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.

Australia, a global climate outlier?

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Key points:

  • Australia’s environmental laws currently fall short in addressing climate change. The country does not have a climate trigger mechanism, despite having one of the highest rates of biodiversity loss in the world.
  • There is a growing number of countries, including the US, UK and New Zealand, that include climate change and emissions considerations in their environmental frameworks.
  • The Australian government’s stance on fossil fuels stands in contrast to warnings from international scientific bodies regarding the urgency of addressing climate change.
  • Australia could be responsible for up to 17% of global carbon dioxide emissions by 2030 if planned expansion of fossil fuels goes ahead.
  • The introduction of a climate trigger presents a chance for the country to align itself with global efforts in tackling GHG emissions from fossil fuel projects and reverse alarming environmental trends.

What is a climate trigger?

A climate trigger means governments have to consider the emissions and climate change impact of a project when assessing whether it should go ahead. Several countries and economies, including the US, UK, European Union, New Zealand and Canada, include assessments of greenhouse gas (GHG) emissions and other climate change considerations in their environmental regulatory frameworks. However, Australia currently has no explicit mechanism to account for climate change and the impacts of fossil fuel projects in its national environmental laws.

Australia’s environmental backbone

Australia has a dual approach to environmental governance, with individual states and territories having their own environmental laws and regulation, alongside national law governed primarily by the Environment Protection and Biodiversity Conservation Act (EPBC Act). While state and territory laws address environmental concerns within their jurisdictions, the EPBC Act serves as a comprehensive framework that complements and coordinates these efforts.

The EPBC Act designates nine key areas as matters of national environmental significance, or triggers, including specific regions, species and ecosystems that hold ecological value and require protection at the national level. If a project is deemed likely to have a significant impact on one of these areas, then a thorough impact assessment and environmental approval process is “triggered.”

The nine triggers identified under the EPBC Act are:
  1. World Heritage properties: These include the Great Barrier Reef and the Tasmanian Wilderness.
  2. National Heritage places: Sites recognised for their outstanding heritage value to the nation, such as iconic landmarks or culturally significant areas.
  3. Wetlands of international importance: Designated under the Ramsar Convention, an international treaty aimed at conserving key wetland ecosystems and their biodiversity.
  4. Listed threatened species and ecological communities: Endangered species and ecosystems that are at risk of extinction or significant decline.
  5. Listed migratory species: Migratory birds and marine species that require protection during seasonal movements across national and international borders.
  6. Commonwealth marine areas: The marine environment within Australia’s Exclusive Economic Zone, such as the Great Barrier Reef Marine Park.
  7. Nuclear actions: Activities related to uranium mining, nuclear power plants, and other nuclear-related actions.
  8. Water resources: The impacts of coal seam gas and large-scale coal mining on water quality and availability.
  9. The Great Barrier Reef: Activities that may impact water quality, coastal development and shipping activities
Criticism of current laws

The lack of a climate trigger has prompted concerns in Australia over the effectiveness of the EPBC Act, in which “climate change” appears just once, as well as the country’s commitment to the 2015 Paris Agreement. Advocates of a climate trigger argue that its omission results in insufficient scrutiny of activities. Projects with substantial climate impacts are allowed to proceed without undergoing the same rigorous assessments as those falling under other triggers, leading to potential habitat degradation and exposing ecosystems to climate-related risks.

Importance of climate trigger for Australia

Increasingly high temperatures, wildfires and other climate impacts have significantly disrupted numerous ecosystems and species in Australia. The country has one of the highest extinction rates of plant and animal species in the world. Since 1999, 84% of threatened species have experienced habitat loss. In the last seven years, Australia witnessed a series of marine heatwaves that lead to four mass coral bleaching events on the Great Barrier Reef, causing a 50% decline in the coral population. Climate change has the potential to exacerbate these losses by fivefold.

Climate triggers globally

Globally, there is a growing trend of countries incorporating climate change considerations into their national environmental frameworks, and the assessment of projects with large amounts of GHG by independent bodies has become standard practice. Examples include the EU, the UK, the US, Canada and New Zealand.

While the environmental frameworks of these countries differ in scope, enforceability and effectiveness, they all prioritise human well-being. The frameworks of the UK, US, and Canada do not explicitly mandate GHG assessments, but GHG considerations are indirectly addressed through other legal mechanisms. Climate change considerations, while not always explicitly mentioned, are increasingly woven into these frameworks, reflecting a global imperative to address climate-related challenges.

Table 1: Comparative analysis of environmental legislation

The countries chosen for analysis — the UK, EU, US, Canada and New Zealand — were selected based on several criteria to enable meaningful comparisons. New Zealand’s proximity to Australia provides regional relevance. The EU and UK dominate global climate discussions, while similarities in political systems led to the inclusion of Canada and the US.

Comparative-analysis-of-environmental-legislationDownload

Australia’s climate trigger proposal

The debate over whether to adopt a climate trigger mechanism in Australia has been ongoing for decades, and several proposals, including a bill submitted by then Shadow Minister for Environment and Heritage Anthony Albanese, failed to win enough support. This was due to concerns that such a trigger would harm jobs, economic development and investment, or clash with existing environmental legislation.

In 2020, a review of the EPBC Act found that it had failed to adequately protect Australia’s vulnerable flora, fauna and ecological communities. The Australian government has committed to revising the Act, and in December 2022 a series of reforms were proposed by the government to be adopted in late 2023. However, climate change considerations were still not addressed.

The Australian Greens plan to submit a proposal for a climate trigger, in order to position the country on par with international trends. Building on an unsuccessful 2020 proposal, the new bill is expected to cover the following:

  • Ministerial authority on carbon dioxide emissions: the bill would grant the climate minister the authority to factor in GHG emissions when making project-related decisions. These powers are categorised into two thresholds:
  • Significant Impact on Emissions: Projects emitting 25,000 to 100,000 tonnes of GHG emissions annually must be evaluated by the ministry, ensuring alignment with the national carbon budget and emission reduction targets.
  • Prohibited Impact on Emissions: Projects emitting over 100,000 tonnes will automatically be denied approval.
  • Introduction of national carbon budget and enhanced roles for the Climate Change Authority (CCA): The CCA is an Australian government agency responsible for providing independent advice on climate change policy. If passed, the bill will mandate the CCA to develop a national carbon budget spanning from 2023 to 2049 in terms of total carbon dioxide equivalent emissions. The CCA must conduct annual evaluations of the remaining budget, while the minister is responsible for evaluating projects, considering the ongoing assessments of the budget.
How does Australia’s climate trigger compare globally?

While most laws discussed in Table 1 are undergoing revisions to better address the challenges posed by climate change, parallels can be drawn between some of them and Australia’s Climate Trigger proposal. Under the Climate Change Act 2008, the UK became the world’s first country to establish legally binding carbon budgets. The measure closely resembles what the Climate Trigger bill aims to introduce in Australia — a national carbon budget, accompanied by annual evaluation of new projects. In Canada, the environment minister was also given authority to require assessments for certain projects if they could have adverse climate impacts. These parallels underscore how Australia’s bill aligns with international efforts to address climate change and responsibly manage emissions, something that is argued to be lacking in the current EPBC Act.

However, what sets the Australian Greens’ bill apart from other laws is its commitment to explicit emissions thresholds. Among the countries examined, none of them automatically ban projects that exceed specific emissions limits. While this doesn’t prevent new fossil fuel projects being approved that emit more than initially estimated, it does pave the way for regulating these emissions.

Next steps for Australia’s climate trigger mechanism

The bill is currently under consideration by an environmental committee in the Australian Senate and a final ruling is expected in December 2023. A majority of lawmakers in parliament now recognize the need for government intervention in addressing climate change, and the crossbench offers strong support for a climate trigger.1The crossbench is where independent and minor party members sit in Australia’s parliament.

However, there has been a significant shift in the stance of Prime Minister Anthony Albanese and the Labor party since 2005. The current Labor government has ruled out a ban on new fossil fuel developments as long as investors perceive demand for coal and gas. It argues that introducing flexible measures, such as carbon offsets, would allow fossil fuel projects to proceed while still enabling the country to achieve its 43% emissions reduction target for 2030. The government’s position diverges from the warnings of organisations such as the United Nations, and leading climate science bodies such as the Intergovernmental Panel on Climate Change and the International Energy Agency.

Australia is the world’s third-largest exporter of fossil fuels behind Russia and Saudi Arabia, accounting for about 7%. In 2022, Australia had twice the electricity use per capita of China, and 47% of its electricity was generated by coal-fired power plants — more than four times the global average. Since 2014, the expansion of LNG production in Australia has grown by 360%, leading to a significant increase in national emissions levels. By 2030, Australia could potentially be responsible for up to 17% of global emissions, up from about 5% currently, if government and industry projections for fossil fuel expansion go ahead.

The Climate Trigger bill offers Australia the opportunity to take accountability for its emissions and the global harm caused by fossil fuels extracted within the country. If passed, it may help to reverse concerning environmental and biodiversity trends.2Assumes that the rest of the world adopts policies in line with the Paris Agreement.

  • 1
    The crossbench is where independent and minor party members sit in Australia’s parliament.
  • 2
    Assumes that the rest of the world adopts policies in line with the Paris Agreement.

Climate change requires a new approach from international financial institutions

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Key points:

  • The International Monetary Fund (IMF) and the Multilateral Development Banks (MDBs) play a crucial role in providing climate finance
  • The IMF and World Bank (WB) were established after World War II and require reform to address the climate change challenge, particularly the US veto and shareholder structure that favours advanced economies
  • MDBs’ risk aversion and desire to maintain a AAA rating is holding back several hundred billion dollars that could be directed to climate and development projects 
  • Therefore the current global financial system does not work for climate-vulnerable countries, many of which are still recovering from the Covid pandemic and Russia’s invasion of Ukraine
  • The Bridgetown Agenda outlines the changes needed in global climate and development finance
  • The IMF can issue new Special Drawing Rights (SDRs) and support the rechanneling of existing SDRs to developing countries
  • MDBs can offer improved concessional finance for climate adaptation and resilience and significantly increase lending capacity by implementing the recommendations of a G20 expert panel without posing a threat to their financial stability or AAA credit rating.

The world is suffering from the economic fallout of the Covid pandemic and the Russian invasion of Ukraine. The recovery has been particularly difficult for developing nations. At the same time, climate change is fuelling the accumulation of debt in countries in the global south. 

Mia Mottley, the Prime Minister of Barbados, is leading the Bridgetown Agenda – a proposal outlining the reforms needed if global financial institutions, such as the IMF and WB, are to provide proper support to climate-vulnerable countries.

The debt crisis and developing nations

The proposed reforms of international financial institutions are a response to three interconnected crises – the Covid pandemic, the Russian invasion of Ukraine and climate change. 

The Covid pandemic and the war in Ukraine severely impacted global supply chains, resulting in widespread economic shutdowns. The economies of developing nations are yet to recover. 

Additionally, since Russia invaded Ukraine, a major producer of wheat and grains, food prices have increased sharply, creating a serious issue for import-dependent poorer countries, such as Sri Lanka, Lebanon and Senegal. Although Sri Lanka was already heavily indebted before the conflict in Ukraine, the rise in food prices pushed the country to default on its foreign debt.((Sovereign default is the failure by a country’s government to pay its debt when due.)) Several other developing nations are experiencing food shortages, while some are dangerously close to a debt crisis.

Meanwhile climate change is fuelling debt accumulation for vulnerable nations, which have little or no option other than borrowing to deal with recovery and reconstruction costs. When an over-indebted country is affected by such an event, existing debt makes it more difficult for that country to respond, as money is spent on servicing the debt rather than climate adaptation or responding to loss and damage. 

Source: Eurodad
Developing countries are particularly affected by debt

Stable currencies, such as the US dollar, dominate global trade – 80% of trade is invoiced in emerging markets in US dollars. Since most countries cannot accumulate significant debts in their own currencies, due to the risk of currency devaluation, they must acquire dollar reserves. These reserves are usually held in the form of dollar-denominated benchmark assets, such as US Treasury bonds, which a country’s central bank can use to finance trade and support its currency’s value. Agricultural commodities, such as wheat and grain, are also traded using US dollars.

