Broken Promises: The Uneven Progress of Climate Finance to Developing Nations

In December 2015, the Paris Agreement established a landmark commitment for countries to limit global temperature rise to well below 2 degrees Celsius above pre-industrial levels.¹ All 195 signatories pledged to create their own plans to achieve this shared goal. Yet, international climate negotiations consistently acknowledge that wealthier nations, historically the largest emitters, bear the greatest responsibility for addressing climate change.

The $100 Billion Pledge and Its Fulfillment

Reflecting this responsibility, developed countries committed to mobilizing at least US$100 billion a year by 2025 to assist developing nations in transitioning to renewable energy sources and adapting to the impacts of climate change.² While the Organisation for Economic Co-operation and Development (OECD) reported that this $100 billion target was first met in 2022, many countries in the Global South argue that the funds remain insufficient to address the scale of the challenge.³

Calls for Increased Funding and the JETP Model

Since the Paris Agreement, nations in the Global South have consistently advocated for increased climate finance at every UN climate summit. At the 2023 COP28 in Baku, Azerbaijan, developed countries agreed to “help channel” at least $300 billion a year to developing countries by 2035.² However, demands from the Global South continue to escalate, with COP30 in Belém, Brazil, calling for the mobilization of at least $1.3 trillion annually by 2035 for climate action.

One prominent mechanism for delivering this finance is the Just Energy Transition Partnership (JETP). JETPs are designed to accelerate the shift to clean energy in fast-growing, coal-reliant emerging economies by blending public and private funding, including grants, concessional loans, and equity investments.

Indonesia’s JETP: A Case Study in Challenges

In 2022, Indonesia secured a US$20 billion JETP, making it one of the largest such agreements.² However, initial results indicate limited progress. A key issue is governance: the JETP secretariat, intended to be the agreement’s planning hub, requires approval from developed-country partners for its policy and investment plans. Despite being chaired by an Indonesian official, the secretariat lacked dedicated funding to build a capable team.

This structure has led to concerns that the JETP is driven more by the interests of developed countries than by Indonesia’s own priorities. Working groups focused on technical planning, policy, finance, and justice are funded by organizations like the OECD’s International Energy Agency, the World Bank, the Asian Development Bank, and the UN Development Programme – organizations where the US and Japan hold significant influence.

companies from donor countries have dominated discussions about JETP funding. Early proposals, such as the planned closure of the Cirebon-1 coal power plant in Java (partly owned by Japan’s Marubeni Corp), have faced setbacks and been shelved.

The Question of Justice and Actual Impact

While JETP documents include justice “standards” related to cultural heritage and labor rights, these remain non-binding guidelines. As of mid-2024, only 19 programs totaling US$144.6 million had been launched or were nearing completion. Reports indicate that, as of October 2024, none of the pledged transition finance had translated into latest clean energy projects or the early retirement of coal-fired power plants.

Initial funding from the United States, Germany, and Canada has largely been allocated to feasibility studies and technical assistance, with follow-on funding for renewable projects not guaranteed. Some programs credited to the JETP were already funded through other schemes, such as the Asian Development Bank’s Energy Transition Mechanism, raising questions about the additionality of JETP funds.

Political Considerations and Future Outlook

Indonesian policymakers have expressed concerns that climate finance is often driven by self-interest rather than a commitment to justice. Some view the JETP as an instrument used by G7 countries to counter China’s influence in Southeast Asia. With potential shifts in US policy, including a possible withdrawal from the Paris Agreement under a future administration, the future of climate finance remains uncertain.

As developed economies face fiscal pressures and reassess their aid budgets, climate finance, often drawn from existing aid commitments, is becoming increasingly precarious. This raises concerns that justice for historical emissions and support for those most vulnerable to the impacts of climate change may be further marginalized, potentially jeopardizing substantive partnerships between developed and developing countries in achieving global climate goals.