GLOBAL CARBON MARKETS AND CLIMATE FINANCE: CHALLENGES AND OPPORTUNITIES FOR DEVELOPING ECONOMIES

Abstract

This article examines how global carbon markets operate, the failure of which when measured against its possible potential, and its effects on the developing countries struggling to finance their low-carbon development through the means of carbon trading mechanisms. Using the information from the World Bank, the International Monetary Fund, Climate Policy Initiative, and UNFCCC, this essay discusses carbon market compliance and voluntarism, the movement of climate finance, and obstacles that hinder the utilization by poor countries of both approaches. Pricing for carbon currently affects 29% of all global emissions, raising more than USD 107 billion annually but still lagging behind Paris Agreement targets. Annual climate finance reached over USD 2 trillion by 2024 but is highly unevenly distributed across the globe, accounting for less than 3% of GDP in sub-Saharan Africa. The core of this problem is that the shortcomings in the carbon market and in access to climate finance are interconnected: the latter depends on fixing the former