Addressing climate policy quantification gaps

First comprehensive warming allocation framework shows why international climate support must complement domestic action. A new study develops a quantitative framework for allocating global warming contributions under the Paris Agreement, addressing a critical gap in how non-CO₂ emissions are considered in climate equity assessments. The researchers establish three distinct interpretations of fairness principles drawn from international environmental law, incorporating equality, polluter-pays, ability-to-pay, and beneficiary-pays principles. The analysis shows that 84-90 countries, including all major developed nations, had already exhausted their fair shares of the 1.5°C warming budget by 2021 across all allocation approaches. This finding holds even when considering alternative starting years for historical responsibilities and different socioeconomic indicators. The implications are profound for global climate policy. The research demonstrates that even these countries' most ambitious domestic emission reductions would be insufficient to meet their fair share. This suggests that developed nations must pursue aggressive domestic reductions and substantially support mitigation efforts in developing countries through technology transfer, capacity building, and climate finance. Kudos to the authors Mingyu Li, Setu Pelz, Robin Lamboll, Can Wang, and Joeri Rogelj.

𝗠𝗼𝘀𝘁 𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝗺𝗼𝗱𝗲𝗹𝘀 𝘂𝘀𝗲𝗱 𝗶𝗻 𝗳𝗶𝘀𝗰𝗮𝗹 𝗽𝗼𝗹𝗶𝗰𝘆𝗺𝗮𝗸𝗶𝗻𝗴 𝘀𝘁𝗶𝗹𝗹 𝘂𝗻𝗱𝗲𝗿𝗲𝘀𝘁𝗶𝗺𝗮𝘁𝗲 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗱𝗮𝗺𝗮𝗴𝗲𝘀 - 𝗯𝘆 𝗮 𝗳𝗮𝗰𝘁𝗼𝗿 𝗼𝗳 3 𝗼𝗿 𝗺𝗼𝗿𝗲 or ignore them all-together. This shapes decisions on public investment, debt sustainability, and our collective ability to transition in time. I recently looked into how deep the modelling gap runs: 🔹 Global income losses from climate change 𝗺𝗮𝘆 𝗿𝗲𝗮𝗰𝗵 19% 𝗯𝘆 2050, with a likely range of 11–29%, according to the latest empirical studies. Yet widely used models like 𝗗𝗜𝗖𝗘-2024 𝘀𝘁𝗶𝗹𝗹 𝗽𝗿𝗼𝗷𝗲𝗰𝘁 𝗼𝗻𝗹𝘆 3.1% output loss at 3°C warming and 7% at 4.5°C - a dramatic underestimation. 🔹 $2.86 trillion in historical climate damages (2000–2019) are recorded empirically, versus just $0.8 trillion in DICE estimates - 𝗮 𝗳𝗮𝗰𝘁𝗼𝗿 𝗼𝗳 3.5 𝗹𝗼𝘄𝗲𝗿. 🔹 𝗧𝗵𝗲 𝗳𝗶𝘀𝗰𝗮𝗹 𝗶𝗺𝗽𝗹𝗶𝗰𝗮𝘁𝗶𝗼𝗻𝘀 𝗮𝗿𝗲 𝗲𝗾𝘂𝗮𝗹𝗹𝘆 𝘂𝗻𝗱𝗲𝗿-𝗮𝗰𝗸𝗻𝗼𝘄𝗹𝗲𝗱𝗴𝗲𝗱. The UK Office for Budget Responsibility projects that delaying decarbonisation could increase the national debt-to-GDP ratio by 10–100 percentage points by 2050. Yet mainstream Debt Sustainability Assessments (𝗗𝗦𝗔𝘀) 𝗶𝗻 𝘁𝗵𝗲 𝗘𝗨 𝗶𝗴𝗻𝗼𝗿𝗲 𝘀𝘂𝗰𝗵 𝗿𝗶𝘀𝗸𝘀 𝗲𝗻𝘁𝗶𝗿𝗲𝗹𝘆. 🔹 Perhaps most concerning: 𝗮𝗰𝘁𝗶𝗻𝗴 𝗻𝗼𝘄 𝗶𝘀 𝗮𝗹𝗺𝗼𝘀𝘁 50% 𝗰𝗵𝗲𝗮𝗽𝗲𝗿 𝘁𝗵𝗮𝗻 𝘄𝗮𝗶𝘁𝗶𝗻𝗴. Climate damages by 2050 outweigh the combined GDP losses from mitigation and impacts by a factor of 1.8 - yet our economic models still bias us toward delay. 𝗧𝗵𝗲𝘀𝗲 𝗯𝗹𝗶𝗻𝗱 𝘀𝗽𝗼𝘁𝘀 𝗮𝗿𝗲𝗻’𝘁 𝗷𝘂𝘀𝘁 𝗮𝗰𝗮𝗱𝗲𝗺𝗶𝗰. 𝗧𝗵𝗲𝘆 𝗰𝗼𝗻𝘀𝘁𝗿𝗮𝗶𝗻 𝘄𝗵𝗮𝘁 𝗽𝗼𝗹𝗶𝗰𝘆𝗺𝗮𝗸𝗲𝗿𝘀 𝘃𝗶𝗲𝘄 𝗮𝘀 𝗳𝗶𝘀𝗰𝗮𝗹𝗹𝘆 𝘀𝘂𝘀𝘁𝗮𝗶𝗻𝗮𝗯𝗹𝗲 𝗼𝗿 𝗽𝗼𝗹𝗶𝘁𝗶𝗰𝗮𝗹𝗹𝘆 𝗳𝗲𝗮𝘀𝗶𝗯𝗹𝗲 - especially in EU settings where fiscal rules and DSAs are central tools of economic governance. 📌 𝗙𝗼𝗿𝘁𝘂𝗻𝗮𝘁𝗲𝗹𝘆, 𝘁𝗵𝗲𝗿𝗲 𝗮𝗿𝗲 𝗲𝗳𝗳𝗼𝗿𝘁𝘀 𝘂𝗻𝗱𝗲𝗿𝘄𝗮𝘆 𝘁𝗼 𝗰𝗹𝗼𝘀𝗲 𝘁𝗵𝗶𝘀 𝗴𝗮𝗽. I want to highlight the excellent work by Dezernat Zukunft - Institut für Makrofinanzen, who recently reviewed how to integrate climate risk and transition investment into EU DSAs. Their proposals offer a crucial pathway to update the way we think about debt, risk, and climate. Another leader is Network for Greening the Financial System (NGFS), who brings together the climate with the fiscal and monetary policy community. 🛠️ Finance ministries need to work on approaches that merge macroeconomic and climate science insights and use them! 🧠 𝗪𝗲 𝗸𝗻𝗼𝘄 𝗯𝗲𝘁𝘁𝗲𝗿 𝗺𝗼𝗱𝗲𝗹𝘀 𝗮𝗿𝗲 𝗽𝗼𝘀𝘀𝗶𝗯𝗹𝗲. 𝗟𝗲𝘁’𝘀 𝗺𝗮𝗸𝗲 𝘀𝘂𝗿𝗲 𝘁𝗵𝗲𝘆’𝗿𝗲 𝘂𝘀𝗲𝗱! Peter Handley Ursula Woodburn Philippa Sigl-Glöckner Ludovic Suttor-Sorel Leslie Johnston, M.Sc. Jo Swinson Rosa Klitgaard Andersen Ida Lærke Holm Olivia Lazard Linda Zeilina-Cross Pascal Canfin Karl Pincherelle Philippe Lamberts Radan Kanev Alexander Reitzenstein Brian Kettenring Daniel Valenzuela Apratim (Tim) Sahay Adam Tooze Rana Foroohar

