around legal liability, fearing that they may become locked into open-ended litigation and compensation for climate-induced disasters. Getting polluters to compensate for loss and damage would be a significant step towards redressing global climate injustice. 

Attribution has greatly shaped the discussion around loss and damage, and advances in attribution science can show how human-caused emissions have increased the likelihood or magnitude of both rapid and slow-onset events. Attribution science has an important role to play in helping to understand loss and damages, in highlighting the different drivers of climate change and in helping to bring more court cases against polluters. 

A study published in July this year attributed greenhouse gas emissions from high-emitting countries to substantial economic losses in low-income, tropical parts of the world and economic gains in high-income, midlatitude regions. This is the first study to directly quantify the culpability of nations for historical temperature-driven income changes in other nations. Studies like these can provide critical insight into climate liability and national accountability for climate policy. 

An example of where attribution science has been used to bring a case against a polluter is a study showing that the melting of the Palcaraju glacier in the Peruvian Andes – which presents a flooding hazard to the city below it – is entirely attributable to rising temperatures. In this case, a Peruvian farmer is holding the German utility company RWE accountable for the role of its emissions in the melting of the glacier, proposing that the company should contribute to the construction of flood defenses. Its contribution would be based on RWE’s share of global emissions, which has been estimated at 0.47%. If successful, this could be a game-changer for getting polluters to pay for climate damages.   

However, developing nations argue that polluters should also be held responsible for losses and damages that cannot be quantified or recovered at any cost – framed as symbolic reparations. There is no amount of money that can bring back lost territory due to sea-level rise or the cultural heritage, animals and plants, human lives and ancestral lands that could be lost due to climate change. For these impacts, reparations may take the form of official apologies and recognition, the building of museums and memorials, truth and reconciliation conferences and other means of helping to maintain a sense of cultural identity where this has been lost due to climate change.

Major milestones for loss and damage in policy negotiations

  • Establishment of the Warsaw International Mechanism for Loss and Damage (WIM) at COP 19 in 2013
    • The WIM aims to ‘address the impacts of loss and damage associated with the impacts of climate change, including extreme events and slow-onset events, in developing countries that are particularly vulnerable to the effects of climate change” 
    •  The WIM Executive Committee (ExCom) was also formed at COP 19 to guide the implementation and functions of WIM through negotiated workplans, with three objectives – knowledge generation, coordination and support to address loss and damage. The first two-year workplan was approved at COP 20 in 2014 
  • At COP 21 in 2015, the Paris Agreement was adopted. Article 8 established that parties of the agreement “recognise the importance of averting, minimising and addressing the loss and damage associated with the adverse effects of climate change”. This was the first time that loss and damage was formally acknowledged as an issue separate from adaptation. 
  • The first review of WIM took place at COP 22 in 2016, where the framework for the five-year rolling workplan of ExCom was approved
  • At COP 24 in 2018, the recommendations made by ExCom on integrated approaches to avert, minimise and address displacement related to climate change were accepted
  • The second review of WIM took place at COP 25 in 2019, which led to the establishment of the Santiago Network, which aims to catalyse the technical assistance of relevant organisations, bodies, networks and experts 
  • At COP 26 in 2021, the functions of the Santiago Network were agreed upon. The Group of 77 + China (a negotiating bloc for developing countries) proposed that a dedicated loss and damage financing facility (LDFF) be established, but this was rejected at the talks.
    • The Glasgow Dialogue was then established as an alternative to the LDFF for facilitating discussion among Parties, relevant organisations and stakeholders regarding funding activities to avert, minimise and address loss and damage
    • The dialogue will take place during annual subsidiary meetings until 2024
  • In June 2022, the 1st Glasgow Dialogue took place at Bonn, where the proposal for loss and damage to be an agenda item for COP 27 was rejected, largely because the EU and US feared that they would become liable for billions of dollars in damages
  • Loss and damage was then accepted as a draft agenda item for COP 27 after the G77 + China wrote to the UNFCCC Secretariat in June this year. “Matters relating to funding arrangements responding to loss and damage associated with the adverse effects of climate change, including a focus on addressing loss and damage” is now an official agenda item for COP 27 and for the CMA (which mandates the work under the Paris Agreement)
  • In September, more than 400 organisations signed a letter initiated by the Climate Action Network (CAN) to make the financing of loss and damage an agenda item for COP 27. The G77 + China will continue their call for a dedicated LDFF at COP this year.

A timeline of milestones can be found here.

What can we expect at COP 27?

A submission by the G77 and China on 13 June 2022 to the UNFCCC Secretariat to make “matters relating to funding arrangements for addressing loss and damage” a provisional agenda item for COP27 and CMA4 this year was accepted. The Presidency of COP 26 and the incoming Presidency of COP 27 convened informal multilateral consultations on loss and damage with Group Chairs and Heads of Delegations in July 2022. In these discussions it was acknowledged that:

  • Operationalising the Santiago Network at COP 27 is necessary to fulfil its purpose of providing relevant technical assistance to developing countries, and that it would be important to establish predictable and adequate funding for the network 
  • A greater need for funding arrangements for loss and damage is also necessary, as disappointment was expressed by Parties who felt that a way forward for the funding of the issues raised in the first Glasgow Dialogue had not been presented 
  • From a loss and damage perspective, a successful COP 27 would  “mean a concrete outcome on the Glasgow Dialogue, which would mean the establishment of funding arrangements or a funding facility under the COP and the CMA to address loss and damage with transparent, predictable resources, which would be separate from adaptation finance, and an agreement for it to become a standing COP and CMA agenda item”. 

