Ten years after the Paris Agreement, the climate crisis is accelerating. The world temporarily passed the 1.5°C temperature threshold for the first time in 2024, and scientists are already warning that we may have reached the first planetary tipping point. The shift to low greenhouse gas emissions and climate resilient economies is therefore more urgent than ever. 

Key to this is the decade-old concept of a Just Transition - a shift to a greener, cleaner economy done in a fair and inclusive way that ensures workers, communities, and countries aren’t left behind. Yet, despite multiple initiatives both within and beyond the United Nations Framework Convention on Climate Change (UNFCCC), the implementation of a truly just transition at the scale and speed needed is simply not happening.

Two key reasons for this are the overwhelming debt that many countries in the Global South are facing and the severe shortfall in public climate finance. The fact is that without urgent action on these issues, this month’s COP30 will not deliver what is needed to ensure a Just Transition. 

The debt crisis - a major obstacle 

Climate action, including policies and measures to support a just transition, requires countries to have the necessary fiscal and policy space to design and implement their own climate policies. However, most developing countries lack this due to structural issues, such as the fact that many are constrained by increasing levels of public debt. This growing debt crisis is fueling a vicious circle where countries are forced to prioritise debt servicing over critical public expenditures, such as health, education and climate action. 

An equally serious concern is that, to repay their growing debts and meet the demands of creditors and financial markets, many countries are being forced to continue exploiting their natural resources - including fossil fuels. This directly undermines a global just transition, which depends on phasing out existing carbon-intensive investments and avoiding new ones in harmful sectors.

At the same time, the need to access hard currencies - especially U.S. dollars - to service external debt is pushing countries to focus on so-called “green” investments such as green hydrogen or the extraction of minerals and rare earths that are critical to the energy transition in the Global North. Although these projects are often promoted by international financial institutions and Global North development agencies as part of the climate transition, they often run counter to the principles of justice and equity that a truly just transition requires.

Furthermore, 70 per cent of climate finance provided by wealthy countries in 2022 was delivered as loans, the majority of which were non-concessional. The most vulnerable are subject to even more debt entrapment, with 50 per cent of climate finance being lent to small island development states (SIDs) and least developed countries (LDCs). 

“Not enough money”

Another major reason climate action is falling behind is that public funding is nowhere near the level developing countries need. To avoid the worst impacts of the climate crisis, it is estimated that the world needs to invest at least US$6.3 trillion every year from 2024 to 2030 in climate finance. A major part of this funding should support a just transition. 

However, this figure is likely a significant underestimate. Many assessments overlook data gaps and fail to include the costs of just transition policies. For example, just transition programs to support the phaseout of fossil fuels alone could require at least US$420 billion per year. 

Key areas of just transition approaches, such as robust consultation mechanisms and institutions; social protection; reskilling and upskilling workers; economic diversification and socio-ecological restoration, require public, non-debt inducing finance. However, instead of honoring their obligations to provide public climate finance to developing countries, wealthy countries lean towards a private finance-first model that is failing to deliver both in terms of quantity and quality of climate finance. In fact, data shows that it is attracting 4-7 times LESS private finance than it promises to finance the energy transition, leaving frontline communities behind.

COP30 could provide a solution 

COP30 is an opportunity to tackle some of the issues constraining the fiscal and policy space of countries in the Global South, and preventing them from implementing a Just Transition. 

First, this COP is an opportunity to establish the Belém Action Mechanism (BAM). This would initiate a process to use the UNFCCC’s convening power to bring key actors around the table to discuss how unsustainable debt levels are hindering the Just Transition, in particular in the Global South, and identify potential solutions. 

Second, COP30 should secure and scale-up grant-based public finance to meet the needs of developing countries, instead of indiscriminately pushing for private sector-led solutions as an alternative to falling climate and aid budgets. 

Finally, many of the obstacles in the way of a Just Transition that will be on the table at COP30 are rooted in the current debt architecture. This COP should start to send strong signals to other processes and actors by supporting the call for a UN Debt Convention, moving from a creditor-led system to a more equitable and sustainable regime where developing countries are not systematically penalised. COP30 should also highlight the need for debt cancellation as an important tool to free up capacity in developing countries. 

Without these key actions, this COP will be remembered as a missed opportunity to drive a just transition, keep 1.5°C alive, and build a climate-resilient future.