Journal of Economic Policy Reform

Climate Finance and Justice

Climate change represents an existential challenge to humankind; scientists have by now demonstrated unequivocally that climate change has been caused by human activities. Climate change itself brings profound, multiple and complex injustices, bringing deep-seated historic injustices to the surface. For example, whilst most greenhouse gases were produced by the industrialized developed countries, less developed countries in the will often disproportionately suffer its consequences—without necessarily having the financial and institutional resources to tackle climate change. Within countries, cities and urban areas are credited with greater responsibility for greenhouse gas emissions, but are better positioned to manage climate change and attract climate finance when compared with their rural and “left-behind” regional peers (Clifton et al., 2026). From an intergenerational perspective, whilst people have inherent rights to live and thrive, climate change will make it much more difficult for people to have a decent life and even, to survive, even in the near future. A gender perspective suggests climate change may well more negatively impact women than men (Eldeep et al., 2025).

From a policy perspective, there may be potential conflicts between the two basic components of climate-change policy: mitigation and adaptation. While the former aims at a global public good (mitigation), adaptation can more strictly respond to distributive criteria (focusing on support for developing countries). The logic of these two financing components is different. Nonetheless, international climate finance has mainly been concentrated on the first component, which carries a cost for developing countries, especially the poorest ones, where mitigation is relatively insignificant while adaptation could be crucial.

A promising policy direction could be the “just transition” approach. Originally emerging from trade unions in the United States during the 1970s as a concern about jobs facing an energy transition, this policy has morphed into a much broader one, whereby the aim is to ensure no-one gets left behind as the world transitions to a decarbonized economy. This just transition policy rests on at least three core elements of justice: procedural, recognitional and distributional (see Kortetmaki et al., 2025 for a recent discussion). The just transition requires huge financial resources are mobilised to put humankind in a position to meet the challenges of climate change in a way that is effective and also fair. However, in the most recent period, optimism that climate change would be tackled by world governments has started to fade, due to US policy shifts as well as potential watering down of climate commitments elsewhere.

To this must be added concerns about the institutional architecture of climate finance. The international community has relied heavily on creating new funds, often very poorly endowed. As a result, today we have a complex institutional structure, with a proliferation of funds and limited levels of consistency and aggregate effectiveness, and calls for the reform of the whole system.

Following from this, the Journal of Economic Policy Reform, originally founded by Dani Rodrik in the 1980s, now under Editor-in-Chief Judith Clifton, seeks to address major challenges facing the planet from an economic policy reform perspective. Climate change is held as the most important global market failure, given the costs of emissions are not properly reflected in prices. Financing policies towards a fair green transition means addressing market and social failures.

Nobel prize economists and economic policy reform experts have made ground-breaking contributions on this topic. From different perspectives, Duflo (2019),  Nordhaus (2018), Ostrom (2009) and Stiglitz (2001) have argued that long-term climate finance is a sound investment, with benefits clearly overshadowing the costs. Duflo (2019), emphasizing that the human costs of climate change are disproportionately borne by the poor, making international financial transfers a matter of global justice, has advocated that the world’s richest nations and individuals shoulder much of the finance climate action in developing countries. Nordhaus (2018) designed an integrated assessment model (IAM) linking the economy and the climate (DICE), a framework which has been applied for climate policy/finance, including carbon tax. Ostrom (2009) contributed to the governance of common pool resources which has an impact on climate change governance and finance, offering insights on the ways in which common pool resources can effectively and sustainably be governed, inspiring generations of scholars working on how to make climate action effective. Stiglitz (2001) strongly advocated for international climate finance, emphasizing developed nations have a moral responsibility to provide financial support to less-developed, climate-vulnerable countries which have contributed less to historical emissions.

 The Journal of Economic Policy Reform invites submissions of original research on the question of climate finance and justice. Questions the special issue seeks to answer include:

• How is the relationship between climate finance and justice conceived, articulated and measured by financial institutions? What theoretical concepts on justice (such as distributional, recognitional and procedural) are being utilised by financial institutions, and, how successfully? To what extent is a common, global vocabulary emerging, in what direction, or is there evidence of conceptual divergence?
• Are the leading international financial institutions fit for purpose given the global challenge of climate change? To what extent do financial institutions need to be redesigned to be in a stronger position to attempt to manage climate change? Which players are notably more or less successful, and why?
• How can climate finance and justice be assessed empirically? For example, to what extent is climate finance disbursed by financial institutions actually creating just (or unjust) outcomes on the ground? To what extent is international climate finance being adequately allocated between mitigation and adaptation tasks? And, regarding the latter, how is climate finance—particularly that aimed at adaptation activities—linked to development finance? Are these complementary forms of financing or are they objectives that compete for the same funds?
• Has the finance of climate change slowed down or been watered down in the last couple of years?
• How can we bridge the gap in adaptation projects which don’t offer a financial return on investment and will not be funded but are necessary for vulnerable communities (poor countries and regions)?
• How can finance be de-risked (investment in the form of grants, preferential loans, guarantees, equity) to reduce risk and costs of investing in green projects (public goods: mitigation or adaptation providing public goods where the private sector will not invest: adaptation – for example, in bridge-dams in poor countries and less developed or underdeveloped regions)?
• How can we enable financial flow from rich to poor countries and regions to mitigate and adapt to climate change? What are the best practices?

 References

Clifton, J., Díaz-Fuentes, D., Gómez, A., Fernández-Gutiérrez, M. (2026) How “just” is the “just transition”? Forthcoming.

Eldeep, C., Elshenawy, A., & Zaki, C. (2025). Gender and climate policies: a general equilibrium analysis for Egypt. Journal of Economic Policy Reform, 28(3), 237–262. https://doi.org/10.1080/17487870.2025.2472335

Kortetmäki, T., Timmermann, C., Tribaldos, T., (2025) Just transition boundaries: Clarifying the meaning of just transition, Environmental Innovation and Societal Transitions, Volume 55, https://doi.org/10.1016/j.eist.2024.100957