This article was first published by the International Institute for Sustainable Development (IISD)
At COP 30, the focus is shifting from big pledges to the policy levers that can drive clean energy investment. Tax incentives are widely used in emerging and developing economies to attract private capital for the energy transition, but their effectiveness depends on targeted design and implementation. Kudzai Mataba examines how countries are deploying green tax policies, what delivers results and what falls short, and the reforms governments should champion at COP to accelerate sustainable green investment.
One of COP 30’s top priorities is boosting climate finance from both governments and private investors. Why is this especially crucial for emerging and developing economies?
Despite record-high investment in renewable energy last year, emerging and developing economies (EMDEs) face a USD 2.2 trillion financing gap each year through 2030 to meet their goals under the Paris Agreement. Countries need to attract investments that can lower emissions while expanding access to affordable energy and creating jobs. Unlike major emerging economies, such as China, India, or Brazil, which attract the majority of global renewable energy investment, the climate transition of many lower-income EMDEs continues to be held back by limited access to affordable finance, perceived country or sector-related risks, and weaker policy frameworks.
In response, mobilizing both public and private finance is crucial. Public financial support is needed to crowd in larger private investment, such as through targeted subsidies including incentives, budget transfers, concessional lending, and market mechanisms that reduce investment risks. This must go hand in hand with phasing out inefficient tax incentives for fossil fuels to level the playing field and encourage a shift by consumers and investors toward less polluting alternatives. Raising taxes on fossil fuels to reflect their social costs—through excise or carbon taxes can also accelerate the transition in an economically efficient way, provided that protections are in place for vulnerable groups.
What have governments already committed to in terms of renewable energy capacity?
At COP 28, 133 governments agreed to the collective goal to triple the world’s installed renewable energy generation capacity by 2030, taking into consideration different starting points and national circumstances. Limited fiscal space and rising debt require that public support be used strategically, such as by lowering investment financing costs. The global FfD4 process has underscored the mounting pressure on public budgets and the need for more efficient deployment of resources.
What mechanisms at COP 30 could help scale green investment and turn commitments into action?
COP 30 has been framed by the Brazilian Presidency as a COP for implementation, where countries work to turn their climate commitments into action. This could be achieved through the Baku to Belém Roadmap to 1.3T, which sets out a plan for how climate finance from all sources can be scaled up to USD 1.3 trillion annually by 2035.
However, as IISD has noted, while the Baku to Belém Roadmap recognizes that phasing out environmentally harmful subsidies, including fossil fuel subsidies, can have long-term benefits, these points are not reflected in recommendations. This means we risk COP 30 becoming a missed opportunity for redirecting public finance from fossil fuels to renewables.
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