Starting at the beginning of 2022, central banks began hiking interest rates in order to curb rising prices. The combination of high interest rates and strong dollar can be disastrous for developing nations, because emerging markets rely on foreign investment and foreign capital. A stronger US dollar and higher interest rates can make servicing the dollar debt more difficult, as the dollar appreciation makes it more expensive for countries to buy the US currency they need to pay off their debts.

Since the beginning of 2022, developing countries’ foreign currency reserves have collectively fallen by USD 379 billion (from approximately USD 7.82 billion to USD 7.45 billion), the most significant drop since 2008. With depreciating currencies, countries without large reserves struggle to buy dollars to import critical goods and to service their debt. In 2021, developing countries paid USD 400bn in debt service, more than twice the amount they received in official development aid. About 60% of the poorest countries are either already in debt distress or are at high risk of debt distress, making it very difficult for them to make any future investments, according to the World Bank. Such investments include climate-resilient infrastructure, for example concrete seawalls or storm shutters to protect from hurricanes. As a result, heavily-indebted countries do not have the capacity to deal with climate disasters.

The Bridgetown Agenda advocates providing emergency liquidity to alleviate debt together with rechanneling funds that would allow vulnerable countries to make necessary investments to shift to a low-carbon world. Addressing climate change without addressing the debt crisis will not be possible. 

The connection between high debt and climate vulnerability 

Climate change is causing a surge in debt accumulation among developing economies. UNCTAD reports that nearly half of the low-income countries currently in or at high risk of debt distress are also highly vulnerable to the effects of climate change (UNCTAD, 2022). At present, countries in the global south are spending five times more on debt repayments than they are on addressing the impact of climate change.

Source: United Nations Conference on Trade and Development

Achieving climate-resilient structural transformation will require developing countries to take on even more debt. Currently, over 70% of public climate finance takes the form of borrowing and is primarily channelled into climate mitigation. Meanwhile, the UN Environment Programme estimates that annual adaptation needs for developing countries could amount to USD 340 billion by 2030 and USD 565 billion by 2050.

To effectively address the challenges posed by climate change, Covid and the war in Ukraine to developing nations, the way in which the global financial system provides funding must be reviewed. Currently, developing countries have limited access to private capital markets and are increasingly relying on international financial institutions for support. To ensure that these countries can build climate resilience and sustainably meet their long-term development needs, their access to financing on terms favourable to both debt sustainability and development needs to be improved. To help bridge the development gap and secure development finance, multilateral initiatives and Multilateral Development Banks need to step in and offer support.

What are the limitations of the current financial system?

According to the implementation plan agreed at the COP27 UN climate change summit in Sharm El Sheikh, the global transition to a low-carbon economy will require an investment of at least USD 4 trillion a year. To achieve this goal, reform of the WB and IMF is necessary. As Mia Mottley stressed last year when addressing the UN assembly, these lenders “no longer serve the purpose in the 21st century that they served in the 20th century”. 

The structural imbalances of the World Bank and International Monetary Fund

The WB and IMF, also known as the Bretton Woods Institutions (BWIs), were created to rebuild the international economic system after World War II. During the post-war period, they were influenced significantly by the US’s geopolitical strength, which is still reflected in their governance.

But the role of the WB and IMF has evolved over the years – the IMF now oversees the stability of the world’s monetary system, while the WB’s goal is to reduce poverty by offering assistance for development to middle and low-income countries. However, the distribution of voting power remains severely imbalanced in favour of the US and EU: 

  • The US still has veto power over significant decisions((At 17.43% of total voting power, the US has veto over major policy decisions. See https://sgp.fas.org/crs/misc/IF10676.pdf))
  • The right to appoint the presidents – when the WB and  IMF were created, a deal was done in which the Europeans got to pick the managing director of the IMF, while the Americans picked the head of the WB. 

The voting shares are based principally on economies’ size and “market openness”. However, emerging market countries do not have voting shares corresponding to their current economic importance. Emerging and Developing Economies (86% of the global population) are often the recipients of loans from the BWIs. However, they are under-represented in decision-making processes. The same applies to countries that are vulnerable to climate change. 

Source: Boston University Global Development Policy Center, 2022

The role of the IMF in post-crisis recovery and climate change response

The Bridgetown Agenda advocates for practical measures that can address the inequalities at the core of international financial institutions and highlights the role that the IMF and Multilateral Development Banks have in response to the Covid pandemic and Ukraine war, as well as to assist countries in meeting their long-term goals, including combating climate change. The Agenda highlights Special Drawing Rights (SDRs), reserve assets of equivalent quality to dollar assets that can be issued by the IMF (see box below).In 2021, equivalent to about USD 650 billion of SDRs were distributed to help countries struggling with the impact of Covid. However, the SDRs were distributed according to the IMF quota, as they have been historically.((A quota formula is used to help assess members’ relative position in the world economy. The current formula was agreed to in 2008 and can be found on the IMFs website.  On this basis, the share of emerging market and developing countries is about 42.3 percent (about USD 275 billion), of which 3.3 percent (about USD 21 billion) is for low-income countries)) Therefore, most go to developed economies and China, countries that do not need these extra reserves. (For more background on SDRs, see this primer by the Center for Global Development). The Bridgetown Agenda demonstrates that SDRs can be rechanneled to vulnerable countries to tackle structural challenges, including climate change.

What are the SDRs?

SDRs were created by the IMF as an international asset to supplement the reserves of  member countries. They are not a currency and cannot be used directly to purchase anything. However, being a medium of exchange, they provide a country with liquidity. 

When a country needs hard currency, it can use its SDRs and exchange them for another member’s reserves such as dollars, pounds or euros. For example, if a country lacks foreign resources to import goods, SDRs can be exchanged for hard currency. They can also be used as payments to other SDRs holders (for instance to service debt).

On 31 October 2021, the G20 pledged to recycle USD 45 billion of its allocated SDRs towards the most vulnerable countries as a step towards USD 100 billion voluntary contributions to help lower-income countries struggling to recover from Covid and the impact of the Russian invasion of Ukraine. 

Efforts to rechannel the SDRs by developed countries are being tracked by The One Campaign initiative. As of February 2023, a total of USD 60 billion worth of SDRs have been pledged (excluding USD 21 billion from the US, which Congress has not yet authorised). However, although developed nations have committed to recycling SDRs to countries in need, the process of actually transferring the SDRs to those countries is not straightforward.

So far, the IMF has confirmed two channels to recycle SDRs: the Poverty Reduction and Growth Facility (PRGT) and the Resilience and Sustainability Trust (RST). The Fund aims to absorb about USD 65 billion worth of SDRs across these two channels. In the case of PGRT, more details are yet to come. The IMF is making progress on RST rechanneling, but it has yet to distribute any money from it. It has so far committed to lend USD 2.5 billion of SDRs to five countries: Costa Rica, Barbados, Rwanda, Bangladesh and Jamaica. The IMF Board approved the first four loans, with Jamaica’s approval pending.

What is the RST and how does it relate to climate action?

The RST is a loan-based trust that could help low-income and vulnerable middle-income countries build resilience to shocks and achieve sustainable and inclusive growth. The main objective is to provide affordable long-term financing to support countries as they tackle structural challenges, including climate change. 

In principle, the RST’s resources would be mobilised voluntarily from members who wish to channel their SDRs or currencies for the benefit of poorer or vulnerable countries.

Who is eligible for the RST support?

All low-income countries, all developing and vulnerable small states, and all middle-income countries with per capita GNI below around USD 12,000.((This correlates to the eligibility of a country for International Development Association support, which depends on a country’s relative poverty, defined as Gross National Income (GNI) per capita. GNI does not differ significantly to GDP. GDP refers to the income generated by production activities on the economic territory of the country, whereas GNI measures the income generated by the residents of a country, whether earned in the domestic territory or abroad.))

What are the qualifications for RST support?

Not every eligible nation will qualify for RST support. An eligible member would need a package of policy measures consistent with the RST’s purpose. Countries also need to show they can repay the loan, demonstrate how they would use the support with policies such as carbon-cutting, and already have a programme of policy reforms with the IMF.

Other recycling options must be explored to live up to the USD 100 billion commitment of the G20. So far, the IMF has approved five new institutions as prescribed holders of SDRs. These include the Inter-American Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Caribbean Development Bank and the Latin American Development Bank (CAF). 

The Bridgetown Agenda proposes a Global Climate Mitigation Trust backed by USD 500 billion in SDRs for climate and development. The trust-funded projects would have to pre-qualify using proven technologies and have high environmental, social and governance standards. Investment managers would choose them based on how much and how fast they could reduce global warming.

The role of MDBs in climate action

The IMF plays an important part in the reforms needed to tackle climate change. However, other key stakeholders exist in this regard, namely MBDs. These banks have a mandate to prioritise development over commercial interests. An increasingly popular view is that MDBs have not effectively delivered the necessary aid to address pressing challenges like climate change, particularly for the developing nations that are most in need. 

The Bridgetown Agenda stresses that the WB and other MDBs must increase lending to USD 1 trillion and prioritise building climate resilience in vulnerable countries. This can be achieved by implementing the measures recommended by the G20 Capital Adequacy Frameworks (CAF) Review (see Table 1 below). Multilateral development banks are owned by countries that signed up to an international treaty – they make up the shareholders. Some of them are borrowers, some are donors, some are both. MDBs collectively hold over USD 1.8 trillion in assets that could potentially be leveraged for lending. Typically, a government applies to the bank for a loan. Legal, policy and technical experts then advise on the loan structure and the policies needed to make it work.

MDBs and concessional finance

Most MDBs have two lending facilities, called windows:

  • Non-concessional windows are mostly available to middle-income countries. MDBs borrow money from international capital markets and then lend the money to middle and low-income countries. The International Bank for Reconstruction and Development (IBRD) is the WB’s non-concessional window.
  • Concessional windows are mostly available to the poorest countries and use aid to subsidise the cost of the loan. The International Development Association (IDA) is the World Bank’s concessional window. 

Concessional loans have more generous terms. Generally, they include below-market interest rates or grace periods in which the loan recipient is not required to make debt repayments. This type of finance targets high-impact projects responding to structural challenges – from climate change to vaccine deployment – that would not be realised without specialised financial support. 

MDBs offer concessional funds to those countries with a GDP per capita of less than USD 1,253 a year (12% of the world’s population). However, during Covid, some middle-income countries that were particularly badly hit were granted temporary access to concessional borrowing. Similarly, broader eligibility for climate-vulnerable countries is much needed.((62% of the world’s poor live in middle-income countries where around 5 billion of the world’s population live. UNCTAD recommends using the UN Multi-Vulnerability Index (MVI) as a criterion for concessional lending, where debtor countries borrow internationally on more favourable terms than in the open marketplace.))

How do MDBs get their capital?

MBDs obtain most of their funding by borrowing on international bond markets. They turn small amounts of capital from shareholders into substantial resources for lending. By issuing bonds, they increase the amount that is available to lend countries for development at a cheaper rate and better terms than countries could access themselves. This is very effective – since 1944, the WB has taken USD 19 billion of cash from shareholders and turned it into over USD 800 billion of lending.

MDBs have a solid financial track record and, therefore, can borrow from bond investors at relatively low rates. They are considered a secure investment because: 

  • They have preferred creditor status, which means they are first in line among creditors to get repaid, even if a country defaults on a loan. Historically, governments have always repaid MDB loans in full. Governments prioritise repaying MDB loans even when they are struggling financially. 
  • They have USD 2 trillion in a guarantee called callable capital. MDBs receive their financial contributions in two types of capital – paid-in capital, which is paid in by member country governments,  and callable capital. Callable capital is paid by shareholders only if and when paid-in capital and accumulated reserves are insufficient to pay bondholders. This is a guarantee from shareholders that, in case there is an extreme shock that impacts MDBs’ finances, they can be called in and pay the financial obligations to the bondholders. As think tank ODI points out, this guarantee has never been called upon, even in the most severe global or regional crisis. 
  • They have a “AAA” credit rating
Why is credit rating important for MBDs?