Understanding the carbon footprint of products is key to shaping effective climate policies, including and importantly in a global trade friendly way. Earlier this week at #COP29, I presented the Inclusive Forum on Carbon Mitigation Approaches’ (#IFCMA) new report tackling challenges in computing carbon intensity metrics and their application in trade-related climate policies. Carbon intensity metrics play an important role in assessing emissions associated with the volume of production of specific goods or sectors and have many potential applications. These metrics provide insights into progress on decarbonisation and are central to a growing range of trade-related climate policies, including green product standards and border carbon adjustments. The IFCMA’s analysis emphasises the need to address data gaps, prevent fragmentation in global supply chains and provide targeted support to SMEs and firms in developing countries. Our report provides a better shared understanding of these challenges and how they can be addressed to help boost international markets for low-carbon goods while ensuring fair and open trade to promote an inclusive, cost-effective transition. Currently with 59 members and the engagement of many more economies, the IFCMA can play a key role in bringing countries together to support international cooperation on the computation and use of carbon intensity metrics. Read the report here: https://oe.cd/5Ma | #OECDatCOP29

Physical climate risk data: the more we learn, the less we know? Khalid Azizuddin's recent piece in *Responsible Investor captures well what many practitioners are grappling with today: - asset-level data that remain incomplete or hard to interpret; - physical hazard exposure often disconnected from financial materiality; - little visibility on supply chains or customers; - adaptation and resilience efforts largely ignored; - and a risk of over-simplifying complex realities into a single “score.” Some three years ago, EDHEC Business School set out to address exactly these challenges, working to advance climate risk modelling and make decision-useful for investors, companies, and public authorities. In this work, we have developed: 🔹 a blueprint for a new generation of probabilistic climate scenarios; 🔹 high-resolution geospatial modeling capabilities to allow for geographic and sectoral downscaling, consistent with each scenario; 🔹 an open database of decarbonisation and resilience technologies through the #ClimaTech project, which officially launched this week. While the research is public, the new EDHEC Climate Institute has also been assisting a school-backed venture, Scientific Climate Ratings (SCR), which integrates this research to deliver forward-looking quantification of the #financialmateriality of climate risks for infrastructure companies and investors worldwide. While SCR provides a rating scale for comparability, it avoids the trap of over-simplification. Each rating is backed by probabilistic scenario modelling, analysis of physical and transition risk exposures, and explicit accounting for adaptation measures. The result is a synthesis that remains transparent, interpretable, and anchored in scientific rigour. Together, these initiatives aim to move the discussion from data abundance to decision relevance, equipping practitioners with tools that connect climate science, finance, and strategy.

