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Climate investments in mitigation and adaptation are falling short, with the annual shortfall expected to hit a staggering USD 2.7 tn by 2030, a Moody’s report found. Despite clean energy galvanizing a projected USD 2 tn investment in 2024, the USD 2.7 tn shortfall includes a USD 2.4 tn gap in mitigation investments and another USD 330 bn gap in adaptation investments — which receives less funding due its having less defined commercial potential, the report says. The total shortfall is equivalent to 1.8% of global GDP, according to Moody’s.
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How are the Middle East and Africa faring? To hit net zero by 2050, mitigation spending in the Middle East needs to grow 622% in the next five years to USD 195 bn, and adaptation investments must increase ninefold from 2022 figures to USD 27 bn in 20230. Africa would also need major investment increases to close the estimated funding gaps of USD 131 bn and USD 22 bn for mitigation and adaptation, respectively.
The shocks to GDP would be significant under the current trajectory: Climate risks could cause the world to lose 14% of its GDP, impacting emerging and advanced economies alike, although Sub-Saharan Africa and Asia would be hit hardest with potential economic losses exceeding 30% of GDP by 2050 under current policies and planned clean energy investments.
Net-zero could soften the blows, but the full economic payoff may not be realized for a decade or more: Although climate-induced GDP losses are inevitable, a net-zero trajectory could help countries halve their losses. In this scenario, nations would still see GDP losses in the next decade, but the world would reach a breaking point by the mid-2030s, reversing losses into growth and saving 2% of annual GDP by 2050. This rebound would largely be due to reduced climate-related losses, such as extreme weather events and crop failures, and increased productivity. Still, the world’s economy would shrink by 7.1%.
The benefits of net-zero will not be evenly distributed: Asia’s emerging markets, with their resource wealth and technological readiness, are poised to benefit from the transition, but high climate risk exposure could still lead to significant economic losses. Africa, on the other hand, could benefit from investments in clean technologies. However, factors like commodity price volatility, limited trade integration, and financing challenges could offset these gains, and the distribution of these impacts may vary across countries and sectors.
Our region’s GDP, however, would be hit hardest in the net-zero scenario. The Middle East would be the only region in which GDP losses from net-zero outweigh losses under current climate projections, the report says.
The data is clear, but emerging countries face difficult choices: Emerging countries — where climate investment gaps are usually the highest — are already burdened with high levels of debt and face competing spending priorities on essential sectors and services, such as health, education, and infrastructure. While a swift transition to a net zero can significantly mitigate future losses, climate mitigation spending would further strain the budgets of emerging markets if governments bear the total cost of the policies. Countries like South Africa, India, and Brazil would be hardly hit with elevated public debt levels.
The private sector’s role will be key in net zero: Public debt by 2050 will be higher regardless of who funds the transition. However, even a modest increase in private-sector financing can significantly reduce the fiscal impact on governments. For instance, in South Africa, increased private sector participation could reduce the government’s debt burden by over 20 percentage points of GDP.