MDBs are subject to regulatory capital and liquidity standards, as well as rating methodologies, that were adapted from those developed for commercial banks and do not reflect MDBs’ mandate to prioritise development over commercial gains. As a result, the WB manages itself according to a level of risk that can be even lower than that represented by a AAA rating. While great for its credit ratings, the Bank’s ‘robust risk management system’ seems at odds with its development mandate, as it remains focused on financial risks instead of developmental investments. The WB’s focus on its credit rating needs urgent rethinking. Importantly, more lending for vulnerable, developing countries could be generated if rating agencies refined their methodologies to reflect MDBs’ low risk status (more detail can found here).

The MDBs each have different adaptations and capital and liquidity buffers. The larger the buffers, the more constrained the MDBs will be in their financial capacity, reflected in their Capital Adequacy Ratio (CAR). 

What is the Capital Adequacy Ratio?

Bond investors who provide MDBs with capital want to be sure that MDBs can repay their money. So currently, like all banks, MDBs must back up their loan portfolios with an adequate amount of their own shareholder capital to meet their financial obligations.

The CAR sets standards for banks by looking at their ability to pay liabilities and respond to credit and operational risks. A bank that has a good CAR has enough capital to absorb potential losses. Therefore, it has less risk of default and losing investors’ money. 

The financial risks posed by MDB operations differ from those of commercial banks because of their official standing and development mandate. Despite this, their Capital Adequacy Frameworks do not reflect their unique strength, such as callable capital and preferred creditor treatment. 

In addition, MDBs and the three main credit rating agencies (Moody’s, S&P, and Fitch) have different approaches to MDB capital adequacy. There is a strong need for MDBs to better coordinate engagement with rating agencies to ensure an appropriate understanding of their financial strength and shareholder support.

The G20 established an independent review to evaluate MDB capital adequacy (please see details below). The review panel concluded that government shareholders, MDB management and credit rating agencies had overestimated the financial risks of MDBs and underestimated their unique strengths.

CAF recommendations: The reforms necessary for MDBs to unlock lending for climate objectives 


In July 2022, a G20 expert panel released a report after being tasked with the independent review of MDBs’ Capital Adequacy Frameworks. The panel recommended five measures to modernise MDBs and to calculate their capacity to lend in support of climate and development objectives. Implementing the recommendations could unlock several hundred billion dollars in additional lending without posing a threat to MDBs’ financial stability or their AAA credit rating.

Source: ODI

Carbon capture and storage: Where are we at?

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Key points

  • The history of CCS is one of unfulfilled expectations. Only 10% of CCS projects undertaken thus far have been built.
  • There is currently unprecedented momentum behind CCS. It has attracted over USD 2 billion in annual investment since 2020 and capacity could increase 600% by the end of the decade.
  • Though it has widespread applications, CCS currently only really makes sense in producing cement.
  • The focus of CCS should be on storing CO2, not on increasing fossil fuel production or even using captured carbon to make products.

What is CCS?

Carbon capture and storage (CCS) refers to myriad CO2 capture technologies, transportation systems and storage methods. As such, CCS is best viewed not as a technology per se – unlike solar and wind – but rather as an “integrated infrastructure” (comparable for instance to existing natural gas infrastructure), which broadly consists of four components:

  • Capture: Technologies that actually capture CO2, either before or after burning
  • Transportation: The captured CO2 then needs to be taken somewhere, either by pipeline or ship
  • Use: The CO2 can then be either used for a specific purpose (see CCUS below)
  • Storage: Or it can be stored more permanently, typically underground.

Based on these components, there are three broad categories we can use to define CCS applications:

  • CCS: A system where the CO2 is captured and stored permanently.
  • CCU (carbon capture and utilisation): A system where the CO2 is instead used in processes, such as producing fizzy drinks, or to make products like building materials. Some applications use the CO2 after it has been captured, while in other cases, the carbon and the oxygen need to be separated through chemical and biological conversion processes so the carbon can be used as a feedstock.
  • CCUS (carbon capture, utilisation and storage): A system where the CO2 is both used and stored. This refers exclusively to enhanced oil and gas recovery (see below).

For the sake of simplicity, when discussing the topic more generally, this briefing will use the acronym CCS, unless it is important to distinguish between these categories.

The main technological component of CCS is the capture technology

A broad range of technologies qualify as CCS, but they have fundamentally different applications. There are capture systems that are directly fitted onto a power plant or an industrial facility that reduce their emissions at source – these are more traditional applications of CCS. These systems can use a chemical or a physical process to capture the CO2 before it is emitted into the atmosphere (see Appendix I for an overview of several technologies).

There are also technologies that directly extract CO2 from the atmosphere, known as carbon dioxide removal (CDR). Organisations like the IEA view CDR as a specific type of CCS, including technologies like direct air capture (DAC) or bioenergy with CCS (BECCS). But this is disputed. Others aim to distinguish between fossil-based CCS, and non-fossil based CCS (which includes BECCS and DAC). However, at its core, CCS is meant to reduce emissions from power stations or industrial facilities, whereas CDR is designed to actually remove CO2 from the atmosphere. As such, this briefing will not focus on CDR.

Transportation and storage is more straightforward

After it has been captured, CO2 can be transported via pipeline or ship. These infrastructure networks could eventually resemble those we use for oil and gas today. It can then be stored in dedicated geological storage sites, such as deep saline formations – essentially deep, underground rock formations – or in depleted oil and gas wells.

CO2 can alternatively be used, post-capture

It can either be used directly or converted into a feedstock:

  • Direct use: It can be used to boost yields in greenhouses, in enhanced fossil fuel production or in producing carbonated beverages.
  • Conversion: It can be used to produce various fuels and chemicals, as well as building materials like concrete by injecting CO2 into the mixture to form a binding agent.

In theory, CCS could be applied to any sector that emits carbon, which is every sector of the economy – from power generation and waste incineration to heavy industry and hydrogen production (see Appendix III).

What are the prospects for CCS?

The history of CCS is characterised by failure

Between 1995 and 2018, over 260 CCS projects were undertaken. Of these, only 27 were ever completed. This despite massive government support following the global financial crisis of 2008-2009. Governments across the world provided USD 8.5 billion in support to CCS projects, but only 30% of that funding was spent as projects failed to get off the ground.

Those that have been built do little to reduce emissions. By the end of 2021, there was only 44 million tonnes a year (mtpa) of capture capacity globally, according to BloombergNEF. This is spread across 27 operational projects – one in the power sector, three in hydrogen production and 23 in industry. To put this into perspective, at this capture capacity, CCS could only capture 0.1% of global emissions. 

But there is now unprecedented momentum behind CCS

However, 2021 was also the year in which the pipeline for new projects began to swell. By November of that year, around 100 new CCS facilities had been announced, bringing the global total to almost 200.

This growth is also reflected in higher inflows of capital. Global investment into CCS hit USD 2.3 billion in 2021, down from USD 3 billion in 2020, but over twice as much as in 2018 and 2019. Investment in this case is a lagging indicator and usually comes one or two years after a project has been announced. As such, the growing pipeline would suggest that investment will not only rebound, but surge in the years ahead. Indeed, several major projects are expected to reach their final investment decision in 2022, which will push the total amount of capital deployed in the sector above USD 3 billion for the first time. 

With higher investments and more projects in the pipeline, global capture capacity could surge at a compound annual rate of 18% between now and the end of the decade, BloombergNEF forecasts – the fastest growth rate CCS has seen in a decade, though admittedly this rate is coming from a low baseline. If all these projects are built, capture capacity would then reach 225 Mt/yr – a fivefold increase from today’s levels, but still orders of magnitude below energy-related global emissions, which hit 36 gigatonnes of CO2 (GtCO2) in 2021 (or 36 billion tonnes of CO2). 

North America and Europe account for the largest share of the CCS pipeline

Between them, these regions host over 70% of the global CCS pipeline, BloombergNEF data show. 
The US has the largest operational capacity and pipeline, due to a favourable policy environment – since 2018, the 45Q tax credit has provided a subsidy to the tune of USD 50 a tonne of carbon stored permanently. This is increasing to USD 180 under the recently-passed Inflation Reduction Act. Additionally, in November 2021, President Biden signed the Infrastructure Investment and Jobs Act, which earmarked around USD 12 billion for the development of CCS projects. The majority of operational US CCS projects are connected to enhanced oil recovery (EOR) – a process of injecting CO2 into oil wells to extract as much oil as possible.

There are a number of large developments in Europe as well, but these are more focused on storage. In Norway, the government has provided USD 1.8 billion in support to the Longship Project, which includes the Northern Lights offshore storage hub. The Dutch state has pledged EUR 2.1 billion to develop the Porthos CCS hub in the Port of Rotterdam. In the UK, the government has committed GBP 1 billion to building four CCS hubs by 2030. 

Other regions are also actively expanding their capacity. The Australian government, at least before the recent election, announced AUD 250 million in funding for CCS hubs. Meanwhile the Canadian government has announced CAD 319 million in research and development funding for CCS technologies. In China, the provincial government in Guangdong recently announced the construction of its first offshore CCS hub, as a joint venture with Shell and Exxon. However China’s commitment to CCS remains small – it has three operational facilities, and three others in various stages of development.

The power sector has the largest pipeline

With a development pipeline of 48 projects, the power sector has attracted most CCS attention, according to BloombergNEF. This despite the well-documented limitations (see below). 

Hydrogen has a pipeline of 37 projects, making it the second largest sector after power. Most of these are in early stages of development and are unlikely to be brought online until later this decade, BloombergNEF suggests. With increasing demand for low-carbon hydrogen, producers see an opportunity for blue hydrogen – produced using natural gas and CCS – to meet some of that demand.

What is striking is that the sectors that would be best served by CCS (see below) – cement and steel production – have the smallest number of projects in the pipeline. This suggests that CCS is being prioritised in the wrong sectors.  

Oil and gas companies developing CCS projects

ExxonMobil is by some distance the market leader. It has a total of 25 mtpa of capture capacity spread across its portfolio – both operational facilities and those in the pipeline. Other oil majors, such as TotalEneriges, Eni, Equinor and Shell, are also among the top ten largest CCS players. Companies that specialise in liquefied natural gas (LNG) are also heavily involved – Rio Grande LNG has a cumulative capacity of 5 mtpa, more than Shell.

How feasible are all these pipelines?

Proponents of CCS stress that it is a cost effective way to meet climate goals. Though CCS could be used to decarbonise existing and future energy assets, its feasibility varies by application.

The power sector

In electricity, CCS has widely been seen as a failure. This is also the sector with the most readily-deployable alternatives, namely solar and wind. Fundamentally, CCS has failed to take off in the power sector for two reasons – cost and the growing competitiveness of renewables. 

CCS requires additional energy to function above and beyond the needs of the power plant. This is known as the energy penalty, and it makes a CCS-equipped facility more expensive. This has been exacerbated by the extreme cost decline in renewables, which have become the most cost-competitive sources of electricity generation. Despite inflationary pressures, onshore wind and solar are 40% cheaper than new gas and coal capacity, even without CCS.

Both factors mean the potential for CCS in the power sector is exceedingly small. This means that a number of projects in the development pipeline will not, like many before them, see the light of day, while many that are built will become increasingly uncompetitive against renewables and so be priced out of the market. Of all projects that have been cancelled so far, 66% have been in the power sector.

Heavy industry

The picture for heavy industry is different. CCS is seen as a key decarbonisation tool in cement production and steelmaking, although less so in the chemicals industry. As noted above, however, neither the cement nor the steel sector has a large pipeline of CCS projects. Though CCS is seen as a necessary tool to cut emissions, these industries are only slowly adopting it.

CCS is currently the only way to decarbonise the cement sector, which is a major emitter, contributing about 7% of global emissions. These come both from the fossil fuels used to generate the heat needed to make cement, but also from the chemical composition of the raw materials used. Cement is made through a calcination process, where CO2 is burned off the limestone. Put simply, you cannot make cement without emitting CO2, and the lack of alternatives make CCS a necessity for cutting emissions from the sector. Moreover, it can be deployed at some scale before 2030, research by Agora Energiewende finds. There is also support within the industry for reducing emissions – major construction and engineering firms have joined forces in the ConcreteZero initiative, a group of 17 companies that pledge to have 30% of the concrete they use low-emission by 2025 and 50% by 2030.