Climate change has become a financial equation 🌍 Companies are beginning to quantify what inaction could cost, translating climate risk into direct revenue impacts. The data show that addressing climate impacts through mitigation and adaptation measures represents about 8% of FY24 revenues, while the cost of inaction reaches 15%. This means the financial exposure of not acting almost doubles the investment required to act. The chart shows how this varies across sectors. Energy, materials, and building industries face some of the highest projected costs of inaction, driven by physical and transition risks. In contrast, the real estate sector stands out with a cost of action near 96%, reflecting the capital needed to protect assets from floods, fires, and hurricanes. Financial asset owners and managers estimate the cost of inaction at 120% of FY24 revenues, the highest across sectors, signaling a growing understanding of portfolio-wide climate risk. These figures show that climate change is now treated as a balance sheet issue, not a sustainability add-on. They also reveal that value protection depends on early adaptation and strategic investment. The financial logic is clear. Acting today reduces the future cost of disruption, regulation, and loss of assets. The next step is to internalize these insights into decision-making, linking climate risk directly with business strategy. How prepared are companies to make that connection before the cost gap widens? Source: EY Global Climate Action Barometer 2025 #sustainability #esg

The externalities era is over. The internalisation era has begun. A powerful new whitepaper from the Value Balancing Alliance demonstrates what many of us in sustainable finance have long suspected: externalities don't stay external. They usually, and to a significant degree, move from narrative into numbers and get internalised as a core driver of asset pricing, cash flows, enterprise valuation, Value at Risk and cost of capital for boards, asset owners, investors and regulators. If unaddressed, they are an impediment to economic productivity. Key findings that should change how we allocate capital: 1. Markets are already pricing externalities: Research shows ~20% of corporate externalities are already capitalised in market valuations. Firms in the top carbon burden decile face +1.7% higher cost of capital. The question isn't whether externalities matter financially- it's whether your models reflect this reality. 2. The risk is material and asymmetric: Climate Value at Risk (CVaR) and Nature Value-at-Risk (NVaR) estimates range from 6-50% of global equity value depending on transition pathways. These aren't tail risks - they're central to valuation, especially in transition-critical sectors. Nowadays, central banks and supervisors, including the Network for Greening the Financial System (NGFS) scenarios map policy and climate pathways to sectoral earnings and default/loss rates, providing input curves for "Value at Risk" and "Expected Shortfall" stress paths. The tooling up to extend climate to nature-related financial risk quantification is underway. 