The Climate Vulnerable Forum (CVF) – a partnership of developing countries that are highly vulnerable to climate change – has also played a key role in increasing the focus on loss and damage, including calling for COP 27 to mandate the IPCC to write a special report on the subject. At the closing of the Glasgow Dialogue on Loss and Damage, the CVF stated that “Loss and damage is an emergency agenda, indeed it should be considered as a third pillar under the convention in addition to mitigation and adaptation, its funding shall be considered high in our agenda”.

Criticisms of the UNFCCC policy and process

While Article 8 on loss and damage was fundamental in anchoring both in the Paris Agreement, it is compromised by the inclusion of a provision by developed countries stating that it does not “involve or provide a basis for any liability or compensation” (paragraph 51 of Decision 1/CP.21). This suggests support for loss and damage will be on a cooperative basis. Unfortunately, there has been little cooperation between developed countries. The current mechanisms available under the UNFCCC are focused on averting loss and damage through mitigation and adaptation, and there are no means available to help people recover from the impacts of climate change that go beyond their ability to adapt.  

Major criticisms of the Warsaw International Mechanism for Loss and Damage executive committee established in 2013 workplans are that it is characterised by broad goals that are ambiguous regarding start lines and deadlines. They are also lacking in strong commitments. Many believe the WIM has focused too much on improving understanding and strengthening the coordination of loss and damage rather than facilitating action and addressing loss and damage events that have occurred.

Loss and damage: The case of Pakistan 

Record torrential downpours in Pakistan earlier this year affected 33 million people, with more than 1,730 losing their lives. The economic losses are estimated at USD 30-35 billion. Guterres exclaimed on a recent visit to Pakistan that: “Loss and damage from the climate crisis… is happening now, all around us… I urge governments to address this issue at COP 27 with the seriousness it deserves”. 

It is thought that the rainfall in Pakistan was at least 50% more intense because of global warming. The representative of Pakistan to the UN and chairman of the G77, Munir Akram, emphasised that while Pakistan is one of the lowest emitters of carbon, it is the fifth-largest victim of climate change. He said that at COP 27, developing countries “will be pressing for the rights of developing countries to equitable treatment, or in terms of support for adaptation as well as compensation for loss and damage”. Pakistan Climate Change Minister Sherry Rehma has also been very vocal on the subject, stating that: “There is so much loss and damage with so little reparations to countries that contributed so little to the world’s carbon footprint that obviously the bargain made between the Global North and global south is not working. We need to be pressing very hard for a reset of the targets”.On a similar note, a recent report suggests with high certainty that the Horn of Africa will be entering its fifth consecutive year of drought. One article suggests that this report has sparked renewed interest in calls for loss and damage compensation for Africa.  

Activist and civil society engagement on loss and damage

The outcry in favour of recognising loss and damage, and funding restitution for it, has been growing considerably. Increasingly, climate movements and developing nations have framed the funding of loss and damage as a means of reparation. In general, reparations are founded on equity and justice ideals and endeavour to rectify significant damage caused to vulnerable communities, including the use of financial and non-financial resources. 

Climate justice movements argue that loss and damage must reside in a matter of restorative justice. This implies acceptance of responsibility by the Global North, followed by measures that seek to address and repair social injustices and the widespread direct impacts of climate change. In addition to financial reparations, demands in the form of technology transfer, the elimination of restrictive immigration policies, and guarantees of non-repetition have been raised by the People’s Agreement of Cochabamba at the World People’s Conference on Climate Change to collectively form a programme for restorative justice. However, these demands have yielded little results, which is why activists and developing nations hope to emerge from COP27 with a concrete package of measures and a sustainable system of long-term loss financing and damage restitution.

Several climate strikes organised by movements like Fridays For Future (FFF) have taken to the streets worldwide in the months prior to COP 27 demanding effective and sweeping climate justice and reparations. Activist groups led by the most impacted frontline communities have also long been working on the matter.

International NGOs active in the UNFCCC, such as Greenpeace, Earthjustice and the Climate Justice Program, have promoted the use of litigation for addressing loss and damage, and Germanwatch has specifically advocated for litigation around loss and damage.

A dedicated financing facility for loss and damage 

The financing of loss and damage was a key sticking point in negotiations at COP 26 last year. The establishment of a dedicated loss and damage financing facility is supported by many climate-vulnerable and developing countries. But many developed countries feel the financing of loss and damage could be drawn from existing financial institutions. However, these institutions do not provide support for non-economic loss and damage or slow-onset events such as the loss of crop production due to sea level rise, desertification or salinisation. Moreover, loss and damage funding needs to be available at short notice, such as in the event of damage from an extreme weather event, and this is not supported by currently-available adaptation funds. Regarding other financing options, humanitarian aid is unreliable, short-lived and does not deal with slow-onset events, and development finance often prioritises donor preferences.   

The V20 Multi-Donor Fund, the Global Environment Facility (GEF) and the Climate Vulnerable Forum (CVF) have worked on a pilot loss and damage fund, with the aim of demonstrating that loss and damage financing is possible at scale. The facility is expected to be launched at COP 27. 

A new report by the Stockholm Environment Institute (SEI) on operationalising finance for loss and damage found that climate finance is largely inaccessible for recipient countries due to stringent proposal requirements and long lags in delivery. In addition, loan-based finance often increases the debt burden of countries and doesn’t reach the most vulnerable communities. The institute recommends that a global loss and damage financing facility should: 

  • Prioritise the delivery of funding directly to communities and marginalised groups
  • Prioritise small grants and unconditional cash transfers to reach vulnerable communities, and avoid loans that increase debt burdens
  • Ensure that recipients are included at all stages of decision-making
  • Create accountability mechanisms that empower recipient communities
  • Agree on a phased approach at COP 27 of establishing a dedicated loss and damage facility in the medium term and mobilising finance through existing mechanisms in the future. 

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