In theory, there is also potential for CCS in steelmaking, but it is more limited due to the cost competitiveness of alternatives. Though retrofitting blast furnaces with CCS could cut CO2 emissions from the sector by 86% by 2050, the mitigation potential by 2030 is much smaller, Agora Energiewende finds. In fact, other processes, such as using hydrogen, could reduce emissions by 66 mtpa by 2030, compared to 26 mtpa with CCS. When it comes to re-smelting existing steel and iron, direct electrification through electric arc furnaces is already widely used. Much of the research done into steel decarbonisation has focused on European industry and globally there may be some room for CCS as part of a portfolio of solutions, but it is far from a silver bullet.

Hydrogen production

CCS is seen as playing a role in producing clean hydrogen. Blue hydrogen, manufactured using natural gas or coal and CCS, is one way of making it. However, it is unlikely to be a cost effective option in the future. By 2030, green hydrogen – made with electrolysers running on renewable energy – is expected to undercut blue hydrogen across all major markets, BNEF finds. Nevertheless, there will be some room for blue hydrogen as well. This is partially due to costs – even with today’s gas prices, it is still cheaper than green hydrogen. It is also due to the energy requirement for manufacturing hydrogen. To supply enough green hydrogen in the future could require up to five times the existing installed solar and wind capacity. 

The drawbacks of CCS

CCU and CCUS have low mitigation potential

In the case of CCU, its ability to offset emissions depends on the lifecycle of the products the captured CO2 is used to create and the amount of energy that is required to make them. If, for instance, it is used to produce plastics that are then burned within a year, the CO2 is still emitted, simply at a later date. However, if the CO2 is used in concrete, which has a much longer lifecycle, then it has more mitigation potential.

If the CO2 needs to be converted into something else before being used, its mitigation potential decreases significantly. This is because of the compound’s low thermodynamic potential. Essentially, CO2 is a very stable compound and separating the carbon from the oxygen requires lots of energy. Widespread use would increase demand significantly, making it more difficult for clean energy sources to meet global energy demand. As such, CCU could end up increasing net emissions, because the energy required would not necessarily come from renewables and it is by no means a given that all these emissions would be captured. Large scale CCU is likely to be a “distraction” and so CO2 should only be used as a feedstock where there are no other alternatives.

To give an example of how energy intensive it is to convert CO2 into a useful element at scale, consider the amount of additional electricity needed to electrify the EU’s chemicals industry. In this example, electricity is used to facilitate CCU, by the energy input to help convert CO2. This process would add 4,400 TWh of electricity demand. Current EU electricity demand is 3,200 TWh. This represents 140% of electricity demand in the EU today.

Most projects today focus on CCUS

Most facilities that are currently in operation are connected to natural gas processing facilities and the CO2 that they capture is often used in EOR. Around 74% of operational facilities either entirely or partially depend on EOR for revenue. The fact that most CCS projects are tied to EOR was by design – these projects received over 42% of public spending on CCS in 2011.

Though some literature suggests that EOR could have a net negative impact on emissions, once the process scales up significantly, the CO2 released by burning the recovered oil and gas more than offsets the CO2 stored. As such, emissions only grow.

That being said, while most CCS projects in the past focused on EOR, the number of projects in the pipeline shows that geological storage is now becoming more popular. This suggests the industry is moving away from focusing on EOR, and indeed CCUS, towards prioritising storage. 

Cost profiles of CCS vary enormously

The costs of CCS are split across capturing carbon, transporting it and then storing or using it. When it comes to capturing carbon, the more concentrated the source, the cheaper it is to capture. This can vary from as little as USD 10 per tonne of CO2 (/tCO2) to USD 300/tCO2.

Building the infrastructure to transport and store carbon is significantly more expensive as it requires scale to make economic sense. This can add as much as USD 74/tCO2. It is for this reason that governments, such as in Norway and the Netherlands, are providing subsidies to help pay for the transportation and storage infrastructure to make the projects more economically feasible. 

When combined, costs can vary between USD 22/tCO2 in natural gas processing to USD 374/tCO2 in making aluminium. As outlined above, these costs make CCS uneconomic in some sectors.

Not all CO2 is captured

A major concern about CCS is that it does not capture all emissions. In practice, many facilities only capture 65% of emissions when they begin operating, which steadily increases to 90% after a few years of operation. The reason is not that it is impossible to capture all carbon emissions, but rather the costs increase exponentially the more carbon is captured.

There are also worries about CO2 leakage from transportation and storage sites, much like the issue with methane today. Through close monitoring and evaluation, many of these leaks could be plugged before emitting too much carbon, but it does illustrate that the less reliant the world is on CCS, the less wary of carbon leaks it will need to be. Civil society groups are sceptical of just how safe and permanent CO2 storage can be. The failure of the large-scale Gorgon CCS facility in Australia to store the required amount of carbon has proven to be a case study in the shortcomings of CCS.

Social concerns could become an issue

From an environmental justice perspective, there is a worry that increasing dependence on CCS could lead to new forms of exploitation or neglect. If CO2 storage becomes increasingly important, a crucial issue will be who decides where the storage sites are situated. Deep saline formations, which are seen as the most feasible storage sites, are widespread both onshore and offshore. For example, in the absence of transparent and strong governance structures, selecting CO2 storage sites could transgress on land rights issues. Issues that fossil fuel infrastructure currently face, such as the Keystone XL pipeline, would also be problems for CO2 transportation infrastructure.

Appendices

Appendix 1: Different capture technologies
Appendix 2: Use cases of captured carbon
Appendix 3: Applications of CCS

IPCC Sixth Assessment Report: Mitigation of climate change

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The Intergovernmental Panel on Climate Change (IPCC) has released the third of its four-part, Sixth Assessment Report (AR6) in April 2022. The Working Group III (AR6 WGIII) report is the most comprehensive review of how we can mitigate climate change since the 5th assessment (AR5) in 2014, and the IPCC’s three recent special reports (SR1.5 in 2018 and the 2019 SRCCL and SROCC). 1WGIII will be third of  four separate reports published in the AR6 cycle. ‘The Physical Science Basis’ which detailed the current state of the climate was published on 9 August 2021 and the second report ‘impacts, adaptation and vulnerability’ was released in March 2022.

The report has been ratified after a plenary negotiation in which governments formally approved the summary for policymakers, ensuring high credibility in both science and policy communities. The report covers a broad spectrum of topics, from mitigation pathways and in-depth sectoral analysis to finance, international cooperation, net-zero and carbon dioxide removal. For the first time in IPCC history, chapters dedicated to technology, innovation and demand-side measures are included.

This briefing covers some of the major developments in our knowledge of mitigation since the IPCC’s AR5 was published in 2014. Today, mitigation literature largely reflects the 2015 Paris Agreement, increasing net-zero commitments and the growing need for action from non-governmental stakeholders including businesses, industry and financial institutions.

1. Since AR5 greenhouse gas emissions have continued to climb

We are nowhere near on track to achieve the Paris targets of keeping warming below 2°C, and ideally 1.5°C. Current national climate plans (NDCs) will see us warm by about 2.7°C this century, or possibly even higher 2These numbers are based on pre-Glasgow estimates. If you add all pre-Glasgow net-zero pledges to the NDCs this brings the world on track for 2.2°C, according to UNEP (or about 2.1°C in IEA assessments), page 12, section 7 of the 2021 Emissions Gap Executive Summary..  If CO2 emissions continue at current rates, we will exhaust the remaining 1.5°C carbon budget in the early 2030s 3Most recent estimates show that only 440 Gt CO2 is left from 2020 to stand even a 50% chance of 1.5°C. Global emissions were over 40 Gt CO2 in 2019, and if annual emissions are similar in the next decade it will be used up in the 2030s.. The energy infrastructure from planned and current fossil fuels alone commits us to about 846 GtCO2 (more than double what’s left in our 1.5°C carbon budget) and every year we add more carbon-intensive infrastructure than we decommission. 

Of the greenhouse gases (GHGs), CO2 causes most warming due to its high concentration and long lifetime in the atmosphere. Despite efforts to reduce emissions, our burning of fossil fuels adds more CO2 to the atmosphere, pushing the cumulative atmospheric concentration to unsustainable highs. Between 1850-2019, coal, oil and gas accounted for ~66% of cumulative CO2 emissions, with land-use change responsible for about 32%. 

But since AR5, there has been greater recognition of increasing emissions of methane (CH4) and nitrous oxide (N2O). Both are potent GHGs that trap about 34 and 300 times more heat than CO2 respectively (over a 100 year period). Methane is responsible for almost a quarter of human-caused warming to date, and concentrations are increasing faster now than at any time since the 1980s. Today, methane emissions are two-and-a-half times above pre-industrial levels. The AR6 WGI SPM authors emphasised that “strong, rapid and sustained reductions” in methane emissions would have the dual impact of limiting “the warming effect resulting from declining aerosol pollution” and improving air quality.

Between 2008-2017, agriculture and waste contributed most to the rise, followed by the fossil fuel industry. However, estimating by exactly how much, and from where, methane emissions are increasing is a topic of continued research and debate. For example, some researchers have found that the role of North American shale gas (so called “fracking”) has been significantly underestimated in calculating the global methane emissions. 

Emissions of N2O have risen 20% from pre-industrial levels, with the fastest growth observed in the last 50 years, mainly due to nitrogen additions to croplands through fertilisers. 

In 2018, global GHG emissions were about 57% higher than in 1990 and about 43% higher than in 2000. Emissions continued to rise in 2019, when they reached about 59 GtCO2e. But in 2020, the COVID-19 pandemic led to a historical large drop in CO2 emissions from fossil fuels and industry. During the height of global lockdowns, daily emissions dropped by 17% compared to 2019, levels not seen since 2006, and people around the world were allowed a short respite from deadly air pollution. Since then, emissions have rebounded, and were the highest yet last year. However, research has shown that rebuilding the economy in a more green, sustainable, just and climate-centred way represents a far greater opportunity than the short, lockdown-triggered emissions break, which will have little impact in the long run.

2. Without a drastic boost in climate ambition, our hopes of  achieving the Paris Goals of 1.5°C and 2°C without “overshoot” are out of reach

We are increasingly likely to “overshoot” average global temperatures of 1.5°C and 2°C (meaning that global average temperature temporarily (on order of decades) exceeds the temperature target before reducing again. This can only occur if atmospheric GHG concentrations are lowered – and this is through carbon dioxide removal (CDR), which is by no means a given (see below)). Growing research shows that, for the same end of century temperature increase, overshooting is likely to lead to more climate damages (some of which are irreversible) – like biodiversity loss and extreme weather – than if we get there with no overshoot 4Zickfeld, K. and Herrington, T., 2015. and; Ricke, Katharine L., and Caldeira, K., 2014 and; Tachiiri, K., Hajima, T. and Kawamiya, M., 2019.. 

Delaying mitigation means we will have to cut more emissions each year to stay Paris-aligned by 2030. We already knew the dangers of delayed mitigation in 2014, when the IPCC stated that scenarios with high emissions through to 2030 would have higher long-term economic costs, and would “substantially increase the difficulty of the transition” and “narrow the range of options consistent with… 2°C”. Today, average annual emissions cuts needed to stay below 1.5°C are four times higher than they would have been if collective mitigation and ambition started in 2010, according to UNEP. This highlights the need to act fast.

Investment levels are also nowhere near to what we need to stay Paris aligned. The 2015 Paris Agreement recognised the key role finance plays in both mitigation and adaptation – it placed investors and financial commitments centre stage for climate policy and action. However, climate finance has only increased slightly since AR5, reaching about USD 579 billion in 2018/2017. This is about ten times less than the estimated USD 6.3 trillion needed every year by 2030 to stay Paris aligned. 

Since AR5, the split between public and private climate finance has remained relatively stable (about 44% public and 56% private in 2018). Private finance has, however, outpaced public finance in the energy sector, and increasingly so in transport, reflecting a more mature renewable energy market and the fact that projects are now perceived to be less risky. The private sector is expressing increasing concern over the risks of climate impacts, but climate-related financial risks remain underestimated by financial institutions and decision makers 5Some disclosure measures, like the Task Force on Climate-Related Financial Disclosure (TCFD) may also be largely ineffective, as the assumption that transparency will automatically lead investors to ‘rationally’ respond by moving climate finance from high- to low-carbon assets could be oversimplified..

