The Costs of Climate Change: Reflections from COP 29

In 2025, this project won the UMass Amherst Undergraduate Sustainability Research Award. Find more about this award here (opens external tab).

Introduction 

Among the many regressive climate policies President Trump has implemented, the so-called Department of Government Efficiency’s elimination of USAID creates a massive gap for climate financing for populations in desperate need. The USAID raised $16.7 billion in climate financing in 2023 through public and private sources, and since public climate funding acts as a catalyst for private investment, this cut will impact a large portion of America’s financing for communities facing immediate disaster. 

In this paper, I will argue that our financialized system of addressing climate fails to empower populations in greatest need and fails to address economic, infrastructural, and ecological inequities from colonialism. I will explore how institutions like the carbon market, leveraged climate finance, and home insurance affect millions of people and how economic or colonial status determines one’s exposure to climate related risk and damage. 

Across the global south, climate damage and natural disasters threaten communities like the Wayuu People in Northern Columbia, where a combination of rapid droughts and floods and neoliberal economic policies have forced many to migrate away from their traditional homes. The incomprehensible human suffering in the global south, especially in indigenous communities, demands that we reexamine how our current instruments for climate finance function and perpetuate inequality. 

Figure 1

The 2024 United Nations Climate Conference ended on November 22nd in Baku, Azerbaijan with a promise for upper income countries to send $300 billion in climate response funds a year to low-income countries. According to projections from a November 4th UN trade and development committee report, developing countries would require $1.1 trillion in climate financing by 2025. Even though this new $300 billion figure marks an increase from the 100 billion dollars target set in 2009, many poorer countries condemned the measure as inadequate to address the crisis of climate change. Marshall Islands Climate Envoy Tina Stege said, “We are leaving with a small portion of the funding climate-vulnerable countries urgently need.” 

During the summit, Donald Trump’s inauguration and immediate withdrawal from the Paris Agreement cast a shadow over the fundraising goals of COP29 because other high income countries reasonably expected Trump’s administration to refuse any payments towards the UN’s goal. Recently, Top US Climate Scientists have missed UN panels, raising concerns of how Trump’s mass firings will influence US presence in fighting climate change. 

Figure 1.2: Climate finance contributions by country: climatefundsupdate.org 

https://climatefundsupdate.org/data-dashboard/#1541245664327-538690dc-b9a8

During COP 29, wealthy nations sought to channel funds from both public and private sources to achieve $300 billion in annual climate funding by 2035, but the aftermath of the conference leaves tremendous uncertainty of whether low income countries will receive necessary funding to fight off the worst impacts of climate change in the short and medium terms. Such a precarious arrangement necessitates thorough evaluation of how our current system of climate financing distributes cost and risk. 

Carbon offsets are a major new part of climate finance and one which was relevant to the decisions from COP29. Carbon credits are bought and sold by countries, companies, and individuals, where the party releasing emissions pays another party for reducing carbon. Article 6 of the Paris Agreement formally recognizes carbon markets under the UN and provides guidelines for how governments might regulate them. Crucially, these agreements don’t provide concrete oversight or regulation for how these transactions are conducted, leaving corporations unaccountable for the truthfulness of their sustainability claims.

Offset projects are measured by how many tonnes of carbon are either removed or prevented from entering the atmosphere. Common projects are renewable energy, waste management, and forest reducing emissions from deforestation and forest degradation (REDD+). The latter, forest conservation initiatives, are the most prevalent form of offset project, and they are also the hardest to measure. It is impossible to determine the difference in forest cover because of a particular offset purchase and initiative (West et al. 1), and unlike other projects, forests will repopulate and consume carbon dioxide without outside intervention. It is for this reason that (REDD+) deserves particular attention to understand the dynamics and effectiveness of the carbon offset market as a whole.

Corporate claims regarding climate neutrality are often intentionally vague and avoid long term commitments for sustainability. When corporations use carbon offsets to claim neutrality, they are marking their current products as carbon neutral, even though projects such as REDD+ take hundreds of years to absorb the carbon which firms currently emit (Trowloon et al., Hanieh). There is a substantial concern that carbon credit brokers could overrepresent the impact of emission reduction projects. Thalis et al. found out of 26 REDD+ they examined, only 8 had substantially reduced deforestation compared to control groups. Lack of oversight creates an incentive structure where the efficient sale of carbon credits often corrupts the integrity of projects’ emissions reduction.

