Climate finance has taken center stage at the COP28 summit in Dubai. Governments, development banks, and companies have pledged to mobilize climate financing, reported Reuters. World Bank’s president, Ajay Banga, announced that the development bank will ramp up its financing for climate-related projects to 45% by 2025. "We're putting our ambition in overdrive and putting to work more than $40 billion per year -- around $9 billion more than the original target," Banga said. These resources are meant to go toward both climate mitigation and adaptation efforts, and the World Bank will also be pausing debt repayment in the aftermath of disasters.

Meanwhile, UAE’s banking system announced the biggest pledge of all, to the tune of nearly $270 billion by 2030. In a joint statement, multilateral development banks noted that “The window of opportunity to secure a liveable and sustainable future for all is rapidly closing,” adding that addressing the interlinked planetary crises of climate, nature, and pollution would require everyone to scale efforts with urgency. While the statement spoke of a just transition and of having raised $61 billion for low and middle income countries in 2022, a glaring gap was noticed. There was no mention of fossil fuels.

While the $61 billion raised last year may have grown compared to previous years, experts have noted that this is only a fraction of what is required to fund developing countries’ just transition. The host of the climate summit this year, the UAE, announced that it would invest $30 billion in a new climate investment venture named ALTÉRRA, with the aim to eventually mobilize $250 billion by 2030.

The Climate Policy Initiative released a report on climate finance in November, in which it noted that climate financing is on the rise, reaching $1.3 trillion in 2021-2022. Most of this is going into mitigation projects in the energy and transport sector; the agricultural sector which is the next largest source of emissions receives comparatively little. The flow of funds to low- and middle-income countries also falls short, the report said. “Less than 3% of the global total (USD 30 billion) went to or within least developed countries (LDCs), while 15% went to or within EMDEs excluding China. The ten countries most affected by climate change between 2000 and 2019 received just USD 23 billion; 4 less than 2% of total climate finance.”

When it comes to climate action, climate financing has gained momentum over the years, owing to the fact that developed countries have contributed disproportionately more to rising emissions than developing countries. Low- to middle-income countries are also the ones most vulnerable to the growing impacts of climate change and lack the resources to effectively transition to a clean economy. This is where funding from governments, development banks, and the private sector comes in. “It’s incredibly important that the capital flows increase since we really can’t reduce emissions in developing countries because they are not very polluting. And they can’t continue to grow their economies and raise prosperity for their citizens without foreign investment,” said Bruce Usher, a professor at the Columbia Business School and Climate School.

“Our global climate finance is a broken train: drastically flawed and putting us at risk of reaching a catastrophic destination. There are too many loans indebting poor countries that are already struggling to cope with climatic shocks. There is too much dishonest and shady reporting. The result is the most vulnerable countries remaining ill-prepared to face the wrath of the climate crisis,” said Nafkote Dabi, Oxfam International Climate Policy Lead in 2022.

At the recent talks, Barbados Prime Minister Mia Mottley, stated that countries must go beyond climate pledges and the push for private investors in order to boost climate financing. One way to do this, she said, is taxation. A 0.1% tax on financial services could raise $420 billion, she highlighted at a news conference at COP28, according to France24. Similarly, if a 5% tax had been levied on global oil and gas profits last year, it could have raised $200 billion.

Climate finance is an important part of achieving climate justice. “Climate justice also means, at its most basic level, dealing with the wild overconsumption of the rich and the underconsumption of the poor. Survival demands a correction because climate change keeps showing us that it’s inequality and injustice that kills,” Naomi Klein told The Guardian.

What that may require is a more radical approach.

Green growth is the predominant principle guiding climate action in much of the world today. But critics say it doesn’t account for addressing the very nature of the economic system that creates structural inequalities – inequalities that both amplify and are amplified by the effects of climate change. In our current capitalist system, solutions for the climate crisis continue to hinge on technological fixes, innovation, and projects such as carbon offsets and carbon markets, which are not the radical change the world needs but only attempts at maneuvering climate action as per a business-as-usual scenario. Reports say that these measures also don’t work in their aim to reduce greenhouse gas emissions.

Critiques against climate capitalism highlight the limitations of relying solely on market-based approaches to resolve the climate crisis. The urgent call to bridge the climate finance gap, estimated at over $2.4 trillion annually by 2030, necessitates a broader systemic shift. While the World Bank emphasizes leveraging private finance and fostering sustainable infrastructure through events like the Carbon Action Forum and discussions on Climate-Smart Public-Private Partnerships (PPPs), the focus remains centered on mobilizing capital without fundamentally addressing the systemic flaws of unchecked capitalism. A more comprehensive approach, encompassing reform in financial architectures and aligning global financial flows with climate objectives, is imperative for true, sustainable change.

With growth and profit being the foundations upon which global economies have been built, the systems in place themselves may drive emissions beyond planetary boundaries and ecological collapse. Some say the principles of degrowth, which advocate for a different approach entirely, must be embraced as one way to address this. “Wealthy economies should abandon growth of gross domestic product (GDP) as a goal, scale down destructive and unnecessary forms of production to reduce energy and material use, and focus economic activity around securing human needs and well-being,” wrote researchers, including Jason Hickel – one of the main advocates of the degrowth theory.

The tussle around climate change economics makes it a contentious topic. The focus on climate finance at COP28 and pledges to the Loss and Damage Fund will also need to be followed by concerted action to not only meet these pledges but also account for the disparities and inequalities created by the current economic system.

Understanding that economic systems deeply intertwine with climate actions, COP28's emphasis on climate finance should not exist in isolation. It should be complemented by broader systemic changes that rethink economic paradigms, fostering a transition towards sustainability, resilience, and equity. The World Bank's fervent push for climate-oriented investments marks a crucial step, but it's just the tip of the iceberg in confronting the multifaceted challenges posed by the climate crisis.