3. The richest 1% emit more than twice the poorest 50%

Since AR5, there has been increased interest in the ‘national responsibility’ for climate change, as well as the links to other sustainability, development and social issues. The US is responsible for about 20% of cumulative historical emissions, followed by China, Russia, Brazil and Indonesia. Just looking at national emissions does not, however, complete the picture, as the unequal size, wealth and carbon intensity of populations need to be factored in. Looking at emissions relative to population size, developing countries tend to have lower per-capita emissions and, if emissions are normalised to population, China, Brazil and Indonesia do not even make the top 20. 

The richest 1% worldwide emit more than twice the combined share of the poorest 50%, according to UNEP. Activities that emit a lot, but only benefit a few, include flying and driving SUVs. For example, if emissions from SUVs were counted as a nation, it would rank 7th in the world. As COVID-19 caused carbon emissions to fall last year, the SUV sector continued to see emissions rise. In 2018, only 2% to 4% of people got on an international flight, and 1% of the global population are responsible for about half of CO2 emitted from all commercial flights. The aviation industry is responsible for 2.4% of global emission, as such these 1% users could be contributing about 450 million tonnes of CO2 each year – about the same as South Africa’s annual emissions. 

Research, including last month’s landmark AR6 WGII report, shows that climate change affects people differently by gender, race and ethnicity, and these all link to economic vulnerability. Marginalised groups have less access to energy, and use less. For example, women’s carbon footprints are generally lower than men’s, mostly due to reduced meat consumption and driving, though this varies across nations 6See reference 1, 2 and 3. But, even though women generally emit less, their inclusion in policy making can lead to better climate policy. Climate groups are now recognising that disadvantage is the result of many interacting systems of oppression.

4. But there is hope: since AR5 national and corporate net-zero commitments have exploded and renewable energy has continued to outperform forecasts

Since AR5, there has been a substantial growth in climate policy, legislation and treaties at both international, national and sub-national levels. Most importantly, in 2015, the Paris Agreement was signed. The Paris Agreement Article 4 seeks to achieve a “balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases”, which can be interpreted as net zero greenhouse gas emissions (not just CO2). Renewable energy has also continued to massively outperform forecasts, making it a post-AR5 success story. Just in 2020, the amount of new renewable electricity capacity added rose by 45% to 280 gigawatts, the largest year-on-year increase since 1999 (more in box below), while costs have fallen sharply in that time. And, more recently, the concept of ‘net-zero’ entered the policy arena in full force. 

In 2014, the IPCC was not directly using net-zero language, but concluded that limiting the cumulative emissions of GHGs to zero was key to stopping climate change. In 2018, the IPCC outlined that to limit warming to 1.5°C, CO2 emissions would need to fall by about 45% in 2030 (relative to 2010 levels), and global net-zero had to be reached around 2050. WG1 of AR6 (released in August 2021) outlined the need not only for a cut in CO2 emissions, but also strong reductions in other GHGs 7IPCC AR6 WGI D.1. In 2019, the UK became the first G7 economy to legislate for net-zero. Today, 136 countries with 85% of the world’s population, covering 88% of global emissions have set net zero targets, although the targets and timing of how they are delivered remain under criticism for being too vague. This 2021 paper sets out ways that governments could begin to add clarity and accountability; issues considered key to delivering net zero GHG emissions, in pursuit of the Paris targets.

What does achieving net-zero actually look like?

There are many scenarios assessing how we can get to net-zero, and we await the IPCC’s assessment to get an up-to-date, global view. However, some of the key points likely to appear are summarised here. 

Achieving the Paris goals requires rapid mitigation across the full range of GHGs. Scientists have shown that, even if CO2 emissions are Paris-aligned, ignoring methane emissions will lead to overshooting the Paris agreed temperature goals, while abating N2O emissions would help achieve the temperature targets as well as a suite of Sustainable Development Goals (SDGs). 

Renewable electrification is key. A consistent success story since AR5 is the rapid deployment and falling costs of Renewable Energy (RE), such as solar, wind and batteries, which have massively outpaced and exceeded the expert expectations outlined in AR5. But we still need to ramp up. The amount of solar PV and wind deployment has to be twice what has already been announced globally to stay on a 1.5°C trajectory, according to the IEA. We also need to boost funding to clean energy solutions, as many of the technologies needed for hard-to-abate sectors are still in development and annual investment into clean energy needs to triple to USD 3.6 trillion through 2030. 

Fossil fuel use needs to decline dramatically. Global coal emissions needed to have peaked in 2020, and all coal-fired power plants need to be shut by 2040 at the latest, a Climate Analytics analysis based on the IPCC’s 2018 report shows. For OECD nations, all coal use should be phased out by 2031. This was echoed by the IEA in 2021 – it concluded that for net-zero, all unabated coal and oil power plants need to be phased out by 2040. Increasing energy efficiency is also key. In the IEA’s net-zero compliant scenario, the energy intensity of the global economy decreases by 4% a year between 2020 and 2030 – more than double the average rate of the last decade.  

Some degree of carbon removal is needed. Net-zero is achieved when the emissions going into the atmosphere are balanced by those removed. It is possible to achieve global net-zero while still allowing for emissions in some sectors – as long as these ‘hard to abate’ emissions are also being removed and permanently stored. Methods of removal range from enhancing natural carbon drawdown through reforestation, restoration and the protection of nature, to ‘negative emissions technology’ like direct air capture (DAC) and bioenergy with carbon capture and storage (BECCS). In the last few years, more attention has been paid to the ‘net’ part of net-zero, as pretty much all published scenarios that bring us within 1.5°C or 2.0°C rely on some form of CDR. 

Transforming the Agriculture, Forestry and Other Land Use (AFOLU) sector is crucial. Today, it accounts for nearly a quarter of global GHG emissions and sectoral emissions have been climbing in recent years. Livestock production and rice cultivation are the main culprits. The sector is also a carbon sink, as plants and biomass draw CO2 from the atmosphere when they grow. Transforming the sector can both reduce emissions – for example, by changing farming and livestock methods – as well as remove emissions from the atmosphere, including measures like planting more (and protecting existing) forests. However, reforestation and better land management alone will not be enough. Some estimates suggest that transforming the AFOLU sector could at most account for 30% of the mitigation needed to stay below 1.5°C. However, the recent hype that planting trees and investing in land can solve the climate crisis is risking delayed mitigation and greenwashing.

Urban planning needs to consider carbon emissions from the get go. The current scale and speed of urbanisation is unprecedented in human history, and since AR5 it has become even more clear that urban areas contribute the majority (about 70%) of the global footprint, posing an enormous challenge for climate mitigation. New urban planning presents a unique opportunity to reduce carbon lock-in. 

Many more aspects of mitigation and gaps in our knowledge will be explored by the IPCC in this report. For example, the IPCC will dedicate a chapter to demand-side mitigation for the first time, which will explore how behaviour and lifestyle changes can reduce emissions, like shifts in diets, transport, buildings and the efficient use of materials and energy. In general, scientists agree that systemic infrastructural and behavioral change will be part of the transition to a low-carbon society, but the feasibility and mitigation potential of demand-side measures remain a knowledge gap.

5. Looking ahead, transparency is key

Net-zero targets should not be seen as end-points, but rather as milestones on the path to negative emissions, milestones that require detailed roadmaps as well as short-term goals. NGOs, scientists and the public continue to demand mitigation plans and net-zero targets that are clear and transparent, asking policymakers, businesses and financiers to clarify the scope, fairness and approach to decarbonisation. 

Over the past years, integrated assessment models (IAMs) have been a critical tool for climate policymakers, but they have also come under intense scrutiny due to issues like the huge reliance on CDR, especially BECCS, in many scenarios. However, over reliance on IAMs have been criticised given its opaque design and economic assumptions which can result in modelling outcomes that overemphasise CDR. 

In a 2020 paper, the co-chairs of the upcoming WGIII report outlined how the IPCC has taken steps to increase transparency this time around. They said the new report will contain some notable criticisms of IAMs, including the uncertainties, CDR and limits to land. It is, however, important to note that the IPCC itself is not advocating for any scenarios, including those with large amounts of CDR. Instead, the IPCC findings are a reflection of the state of climate modelling, as well as previous emissions pathways and scenario research.

Is it possible to stay Paris aligned without carbon removal?

Many of the scenarios used in earlier IPCC reports (including the special report on 1.5C) relied heavily on negative emissions in the second half of the century. Modelled negative emissions were primarily achieved by inputting a large amount of BECCS and/or forest protection/planting in the future scenarios. 

The numbers for future CDR are often huge, though they vary across models and scenarios. For example, in the IPCC’s special report on 1.5°C, the cumulative carbon removal needed by the end of the century was estimated to be somewhere between 100 and 1000 billion tonnes of CO2. For perspective, we emit more than 40 billion tonnes a year now, so even in the very lowest scenario we would have to remove more than two years’ worth of global CO2 emissions. 

Academics and NGOs have also pointed to the fact that all methods of carbon removal come with side effects and trade-offs that are context and method dependent – such as the huge land areas needed for BECCS, or energy requirements for Direct Air Capture with Carbon Storage (DACCS) (a technology  which some scientist predict could remove tens of GtCO2 by the end of century). Land-based carbon removals also come with other trade-offs, such as increased competition for agricultural land and disruption of biodiversity. There has also recently been an increased recognition that unrealistically high carbon removal projections could be encouraging delayed action and greenwashing. 

In this report, the IPCC intends to explain the limitations and trade-offs of carbon removal carefully, while assessing the amount of CDR in many of the scenarios. There has also been a new wave of scientific literature looking at how to achieve the Paris goals with no carbon removal whatsoever. These pathways show us that net-zero without the ‘net’ (let’s call it ‘true zero’) requires much more rapid transformations of the energy system and larger near-term emissions cuts. These scenarios also lead to multiple other benefits (so-called ‘co-benefits’) like avoiding drastic land-use change, as well as benefiting food systems, biodiversity and the environment in the long-term.

6. Further reading and academic papers

1. Since AR5 greenhouse gas emissions have continued to climb

Explainers and reports 

Selected academic research studies and reviews  

2. A lack of ambitious mitigation has made us increasingly likely to ‘overshoot’ the Paris Goals of 1.5°C and 2°C.

Explainers and reports 

Selected academic research studies and reviews  

3. The richest 1% emit more than twice the poorest 50% 

Explainers and reports 

Selected academic research studies and reviews  

4. But there is hope: since AR5 national and corporate net-zero commitments have exploded and renewable energy has continued to outperform forecasts

Explainers and reports 

Selected academic research studies and reviews  

5. Looking ahead, transparency is key  

Explainers and reports 

Selected academic research studies and reviews  

  • 1
    WGIII will be third of  four separate reports published in the AR6 cycle. ‘The Physical Science Basis’ which detailed the current state of the climate was published on 9 August 2021 and the second report ‘impacts, adaptation and vulnerability’ was released in March 2022.
  • 2
    These numbers are based on pre-Glasgow estimates. If you add all pre-Glasgow net-zero pledges to the NDCs this brings the world on track for 2.2°C, according to UNEP (or about 2.1°C in IEA assessments), page 12, section 7 of the 2021 Emissions Gap Executive Summary.
  • 3
    Most recent estimates show that only 440 Gt CO2 is left from 2020 to stand even a 50% chance of 1.5°C. Global emissions were over 40 Gt CO2 in 2019, and if annual emissions are similar in the next decade it will be used up in the 2030s.
  • 4
    Zickfeld, K. and Herrington, T., 2015. and; Ricke, Katharine L., and Caldeira, K., 2014 and; Tachiiri, K., Hajima, T. and Kawamiya, M., 2019.
  • 5
    Some disclosure measures, like the Task Force on Climate-Related Financial Disclosure (TCFD) may also be largely ineffective, as the assumption that transparency will automatically lead investors to ‘rationally’ respond by moving climate finance from high- to low-carbon assets could be oversimplified.
  • 6
    See reference 1, 2 and 3
  • 7
    IPCC AR6 WGI D.1

IPCC WGIII report: The land sector and climate mitigation

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This briefing summarises the Working Group III (WG3) of the IPCC’s main insights about the mitigation options with the Agriculture, Forestry and Other Land Uses (AFOLU) sector. The term “land sector” will be used throughout this briefing for clarity. The briefing also summarises the findings on the needs and limitations of land-based carbon dioxide removal (CDR).