Carbon Brief's compilation found that 70 percent of REDD+ initiatives had negative impacts on indigenous communities, with the largest portion in Latin America. As was discussed in COP 29, indigenous communities play a crucial role in environmental stewardship. 45% of the remaining Amazon is composed of indigenous territory, and all across the global south, poorly regulated REDD+ projects threaten the guardianship indigenous people have practiced. A project named CIMA initiated a REDD+ project in the Peruvian Amazon where members of the Kichwa tribe traditionally hunted. After its establishment, park authorities disrupted Kichwa villages, agriculture, and hunting, and the AP found in 2023 that the CIMA sold 28 million carbon credits sold to companies like Shell and TotalEnergies based on an overestimation of their net impact on deforestation; average canopy loss more than doubled from the years before the project’s foundation. Aside from falling short of carbon reduction goals, such projects perpetuate colonial power dynamics because they derive value from indigenous lands and assume control over their maintenance.

Countries and state owned enterprises are also able to purchase offsets, and they can use them to reduce their emissions to align with goals they have set. For this reason, many gulf states have incorporated offsetting into their short emission reduction plans, and the UAE has announced plans to invest $450 million in African based offsets. In 2022, Ahmed Dalmook Al Maktoum from the ruling family of Dubai announced the launch of Blue Carbon with the goal of investment in natural emissions reduction. 

In 2023, Blue Carbon secured a deal with Zimbabwe to lease 10% of its total land for carbon credits. This followed a recent amendment to the country’s carbon law which permitted projects where developers keep up to 70% of profits. Blue Carbon has several memoranda for similar deals in countries including Tanzania, Zambia, and Kenya for a total of 60 million acres under management. While the distribution of sales revenue between the projects and the host countries varies from case to case, countries with high climate vulnerability are often forced to accept small fractions of revenue in order to remain competitive. Without international policy to govern these projects, poorer countries lack negotiating leverage to draw further value from developments on their land. On a local level, these new projects jeopardize indigenous rights without meaningful evidence that they reduce emissions at the same level of other mitigation techniques. Blue Carbon’s association with the fossil fuel industry is problematic because the power imbalance between the developer and host country allows for it and similar initiatives to retain a large portion of the offset revenue, effectively discounting the offset for the buyer. 

The financialization of carbon reduction through carbon credits allows for companies to market abstract and often inefficacious emissions reductions without regulation. The model under which REDD+ initiatives operate allows Western Multinationals and the fossil fuel industry to extend financial control over crucial natural resources in regions which have historically generated much of their wealth. Under such a model, the difference between deforestation and climate offsetting is only between cost of goods sold and marketing expense. If enough firms follow Shell in shifting their marketing strategy away from climate neutrality, how certainly will the Peruvian Amazon gracefully return to the care of the Kichwa? If the US pulls out of the Paris Agreement once again, how likely are other large emitters like the Gulf states to scale down their already dubious offset plans? The existing system for carbon offsets provides little security for the protection of earth’s most vital sources of climate mitigation and insufficient incentive to develop the needed amount of additional climate mitigation. With the majority of all human-caused carbon emissions released in the last 30 years, the potential of institutions like the carbon market ought to be viewed in light of the historical beneficiaries and victims of neoliberal development economics. It is one of many market based “solutions” which fail to distribute resources for the short and medium term impacts of the climate crisis, leaving global south populations which already struggled under global wealth inequality and the legacy of imperialism vulnerable to rapid climate change. In this way, carbon offset projects can actually exert neocolonial control over the areas they are purporting to help by exporting control of land and natural resources to wealthy nations and multinationals, often at the expense of indigenous rights. 

Direct private sector investment has been cited as a necessary component of climate financing, and the UN’s goal of 1.3 trillion in climate finance is contingent on a massive shift in that direction. The example of rainforest carbon offsets demonstrates the need for examining climate financing beyond the dollar value, and in particular, the difference between Climate Mitigation and Adaptation is of particular importance in understanding the allocation of climate funding. Climate mitigation is the practice of reducing further carbon emission into the atmosphere, including projects such as renewable energy and carbon sequestration. Climate adaptation seeks to equip communities with the infrastructure needed to resist the physical impacts of environmental degradation. Developing countries are the primary recipients of adaptation, and they don’t receive enough investment to cover their approximate financial need of $387 billion annually. Only $63 billion, or five percent of global climate financing goes into adaptation, and this 11 digit deficit underlies a perverse incentive structure for distributing climate funds. Since enterprises like green tech and sustainable energy are perceived as safer and more profitable than projects to help communities in dire need, climate adaptation often goes chronically underfunded. 