3. The implementation gap is closing fast: Standard setters (ISSB, CSRD, ESRS, ISO14008/14054, ICMA, OECD et al) now anchor decision-useful sustainability information into core reporting regimes, valuation principles, transition finance guidance, and investment stewardship expectations: the infrastructure for decision-grade impact valuation is becoming operational. 4. For Transition Finance, this is the breakthrough moment: Externalities accounting provides the analytical spine that converts transition commitment narratives into quantified cash-flow drivers, risk factors, and investable guardrails. It's the bridge from narrative to numbers. If your company's externalities are 50% of its market value, are you running a business or managing a liability that hasn't been billed yet? #SustainableFinance #TransitionFinance #NaturalCapital #ImpactValuation #ESG #ClimateRisk #NatureRisk

New article! Benjamin Sovacool & I argue that climate governance must move beyond nation-states and toward a multi-level approach that centers cities. To chart this path, we apply the IPCC framework for rapid climate mitigation—governance & institutions, policy, finance, behavior, and technology—to cities, identifying for each: (a) the state of practice/knowledge, and (b) data/research gaps: 🏛️ Governance & Institutions ✅ State: Cities are accelerating progress through City–Business Climate Alliances, partnering with local firms pursuing ESG goals; Cities in networks like ICLEI & C40 are reducing GHGs by more than others; & vertical alignment of cities with nations (at COP) is gradually occurring via the Local Governments & Municipal Authorities Constituency. ❓ Gaps: How much do tools by ICLEI & C40 help member cities accelerate their GHG reductions? While member cities achieve more mitigation than non-members, how much is attributable to deployment of internal city climate governance resources (i.e., independent of network membership)? Further, better understanding local drivers of urban & local corporate GHG reductions requires global standardized urban and facility emissions data (via CDP & elsewhere), which remains an in-development task. 💰 Finance ✅ State: Local incentives (rebates) work to reduce local GHGs, but many cities look to external finance--sources like EIB provide direct-to-city climate finance, but credit ratings limit access & increase costs for poorer borrowers in need (i.e., "climate investment trap")--thus more publicly-authored finance is needed; innovative financing mechanisms from the Climate Finance Gap Fund to Climate Insurance-Linked Resilient Infrastructure Finance are being deployed.  ❓ Gaps: Researchers need to request climate allocations data directly from multinational banks (I've done this!) to better answer questions on what factors enable more bankable projects. 🧠 Behavior ✅ State: Programs like Perth’s LivingSmart and declining household energy use in Swiss cities show behavioral levers can work. ❓ Gaps: Cities rarely measure tools like household energy feedback well enough to convert public concern into emissions reductions. ⚙️ Technology ✅ State: Cities are deploying smart grids and low-carbon building programs successfully. We highlight Ann Arbor's (Michigan) Sustainable Energy Utility (SEU), designed to provide 100% renewable energy via municipally owned solar, battery, and planned geothermal systems, supplementing the existing grid. ❓ Gaps: Do smart grids, low-carbon materials, and urban carbon removal consistently deliver real GHG reductions? 📘 We hope this work can help inform the first IPCC Special Report on Climate Change and Cities (cc Angel Hsu, PhD Kevin Gurney) cc Katharine Hayhoe Shoshannah Lenski Lily Hsueh, PhD Saharnaz Mirzazad Kale Roberts yunus Arikan Zöe Fitzgerald Katie Walsh Ken Pucker Article 👇 https://lnkd.in/gADR5uBJ