Key points

  • Rapid deployment of mitigation in the land sector is essential in all 1.5°C pathways. It can provide up to 30% of the global mitigation needed for 1.5°C and 2°C pathways.
  • The sector offers significant near-term mitigation potential at relatively low cost. The global land-based mitigation potential is ~8–14 billion tonnes of CO2 equivalent (GtCO2-eq) each year between 2020-2050. About 30-50% of this potential could be achieved under USD20 per tCO2-eq. Options costing USD100 per tCO2-eq or less could reduce global GHG emissions by at least half the 2019 level by 2030 (SPM C.12). But land-based mitigation cannot compensate for delayed emissions reductions in other sectors.
  • The IPCC recognises that carbon dioxide removal (CDR) is necessary to achieve net-zero GHG globally. Modelled scenarios rely heavily on forest planting and BECCs as main options to remove emissions from the atmosphere to achieve it. 
  • But, the IPCC is not advocating for large-scale CDR. There are many uncertainties, risks and a lack of social licence for these options. It is still uncertain whether CDR through some land-based measures can be maintained in the very long term because sinks can saturate, for example. CDR cannot be deployed arbitrarily and given the time needed to ramp-up CDR, it can only make a limited contribution to reaching net zero in the timeframe required.
  • There is a substantial investment gap in the sector. The IPCC estimates that, to date, only USD 0.7 billion a year has been invested in land-based mitigation, well short of the more than USD 400 billion per year needed to deliver the up to 30% of global mitigation effort in deep mitigation scenarios.

The land sector is key to climate mitigation, but only within limits

The land sector is both a carbon source and a carbon sink. It accounted for ~13%-21% of global greenhouse gas (GHG) emissions between 2010-2019. 1Chapter 7, p.4. This is different from emissions of the entire food system, which are estimated to account for  23-42% of global GHG emissions in 2018 – Ch.12, p.4. For sinks there is also a error of aprox +/- 5.2 But the land sector is also a carbon sink, as it draws CO2 from the atmosphere when plants grow (through the process of photosynthesis). When the sector’s sources and sinks are added up, the land sector is considered a net sink of emissions – removing about 6.6 GtCO2 a year for the period of 2010-2019. 2Chapter 7, p.4. This is different from emissions of the entire food system, which are estimated to account for  23-42% of global GHG emissions in 2018 – Ch.12, p.4. For sinks there is also a error of aprox +/- 5.2. Chapter 3, p.42 : But there are still large uncertainties on net CO2 human emissions and its long-term trends. Currently, national GHG inventories (NGHGI) tend to overestimate the amount of CO2 absorbed by sinks when compared to other global models. There is a gap of ~5.5 GtCO2 a year between NGHGI and Bookkeeping models and dynamic global vegetation models. The difference largely results from different definitions of what “anthropogenic” means, which leads NGHGIs to estimate that more CO2 is taken up by sinks.

The IPCC clearly states that the land sector has huge potential for mitigation. It can both reduce emissions – for example by changing farming and livestock practices – as well as remove them from the atmosphere, via measures like planting more forests and protecting existing ones. But the sector “cannot fully compensate for delayed action in other sectors”. (SPM C.9)

Overall, the IPCC estimates that the global land-based mitigation potential is ~8–14 billion tonnes of CO2 equivalent (GtCO2-eq) each year between 2020-2050, at costs below USD 100/tCO2. 3Chapter 7, p.41. The bottom end represents the mean from IAMs and the upper end the mean estimate from global sectoral studies. The economic potential is about half of the technical potential from AFOLU, and about 30-50% could be achieved under USD20 tCO2-eq-1. Note that the IPCC uses a different methodology for individual AFOLU options than for the total sector potential. These estimates are slightly higher than those in AR5. Considering both integrated assessment models (IAMs) and sectoral economic potential estimates, WG3 states that “land-based mitigation could have the capacity to make the sector net-negative GHG emissions from 2036 although there are highly variable mitigation strategies for how [its] potential can be deployed for achieving climate targets”. 4Chapter 7, p.42. “Economic mitigation potential is the mitigation estimated to be possible at an annual cost of up to USD100 tCO2 -1 mitigated. This cost is the price at which society is willing to pay for mitigation and is used as a proxy to estimate the proportion of technical mitigation potential that could realistically be implemented.” There are many options that can help reduce and remove emissions (Box 1). Most of the options to reduce emissions are available and ready to deploy, whereas CDR needs more investment. 5Chapter 7. 42

The IPCC does not use the term ‘nature-based solutions’ (NbS), but ‘land-based mitigation measures’. When evaluating the mitigation potential within the sector, it discusses 20 measures, both supply and demand-side (Box 1). However, when it analyses mitigation pathways, it only includes a few options because of how climate models are currently built (see the role of CDR in mitigation pathways section for more detail).

Box 1. What are the main ways the land sector reduces and removes emissions between 2020-2050? 

Forests and other ecosystems have the highest potential for carbon mitigation, according to global sectoral models. Protecting, managing and restoring these ecosystems is likely to reduce and/or sequester up to 7.4 billion tonnes of CO2 equivalent each year between 2020 and 2050. 6SPM, p.43 Crucially, the IPCC finds that protecting ecosystems has the highest potential. The report also stresses that halting deforestation and restoring peatlands is vital to keeping temperature rises below 2C. 

Agriculture and demand-side measures provide the second and third highest potential for mitigation, potentially reducing and/or sequestering up to 4.1 and 3.6 billion tonnes of CO2 equivalent a year respectively between 2020 and 2050. 7SPM, p.43 For agriculture, the measures that have the greatest potential are soil carbon management in croplands and grasslands, agroforestry, biochar and rice cultivation, as well as livestock and nutrient management. On the demand-side, it’s shifting to healthy diets and reducing food waste and loss.

Land sector mitigation measures can have important co-benefits, but only if done properly. For example, “reforestation and forest conservation, avoided deforestation and restoration and conservation of natural ecosystems and biodiversity, improved sustainable forest management, agroforestry, soil carbon management and options that reduce CH4 and N2O emissions in agriculture from livestock and soil, can have multiple synergies with the sustainable development goals.” 8SPM, p. 53

But there are many risks and trade-offs. Large-scale or poorly planned deployment of bioenergy, biochar, and afforestation of naturally unforested land. (high confidence) for instance, can compete with scarce resources, such as agricultural land. 9SPM, p. 55 This can threaten food production and security and reduce adaptive capacity. The use of non-native species and monocultures (e.g. planting one type of tree) in forest projects can also lead to biodiversity loss, and negatively impact ecosystems. 10Chapter 7 of WGIII provides an overview of 20 mitigation measures, evaluating the co-benefits and risks from land-based mitigation measures, estimated global and regional mitigation potential and associated costs according to literature published over the last decade. There are also risks in relation to land’s ability to continue to act as a carbon sink in the future, which can reduce land sector measures’ capacity to mitigate emissions. 11Chapter 7.4

Joint and rapid effort is key to achieving high levels of mitigation in the sector, the IPCC says. But there has been a lack of funds to support these efforts. The IPCC estimates that, to date, only USD 0.7 billion a year has been invested in the sector, well short of the more than USD 400 billion per year needed to deliver the up to 30% of global mitigation effort envisaged in deep mitigation scenarios.12Chapter 7, p.6. This is based on land-based carbon offsets (i.e. money from the Clean Development Mechanism, voluntary carbon standards, compliance markets and reduced deforestation).

What does the IPCC say about the scale of land-based CDR?

Mitigation potential of different CDR options

CDR is defined by the IPCC as “human activities that remove emissions from the atmosphere and durably store it”. Thus, CDR excludes uptake of emissions not directly caused by humans. CDR can help in several phases of mitigation: 

  1. Reducing net CO2 or GHG emission levels in the near-term 
  2. Counterbalancing residual emissions from hard-to-transition sectors like industry and agriculture to help reach net-zero CO2 or GHG emissions targets in the mid-term 
  3. Achieving and sustaining net-negative CO2 or GHG emissions in the long-term if deployed at levels exceeding annual residual emissions. 13SPM, p. 48 Therefore, offsets are discussed in the report as a way to counterbalance residual emissions, highlighting that hard-to-abate sectors could have more social licence to rely on CDR. 14The IPCC evaluates previous offsets measures, such as REDD+, offsets within emissions trading systems, among others in chapter 7;Chapter 3, p. 14-15

Currently, the only widely practised CDR methods include afforestation, reforestation, improved forest management, agroforestry and soil carbon sequestration. 15SPM, p. 47 Figure 1 presents the options that can be deployed on land as well as in the oceans. The IPCC discusses these options, presenting a summary of their mitigation potential, risks, co-benefits and costs. (Table 1 in the appendix)  However, the IPCC does not go into detail on all options. For example, it mentions that the choice of feedstock for BECCS could lead to positive or negative impacts, but does not explore all feedstock options and their related consequences.

Figure 1. CDR methods across Land sector and Oceans (​​IPCC- WG3 Chapter 12, p.37)
The role of CDR in mitigation pathways

The WG3 report looks at what the science says about mitigating the climate crisis. As established in most scientific literature, achieving net zero by mid-century is the safest way to stay Paris aligned. There are, however, many different routes to net zero. Thus, the scope of this report is to chart the options, limits, benefits and trade-offs of pursuing a net-zero emissions society. To do this, the IPCC reviewed more than 3000 pathways, including over 1200 scenarios, to develop five “Illustrative Mitigation Pathways” (IMPs) and two high-emissions pathways for reference.

The report finds that “CDR is a necessary element to achieve net-zero CO2 and GHG emissions, and counterbalance residual emissions from hard-to abate sectors”. 16Chapter 12, p. 35 It is also a key element in scenarios that are likely to limit warming to 2°C or lower by 2100”. 17Chapter 12, p. 35 All of its IMPs use land-based CDR, which is dominated by BECCS, afforestation and reforestation. 18Chapter 12, p.4 and p. 55

In most scenarios that limit temperatures to 2°C or lower, the IPCC predicts cumulative volumes of CO2 removed between 2020-2100 could reach (all median values): 19Chapter 12, p. 5

  • BECCS – 328 GtCO2 
  • Net CO2 removal on managed land (including afforestation and reforestation) – 252 GtCO2
  • Direct Air Capture Capture and Storage (DACCS) – 29 GtCO2

To put this into perspective, the remaining carbon budget assessed by WG1 from the beginning of 2020 onwards is 500 GtCO2 for limiting warming to 1.5°C with a 50% chance of success. 20Summary for policymakers, p. 6 The IPCC also predicts that mitigation measures in 2°C or below pathways can significantly transform land all around the world. These pathways are “projected to reach net-zero CO2 emissions in the land sector between the 2020s and 2070, with an increase in forest cover of about 322 million hectares (-67 to 890 million ha) [an area almost as big as the US and India combined] in 2050 in pathways limiting warming to 1.5°C with no or limited overshoot”. 21Chapter 3, p. 6

Delaying action will result in larger and more rapid deployment of CDR later, especially if there is a temperature overshoot. Then, large-scale deployment of CDR will be needed to bring temperatures back. 22Smith et al. 2019; Hasegawa et al. 2021 Since IAM pathways rely on afforestation, reforestation and BECCS, delayed mitigation can lead to a lot of changes in land use, with negative impacts for sustainable development. 23IPCC 2019, Hasegawa et al. 2021  The IPCC points out that “strong near-term mitigation to limit overshoot, and deployment of other CDR methods than afforestation / reforestation and BECCS may significantly reduce the contribution of these CDR methods in scenarios limiting warming to 1.5 or 2C”. 24Chapter 12, p. 56 “Stronger focus on demand-side mitigation implies less dependence on CDR and, consequently reduces pressure on land and biodiversity”. 25Chapter 3, p. 7  It adds that: “Within ambitious mitigation strategies…, CDR cannot serve as a substitute for deep emissions reductions”. 26Chapter 12, p. 38 To put this into perspective, the market for carbon offsets today, which include these CDR measures, reduce global emissions by about 0.1%, according to the Energy Transitions Commission.