Figure 3 Source: https://climatefundsupdate.org/data-dashboard/

One central problem of adaptation finance is that the material and climate conditions which destabilize communities also tend to deter investment. Despite their generally lower need, urban areas are far more likely to receive adaptation finance than rural areas because they have more influence to attract investors (Venner et al. 51). Geographic biases of this kind contribute to additional barriers for vulnerable communities to receive what little adaptation funding is available. 

Adaptation in particular is often financed by debt, which creates a sharp financial burden for those countries and governments already struggling to provide for their citizenry. In 2016-2020, 62% of adaptation was financed through debt, and Sub-Saharan Africa’s debt totaled 700 billion dollars in 2020 (Centre for Science and Environment, 8), paying 18 times more in debt repayments than received from climate finance. Only ten percent of total funding in that period were grants. In this way, debt based climate finance can actually impoverish the countries it intends to help, and there are no specific clarifications in the Paris agreement for the form climate financing should take (Venner, 49). Much of the US’s contributions to climate financing is debt issued at market value (Center for Science and the environment, 3), and even though they have contributed only 14% of Africa’s total climate funding, Western Financial institutions hold most of the outstanding debt, three times more than China. The crisis of funding for adaptation finance reveals how global wealth inequality and colonial power imbalances continue. Affected countries lack all negotiating leverage, and private investors are allowed to prioritize their own financial risk over the risk of immediate environmental and communal destruction. 

Under this dynamic, Western investors can generate returns from climate vulnerability without incurring opportunity cost and without any liability for the financial and material outcomes of the countries they loan to. Even firms like Altérra, which holds the title of the largest climate investment fund and which raised more than a third of climate finance in COP28, are not wholly devoted to sustainable investment. Owned by a member of the ruling Nahyan family of the UAE, Altérra is partnered with BlackRock and invested in its Global Infrastructure Fund IV, which recently acquired a portion of the 475 km Portland Natural Gas Pipeline. It is in this way that asset managers are truly neutral on the issue of carbon and adaptation, and they are unwilling to incur additional risk purely to support the most vulnerable populations around the world. The fossil fuel industry has no financial liability for the impact of their operations on stakeholders around the world and outsources the real cost of their actions. 

For this reason, the majority of climate finance historically has come from the public sector and multilateral development institutions. For example, in 2022, the world bank provided 56 percent of all climate funds, $31 billion in total (Center for Science and the Environment, 4). It provides loans below commercial rates to middle income countries and acts as a lender of last resort to provide interest free loans to the poorest countries. In Bangladesh, the World Bank supported building storm shelters which also function as schools, and such systems for disaster management have helped soften the impact of cyclones. 

While these reduced interest rates can limit the risk of debt crises, the world bank is able to offer bonds of this kind because of subsidy and investment by its member states. The US holds the largest share of 16.64% with $52.9 billion in callable capital. For this reason, the below-market bonds that the World Bank offers are a function of taxpayer money from member states. Because asset managers and fossil fuel conglomerates refuse to sacrifice profits to pay the real costs of climate change, a portion of that cost is socialized in high-income countries through donor contributions. As we have seen with the recent elimination of USAID, there is no enforcement mechanism to ensure the flow of adaptation finance where it is needed most. The tragedy of COP29 and existing climate finance infrastructure lies not only in the shameful failure of Western countries to meet the occasion, but the structural injustice that nations and corporations responsible for emissions have no real stake or responsibility for the material suffering they have caused around the world. 

Figure 4

Climate Risk and Insurance

Western Nations’ hesitancy to commit to climate contributions would seem to suggest that people in high-income countries have yet to experience quality of life changes that would spur urgency. Even though Americans aren’t generally driven to relocate because of the material impacts of climate change, accelerating natural disasters are bringing Americans into closer contact with the impacts of climate change. According to a report from Insuring Our Future, at least 30% of weather-related insurance claims filed in the past 20 years were caused by climate change. These claims resulted in payments over $600 billion dollars, bringing climate related losses up to $10.6 billion for top insurance companies. This rapidly increasing cost is fast approaching the total direct premiums that the same firms received from fossil fuel. The insurance industry has continued to underwrite fossil fuel investments, and even though they contribute financially to worsening the environment, they use strategies such as premium hikes, denying coverage, and reinsurance to mitigate their losses. As insurance companies come to terms with the increased risk of climate-fueled disasters, average American Citizens will inherit a major chunk of the cost.