Over 130,000 documented orphan oil and gas wells are scattered across the United States. The real number? Likely in the hundreds of thousands, possibly exceeding three million. Finding these wells is part scavenger hunt, part detective story—historical records are either difficult to track down or simply don't exist. This is where the data analytics challenge gets interesting. These orphan wells emit methane equivalent to 2-5 million cars annually. The federal government allocated $4.7 billion to plug them, but estimates suggest we need tens or possibly hundreds of billions to address the problem. Carbon credits offer a promising financing mechanism, but quantifying emissions from wells with limited or missing production history requires sophisticated decline curve analysis and production forecasting. Researchers at Colorado School of Mines, my alma mater, published an analysis showing how different crediting methodologies approach this data problem. Some assume constant emissions rates. Others apply exponential decline curves based on historical production... when that data exists. The real challenge? Working with wells drilled before production reporting was even mandated. This hits everything I've been working on: fragmented data ecosystems, missing historical records, predictive modeling with incomplete datasets, and using analytics to drive both business value and environmental outcomes. The opportunity to combine data engineering, machine learning, and GIS mapping to identify and quantify orphan well emissions is compelling. The technical problems are substantial but solvable with the right approach. What we need: better data discovery methods, predictive models that work with sparse records, and platforms connecting well locations with carbon credit quantification. What data gaps do you see as the biggest barriers to scaling orphan well plugging projects? https://lnkd.in/g4sbX69m #dataanalytics #carbonmarkets #esg #climatetech #datascience #machinelearning #environmentalanalytics #carboncredits #orphanwells #mines #csm

What's going to close the $7 trillion gap in climate finance? One of my favorite reports each year from Climate Policy Initiative has some ideas for scaling the investments needed to align with a net-zero pathway. To my mind, this is the best report each year on the state of climate finance. It shows you: -Where financial flows are going from (across public and private sources) -Where money is going to (in industry, location, and activity) -What our estimated needs are across sectors and regions -The mitigation potential to unlock across sectors -Strategies for scaling both public and private investment. Here's a look at the sector gaps we are seeing to date and how they can be overcome. Energy systems- need a 2.5-fold increase in mitigation finance to align with average 2024 to 2030 needs. This sector has the highest emissions reduction potential, requiring investment in renewables, grid modernization, and storage solutions. Transport- also requires an almost 2.5-fold increase in mitigation finance, alongside a significant shift away from high-carbon investments. With a mitigation potential of 3.2 GtCO2e, priorities include electric mobility, public transport