But while most scenarios in WG3 still rely on CDR to achieve net-zero, the IPCC is not advocating for large amounts of it. Instead, the reliance on CDR reflects the state of climate modelling and research (see box 2 in appendix). The IPCC discusses the uncertainty, risks and lack of social licence for CDR, such as concerns that large-scale CDR could obstruct near-term emission reduction efforts or lead to an over-reliance on technologies that are still in their infancy. 27Chapter 12, p. 39 It stresses that there is uncertainty about how much CDR will be deployed in the future and the amount of CO2 it can remove permanently from the atmosphere. 28Chapter 12, p. 39 This is because some measures in the land sector cannot be maintained indefinitely as these sinks will ultimately saturate, while trees can also be cut down, burnt or die prematurely. 29Chapter 3, p.7

Box 2. A word about climate models and the potential and limitations of land sector mitigation 

Since the last IPCC reports, there have been more assessments of the total mitigation potential of the land sector. 30Chapter 7, p.40 These can be split into:

  • Sectoral models: These estimate the potential of the sectors and/or individual measures. But they rarely capture cross-sector interactions, making it difficult for them to account for land competition and trade-offs. This could lead to double counting when aggregating sectoral estimates across different studies and methods. 31Chapter 7, p.40-42 They usually show higher mitigation potential as they include more land-based mitigation options than IAMs. 32Chapter 3, p. 64
  • IAMs and integrative land-use models (ILMs): IAMs assess multiple and interlinked practices across sectors, and thus account for interactions and trade-offs (i.e. land competition). IMLs combine different land-based mitigation options, which are only partially included in IAMs. Both have extended their coverage, but the modelling and analysis of land-based mitigation options is new compared to sectoral models. Consequently, “[Land sector] options are only partially included in these models, which mostly rely on afforestation, reforestation and BECCS”. 33Annex III- p.29; Chapter 7, p.86
  • Currently, most models do not consider, or have limited consideration of, the impact of future climate change on land. 34Chapter 7. 42.And there is still uncertainty about land’s ability to act as a sink in the future and how this will impact mitigation efforts. 35Chapter 7. 116  Bottom-up and non-IAM studies show significant potential for demand-side mitigation. 36Chapter 3, p. 7 (see Table 2 in the Appendix)

When evaluating the potential of different land-based mitigation measures, AR6 uses mainly sectoral models and compares to IAM’s, when available. But, AR6 still relies on IAMs/ILMs to devise mitigation pathways. This can be problematic in two main ways:

  • Climate change impacts on land and future mitigation potential: Given the IPCC WG1 finding that land sink efficiency is decreasing with climate change, relying too much on land to remove CO2 from the atmosphere could be problematic. This could create a false sense of security and allow for land mitigation to be used as an excuse for not making deep emissions cuts. This is key as many corporations are relying on offsetting emissions in the land sector instead of reducing them. 

Unrealistic CDR projections (over-reliance on BECCS and afforestation and reforestation): The volumes of future global CDR deployment assumed in IAM scenarios are large compared to current volumes of deployment. This is a challenge for scaling up. Similarly, the lack of representation of other options makes it difficult to compare different measures and envisage a different future that alters the contribution of land in terms of timing, potential and sustainability.

Appendix – Mitigation potential of different CDR measures

  • 1
    Chapter 7, p.4. This is different from emissions of the entire food system, which are estimated to account for  23-42% of global GHG emissions in 2018 – Ch.12, p.4. For sinks there is also a error of aprox +/- 5.2
  • 2
    Chapter 7, p.4. This is different from emissions of the entire food system, which are estimated to account for  23-42% of global GHG emissions in 2018 – Ch.12, p.4. For sinks there is also a error of aprox +/- 5.2. Chapter 3, p.42 : But there are still large uncertainties on net CO2 human emissions and its long-term trends. Currently, national GHG inventories (NGHGI) tend to overestimate the amount of CO2 absorbed by sinks when compared to other global models. There is a gap of ~5.5 GtCO2 a year between NGHGI and Bookkeeping models and dynamic global vegetation models. The difference largely results from different definitions of what “anthropogenic” means, which leads NGHGIs to estimate that more CO2 is taken up by sinks.
  • 3
    Chapter 7, p.41. The bottom end represents the mean from IAMs and the upper end the mean estimate from global sectoral studies. The economic potential is about half of the technical potential from AFOLU, and about 30-50% could be achieved under USD20 tCO2-eq-1. Note that the IPCC uses a different methodology for individual AFOLU options than for the total sector potential.
  • 4
    Chapter 7, p.42. “Economic mitigation potential is the mitigation estimated to be possible at an annual cost of up to USD100 tCO2 -1 mitigated. This cost is the price at which society is willing to pay for mitigation and is used as a proxy to estimate the proportion of technical mitigation potential that could realistically be implemented.”
  • 5
    Chapter 7. 42
  • 6
    SPM, p.43
  • 7
    SPM, p.43
  • 8
    SPM, p. 53
  • 9
    SPM, p. 55
  • 10
    Chapter 7 of WGIII provides an overview of 20 mitigation measures, evaluating the co-benefits and risks from land-based mitigation measures, estimated global and regional mitigation potential and associated costs according to literature published over the last decade.
  • 11
    Chapter 7.4
  • 12
    Chapter 7, p.6. This is based on land-based carbon offsets (i.e. money from the Clean Development Mechanism, voluntary carbon standards, compliance markets and reduced deforestation).
  • 13
    SPM, p. 48
  • 14
    The IPCC evaluates previous offsets measures, such as REDD+, offsets within emissions trading systems, among others in chapter 7;Chapter 3, p. 14-15
  • 15
    SPM, p. 47
  • 16
    Chapter 12, p. 35
  • 17
    Chapter 12, p. 35
  • 18
    Chapter 12, p.4 and p. 55
  • 19
    Chapter 12, p. 5
  • 20
    Summary for policymakers, p. 6
  • 21
    Chapter 3, p. 6
  • 22
  • 23
  • 24
    Chapter 12, p. 56
  • 25
    Chapter 3, p. 7
  • 26
    Chapter 12, p. 38
  • 27
    Chapter 12, p. 39
  • 28
    Chapter 12, p. 3
  • 29
    Chapter 3, p.7
  • 30
    Chapter 7, p.40
  • 31
    Chapter 7, p.40-42
  • 32
    Chapter 3, p. 64
  • 33
    Annex III- p.29; Chapter 7, p.86
  • 34
    Chapter 7. 42
  • 35
    Chapter 7. 116
  • 36
    Chapter 3, p. 7

IPCC Sixth Assessment Report: Impacts, adaptation and vulnerability

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The Intergovernmental Panel on Climate Change (IPCC) has released the second part of its four-part, Sixth Assessment Report (AR6) in February 2022. The Working Group II (WGII) report is the most comprehensive review of climate impacts – and how much we can adapt to them – since its 2014 5th Assessment (AR5).1WGIII in March will be the last of three separate Working Group reports published in the AR6 cycle and then a Synthesis Report will be published later in 2022. ‘The Physical Science Basis’ which detailed the current state of the climate was published on 9 August 2021 and the second report ‘impacts, adaptation and vulnerability’ is due February 2022. Line-by-line approval by governments as well as acceptance of the underlying scientific report ensures high credibility in both science and policy communities and ownership by governments. 

The report summarises the current understanding of how climate change impacts humans and ecosystems. Compared to previous IPCC reports, WGII integrates more from economics and the social sciences and highlights more clearly the important role of social justice in adapting to climate change.

Based on publicly-available literature, this briefing covers some of the major developments in our knowledge of climate change impacts and adaptation since AR5. 

1. Climate change is severely impacting people and the ecosystems we depend on 

In August 2021, the IPCC published the first part of its 6th assessment report (WGI – Physical Science). WGI found that greenhouse gases from human activities had caused approximately 1.1°C of global warming by 2010-19 compared to 1850-1900, and that global temperature is expected to reach or exceed 1.5°C of warming over the next 20 years. Dubbed a “code red” for humanity by the UN’s António Guterres, the report left no space for doubt – climate change is unequivocally the result of human activities and at the current 1.1°C of global warming we are already seeing increasing impacts, including from extreme weather events such as heatwaves, droughts and flooding across the world. It also warned of abrupt responses and tipping points in the climate system (such as increased glacial melting of approximately 600 Gt of ice annually). 

A Special Report on 1.5°C (SR1.5) emphasised that the world will face severe climate impacts even with 1.5°C of warming, and the effects get significantly worse with 2°C and worse still at higher levels of warming. The expectation is that WGII will pick up on explaining and outlining these risks, as recent research has shown that exceeding the 1.5°C temperature limit could lead to irreversible impacts, like the loss of species and biomes, with serious consequences, not least for food security, for humans.

Compared to the last IPCC Assessment in 2014, AR6 sees an increased focus on regional impacts, benefiting from improved models and knowledge of how global impacts manifest regionally. WGI already presented the main physical climate impacts projected for the world’s regions. For example, the African continent is already experiencing higher warming and sea level rise than the world average. In the next decade, Africa will see more frequent and intense heatwaves (up to five times more common in 2050 than today) as well as heavier precipitation, more frequent and intense droughts, and more common and severe coastal flooding. In Europe, the frequency and intensity of hot extremes is increasing, and will continue to do so, while glaciers and snow cover will continue to disappear. In North and Central America, for example, the IPCC states that tropical cyclones and heavy rainfall will become ever more frequent as the world continues to warm.2For a detailed breakdown of the IPCC’s regional findings please take a look at their individual factsheets, published August 2021.

Since AR5, more research has been done to connect the physical impacts of climate change to socio-economic and justice implications. Building on findings in the WGI report, WGII will go much further by describing the damaging impacts of climate change on humans, ecosystems and the economy, charting how climate change is disrupting livelihoods and the systems we depend on. 

2. Extreme weather is causing unprecedented damage

Since the AR5 WGII report, extreme weather events that are caused or exacerbated by climate change have caused widespread and severe damage. One of the main developments in climate science since the last IPCC report has been the expansion of ‘attribution literature’. Attribution studies can tell us if, and how, climate change made a particular extreme weather event more likely or more intense. The expanded attribution literature shows that heatwaves, droughts, tropical cyclones and even locust swarms are directly linked to climate change caused by human activities. 

Many of the extreme weather phenomena that the world experienced in 2021 have been attributed to human-induced climate change. The Pacific Coast heatwave in June 2021 was found to be ‘virtually impossible’ without climate change. Climate change made the massive wildfires that ripped through California and Oregon, extreme heat across the Mediterranean, and the severe flooding that Western Europe experienced much more likely. In September, the National Oceanic and Atmospheric Administration (NOAA) linked the most severe southwest USA drought in history to climate change. Meanwhile in Siberia, wildfires released about as much CO2 as Germany produces in a year. By November, the intense rain and flooding in British Columbia, ‘made worse because of climate change’, forced 17,000 from their homes.

It is also clear that the world’s poorest and most vulnerable are at greater risk, including from mortality and other health consequences of extreme weather. Over the last decade, the mortality from floods, drought and storms has been up to 15 times higher in the most affected countries, including most of Africa and large parts of Central America, compared to less affected countries (like those located in western and northern Europe). Between 1970 and 2019, more than 91% of the deaths from weather, climate and water hazards across the world have been in developing nations. Emerging research has also found an increasing mental health burden of extreme weather. Post-traumatic stress disorders, anxiety, grief and survivor guilt are among some of the mental health challenges observed in people after extreme weather events.

Large scale human migration and displacement could be driven by more frequent resource scarcity, damage to infrastructure from extreme weather events, and increases in the frequency and severity of disease outbreaks. Human populations are concentrated in narrow climate bands, with most people living in places where the average annual temperature is about 11°C-15°C and a smaller number of people living where the average temperature is about 20°C-25°C. The climate hazard of rising temperatures alone is predicted to force 3.5 billion people to live outside the climatic zones  where humans have thrived for 6,000 years. Higher temperature is projected to increase asylum applications in the EU by 28%. In 2018, the World Bank estimated that three regions (Latin America, sub-Saharan Africa, and Southeast Asia) will generate 143 million more climate migrants by 2050. The most foreseeable case of migration as a response to climate impacts will likely be the Pacific Islands. The sea level rise (at a rate of 12 millimetres per year) has already submerged eight islands in the western Pacific. Two more are on the brink of disappearing, prompting a wave of migration to larger countries. Despite this, no international agreements exist on how to protect those who are displaced and forcibly moved as a result of climate change. In 2015, a family from Kiribati applied for refugee status in New Zealand, citing climate change as the reason for the forced migration. Their application was originally denied by the New Zealand Immigration and Protection Tribunal, the Court of Appeal and the Supreme Court.

3. Impacts are getting worse, hitting marginalised people the hardest 

Climate risks that negatively impact ecosystems will further limit the services these systems provide to society, and could reduce access to energy, healthcare, water and international trade. Building climate resilience is, therefore, an essential component of sustainable development, and WGII is expected to discuss the core principles of climate resilience development such as the trade-offs and synergies of sustainable development, adaptation and mitigation, and the social effects of greenhouse gas emissions. Research has shown that human-induced climate change could occur across 80% of the world’s land area, where 85% of the population reside. These impacts will propagate across national boundaries through global supply chains, which are increasingly compromised by climate impacts. In the US, the annual costs to supply chains from natural disasters rose to a record high of USD 95 billion in 2020. These costs will continue to grow. For example, McKinsey predicts that a collapse in the global supply of semiconductors (critical to the global tech industry) from a hurricane will grow up to four times by 2040 due to climate change. 

Food production systems are also under increasing pressure. Human activities have already changed 75% of the Earth’s land, and nearly 75% of freshwater resources are now devoted to crop or livestock production. Today, 25% of the total land area of the world is degraded. Land degradation has reduced the productivity of 23% of the global land surface, with global agriculture crop production increasing by 300% since the 1970s. The IPCC’s Special Report on Land (SRCCL) estimated that soil erosion from agricultural fields is 10 to 20 times (no tillage) to more than 100 times (conventional tillage) higher than the soil formation rate. Scientists have warned 24 billion tons of fertile soil are lost each year, largely due to unsustainable agriculture practices. If this trend continues, 95% of the Earth’s land areas could become degraded by 2050. Studies that separate out the effects of climate change alone have shown that yields of some crops (like maize and wheat) in many lower-latitude regions have declined. Increasing temperatures will continue to impact food production, estimating up to a 29% increase in the cost of cereals by 2050, depending on the amount of warming. These price increases will impact consumers globally, with low-income consumers at particular risk of malnutrition.

As a result of climate change and land degradation, one million animal and plant species are now threatened with extinction, many within decades – more than at any time in human history, according to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES). Today, only 15% of land and just under 8% of the ocean are under some form of ecosystem protection. IPBES concludes that the loss of ecosystems has made human communities more vulnerable to climate impacts. Continued overlapping climate change with non-climatic pressures like land-use change, deforestation, infrastructure development, resource extraction, overfishing and pollution will continue to threaten ecosystems and people’s livelihoods. Climate change currently affects at least 10,967 species on the International Union for Conservation of Nature (IUCN)’s Red List of Threatened Species. The Bramble Cay melomys (a genus of rodents) is the first mammal reported to have gone extinct as a direct result of climate change. 

Since AR5, more research has shown that the most marginalised, both economically and socially, are hit first and hardest by climate impacts, both in the global south and north. Climate change could cause GDP losses of 64% in the world’s most vulnerable countries, and the impacts of climate change may further exacerbate marginalisation and injustices. On a global scale, new research shows the vulnerabilities of the urban poor. According to one study, if greenhouse gases continue on their current trajectory, 215 million urban poor around the world will be exposed to average summer temperatures of over 35°C – an eightfold rise from today – which will increase the risks of heat mortality. 

Worryingly, scientists say that ‘compound extremes’ will become more common in a warming world, and that these events are likely to cause more suffering than we would see from individual events alone. Compound extremes arise when multiple climate hazards (such as extreme temperature and precipitation) occur simultaneously in the same place, affect multiple regions at the same time, or occur in a sequence (commonly referred to as cascading events). Climate hazards can be also compounded by other human impacts, such as pollution, habitat fragmentation and environmental degradation. For example, the rise in concurrent drought and heatwave events was especially observed in southern and central Africa over the last decade, and the impact of these compound events can last longer as a result of climate change.3The researchers model the difference between the period 1983-1999 and 200-2016. An initial rise in temperature can trigger a cascade of climate impacts. For example, sustained higher temperatures that decrease in soil moisture will suppress plant growth, which in turn suppresses rainfall, leading to more drought in what is known as an escalating ‘feedback loop’. In recent years in California, a combination of droughts and heatwaves have led to wildfires and in some cases, been followed by heavy rain and landslides.

Academic literature exploring the complex connections between climate change, extreme weather, migration and conflict has also expanded. The civil war in the Darfur region of Sudan is an example of a conflict researchers think was made worse, or even triggered, by a changing climate. In 1983-84, a drought fuelled a famine that killed over 100,000 people and led to mass ecological migration, mainly towards southern Darfur. As people migrated into different regions, ethnic polarisation disrupted regional harmony and triggered conflict. Migration is a complex topic, which cannot be simply attributed to one cause. However, researchers have focused on the increased risks of migration that small island states and coastal cities will face due to climate change. One estimate suggests that between 17 million and 72 million people may have to relocate from coastal settlements if sea levels rise somewhere between 0.3 and 1.7 metres.

4. Adaptation is vital, but far more is needed

Since AR5, there has been an increase in adaptation activities, including by governments, businesses and civil society, with most in response to extreme weather events. For example, an EU Commission-funded project by the WHO and the London School of Tropical Medicine charts the need to shift from disaster response to risk management for flooding in Europe, including better warning systems and health protection measures. However, though adaptation options are available across all sectors and can reduce the risks of climate change, adaptation has so far been dominated by small changes to current systems, rather than the transformative changes that experts say we needed. 

Adaptation and biodiversity are closely linked and implementing nature-based solutions (NbS) can create co-benefits for adaptation to climate change, for nature and its contribution to people. However, trade-offs can arise if climate mitigation policy encourages NbS with low biodiversity value, such as afforestation with non-native monocultures. In 2021, the IPBES and IPCC found that the “mutual reinforcing of climate change and biodiversity loss means that satisfactorily resolving either issue requires consideration of the other.” One of the best documented co-benefits of adaptation is the positive impact on population health, both physical and mental, when investing in nature-based and green infrastructure in cities. Similarly, scientists found that global mangroves are responsible for storing a stock of 6 billion tonnes of carbon, and that restoring mangroves protects against flooding and is two-to five-times cheaper than conventional engineered sea level rise protection. As a result, several nations, including Indonesia, India, Bangladesh and Sri Lanka, are investing in mangrove restoration for adaptation. 

Scientists have made significant progress in estimating the costs of climate change impacts, finding that adaptation can be cost effective if it is done in a timely manner. The upcoming IPCC report is likely to reflect that, although numbers still vary widely, the costs of impacts are now thought to be much higher than AR5 suggested. Yet despite the benefits to adaptation (and the threat of tipping points), currently most climate finance is directed to mitigation and there remains a large finance gap (public and private) between the amount of money flowing to developing countries and the amount needed. Estimated adaptation costs in developing countries are five to 10 times greater than current public adaptation finance, and the adaptation finance deficit grows at higher levels of warming. It is expected that the WGII report will discuss some of the fundamental barriers to access private finance for adaptation, such as the fact that private investment tends to gravitate to opportunities where revenues are highest and risks are lowest, meaning it is unlikely to target the most vulnerable developing nations or non-market sectors, where adaptation is needed the most. 

Although adaptation is a necessary solution to the climate impacts we are already experiencing, previous IPCC reports have also emphasised the limitations of adaptation. The Paris Agreement refers to impacts of climate change that have not been, or cannot be, avoided through mitigation and adaptation and that are considered the third pillar of climate action. The AR5 WGII report discussed the losses and damages associated with ‘hard’ (biophysical, institutional, financial, social and cultural) and ‘soft’ (technological and socioeconomic) limits to adaptation. For example, there are hard physical limits to how much Small Island Developing States (SIDS) can adapt to rising sea levels, and their vulnerability to climate change is likely to lead to forced migration from these countries. For species and ecosystems, there may be hard limits to the physiological capacity of individual organisms to adapt to changes in the climate. Often, socioeconomic barriers stop the poorest and most vulnerable people from being able to adapt. The SR1.5 built upon these definitions and assessed the soft and hard adaptation barriers for impacts under a 1.5°C and 2°C  of global warming, and we expect the issue of equity and justice in responding L&D to be the focus of the upcoming AR6 report. 

5. The costs of inaction far exceed those of mitigation and adaptation

The need for, and success of, adaptation is closely linked to the level of mitigation we achieve. The AR5 WGII report highlighted that the overall risks of impacts can be reduced by limiting the rate and magnitude of climate change, which will in turn reduce the scale of adaptation required. Studies have found per capita GDP would be 5% higher by 2100 if temperatures are stabilised at 1.5°C above pre-industrial temperatures rather than 2°C and limiting global warming to 2°C instead of 4°C could save USD 17.5 trillion a year globally by 2100. Conversely, the cost of failing to limit warming to 1.5°C rises dramatically – from USD 1.3 trillion a year of inaction in 2010 to over USD 5 trillion a year in 2020.

Adaptation is already necessary and will be harder or impossible with greater warming. The economic damage that climate change and extreme weather events cause is already significant: The cost of climate impacts in Central America in 2010 ranged from 2.9% of GDP for Guatemala to 7.7% for Belize; Tropical Cyclone Pam caused loss and damage to Vanuatu’s agricultural sector estimated at 64.1% of GDP in 2015; while Hurricane Maria caused loss and damage totalling 224% of Dominica’s GDP in 2016. Nearly half the global population is already living in potential water-scarce areas at least one month a year and this could increase to some 4.8 billion – 5.7 billion by 2050. 

The WGII report discusses how a delay in mitigation and adaptation actions will threaten sustainable development, as climate change impacts and responses are closely linked to social well-being, economic prosperity and environmental protection. Human-induced climate change may lead to a decline in agricultural yields, water scarcity, food insecurities, reduced livelihoods and displacement of communities, and the impacts will not be felt equally by all. Climate change is projected to increase the number of people experiencing extreme poverty from 32 million to 132 million by 2030. The gap between the economic output of the world’s richest and poorest countries is 25% larger today than it would have been without global warming. If climate change is not addressed through global reduction in emissions, global income inequality is predicted to widen as a result of decreases in global incomes. 

6. Further reading: Explainers and scientific papers 

The list below summarises some important commentaries and scientific papers, focusing on those published in the last two years. It is not a comprehensive review of the scientific literature. To explore the specific topics further, please refer to the reference lists within these publications. 

1. Climate change is severely impacting people and the ecosystems we depend on

Explainers and reports 

Selected academic research studies and reviews  

2. Extreme weather is causing unprecedented damage – and it will get worse. 

Explainers and reports 

Selected academic research studies and reviews  

3. Impacts are getting worse, hitting marginalised people the hardest

Explainers and reports 

Selected academic research studies and reviews  

4. Adaptation is vital, but far more is needed

Explainers and reports 

Selected academic research studies and reviews 

5. The costs of inaction far exceed those of mitigation and adaptation

Explainers and reports 

Selected academic research studies and reviews 

  • 1
    WGIII in March will be the last of three separate Working Group reports published in the AR6 cycle and then a Synthesis Report will be published later in 2022. ‘The Physical Science Basis’ which detailed the current state of the climate was published on 9 August 2021 and the second report ‘impacts, adaptation and vulnerability’ is due February 2022.
  • 2
    For a detailed breakdown of the IPCC’s regional findings please take a look at their individual factsheets, published August 2021.
  • 3
    The researchers model the difference between the period 1983-1999 and 200-2016.

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