expansion, and freight decarbonization. Buildings and infrastructure- mitigation finance must rise nearly 4-fold. This is sector is generally climate-aligned, but further investment can realize its 3.2 GtCO2e mitigation potential. Focus areas include efficiency upgrades, sustainable construction, and low-carbon heating and cooling. Industry- a nearly 24-fold mitigation finance increase, along with reallocation from high-carbon activities, is needed to tap the sector's 4.4 GtCO2e abatement potential. Key areas include clean hydrogen, low-emission manufacturing of cement, steel, and ammonia, and carbon capture, and storage. AFOLU- holds great untapped emissions reduction opportunities—mitigation flows should increase 64-fold from USD 18 billion to USD 1,170 billion annually through 2030 to realize this potential. There is also a need to improve definitional boundaries and enhance tracking of finance flows to this sector. Check out the full report here along with the data and dozens of interactive charts: https://lnkd.in/esqBmpfe #climatefinance #climateinvestment #netzero #decarbonization #climatepolicy #climateaction #emissions

Is #TransitionFinance funding the right areas at the scale and speed needed? 2024 showed us a conflicting reality: record emissions, surging #climatepolicies, and uneven investments. Let’s break down what the data is telling us (thanks to Nat Bullard’s compelling presentation): 1️⃣ 𝘙𝘦𝘤𝘰𝘳𝘥 𝘌𝘮𝘪𝘴𝘴𝘪𝘰𝘯𝘴 𝘈𝘮𝘪𝘥𝘴𝘵 𝘙𝘦𝘤𝘰𝘳𝘥 𝘐𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵𝘴: The #energytransition fund AUM is nearing $1 trillion, and yet fossil fuel emissions have hit a new high. 𝘛𝘩𝘦 𝘥𝘪𝘴𝘤𝘰𝘯𝘯𝘦𝘤𝘵 𝘪𝘴 𝘤𝘭𝘦𝘢𝘳—𝘤𝘢𝘱𝘪𝘵𝘢𝘭 𝘪𝘴 𝘧𝘭𝘰𝘸𝘪𝘯𝘨, 𝘣𝘶𝘵 𝘪𝘴 𝘪𝘵 𝘧𝘭𝘰𝘸𝘪𝘯𝘨 𝘵𝘰 𝘵𝘩𝘦 𝘳𝘪𝘨𝘩𝘵 𝘴𝘦𝘤𝘵𝘰𝘳𝘴 𝘢𝘯𝘥 𝘢𝘵 𝘵𝘩𝘦 𝘴𝘤𝘢𝘭𝘦 𝘳𝘦𝘲𝘶𝘪𝘳𝘦𝘥? Electrified transport and #renewableenergy dominate, but critical areas like clean shipping and #CCS (carbon capture and storage) are barely receiving funds. 2️⃣ 𝘚𝘬𝘦𝘸𝘦𝘥 𝘐𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵𝘴 𝘊𝘳𝘦𝘢𝘵𝘦 𝘝𝘶𝘭𝘯𝘦𝘳𝘢𝘣𝘪𝘭𝘪𝘵𝘪𝘦𝘴: 2024 investment heavily favored sectors like transport ($757B) and renewables ($728B), while sectors crucial to a holistic transition—like clean industry, hydrogen, and nuclear—are severely underfunded. Without a balanced portfolio of investments, we risk leaving gaps that could slow progress. 3️⃣ 𝘛𝘢𝘳𝘨𝘦𝘵 𝘚𝘦𝘵𝘵𝘪𝘯𝘨 𝘐𝘴𝘯’𝘵 𝘛𝘳𝘢𝘯𝘴𝘭𝘢𝘵𝘪𝘯𝘨 𝘪𝘯𝘵𝘰 𝘈𝘤𝘵𝘪𝘰𝘯: 89% of Fortune Global 500 companies have climate-related targets (carbon, water, #biodiversity, etc.), but targets don’t drive results on their own. The financial sector must push for more credible, enforceable benchmarks tied to tangible outcomes. 4️⃣ 𝘊𝘭𝘪𝘮𝘢𝘵𝘦 𝘓𝘦𝘢𝘥𝘴, 𝘉𝘶𝘵 𝘉𝘳𝘰𝘢𝘥𝘦𝘳 #𝘌𝘚𝘎 𝘚𝘵𝘪𝘭𝘭 𝘓𝘢𝘨𝘴: While climate dominates investment priorities, social and governance issues lag far behind. Yet, a #justtransition demands that social equity isn’t an afterthought. Are we aligning climate ambition with fairness and inclusivity across global value chains? 5️⃣ 𝘈 𝘚𝘶𝘳𝘨𝘦 𝘪𝘯 𝘗𝘰𝘭𝘪𝘤𝘪𝘦𝘴, 𝘉𝘶𝘵 𝘐𝘮𝘱𝘭𝘦𝘮𝘦𝘯𝘵𝘢𝘵𝘪𝘰𝘯 𝘎𝘢𝘱𝘴 𝘌𝘹𝘪𝘴𝘵: With over 3,500 #climateadaptation and #mitigation policies in place, we have the policy support—but how do we ensure effective implementation and global coordination? 𝗪𝗵𝗮𝘁 𝗡𝗲𝗲𝗱𝘀 𝘁𝗼 𝗖𝗵𝗮𝗻𝗴𝗲: 🌱 Shift capital from low-impact sectors and direct it toward underfunded, high-impact opportunities. 🔍 Hold companies accountable for hitting milestones tied to transition finance metrics—not just vague pledges. 🏛️ Strengthen global financial and policy frameworks to align incentives, manage risk, and drive cooperation. What do you see as the biggest obstacle to scaling transition finance effectively?