The future of the planet depends largely on emerging and developing economies (EMDEs), as their share of global greenhouse gas emissions is growing and they are expected to contribute to the majority of new emissions. Although developedWhile sustainable economies still play a key role, success in halting global warming and biodiversity loss depends on countries like India, Indonesia, Brazil, South Africa and China adopting low-carbon and nature-friendly development paths. However, current geopolitical fragmentation and shifting priorities are slowing the transition to a more sustainable economic model.

Despite the accelerating degradation of the climate and nature, there is a bright spot: rapid progress in technological innovationThe cost of renewable energy and other green technologies has fallen dramatically, with most new renewable energy now cheaper than fossil fuel-based alternatives. For example, the cost of solar photovoltaic (PV) systems has fallen to around €0.04 per kWh, making solar energy more than 50% cheaper than fossil fuel or nuclear generation.

Yet investment in new coal-fired power plants continues, particularly in China, and the global vehicle fleet remains dependent on fossil fuels. As a result, climate policies and trajectories are far from the goals of the 2015 Paris Climate Agreement, which are needed to limit global warming to 1.5°C above pre-industrial levels. Current policies suggest warming of around 2.7°C by 2100.

In addition, EMDEs are the custodians of much of the planet’s natural capital, including key carbon sinks and biodiversity hotspots such as tropical forests and wetlands. Their destruction would accelerate climate change and undermine adaptation efforts. However, the costs of greening and restoring nature in emerging economies are often disproportionately high relative to their GDP and fiscal capacity, while annual clean energy investments in developing regions would need to more than quadruple by 2030. Financing is challenging due to the high cost of capital in EMDEs. International climate finance remains insufficient, with support falling significantly short of pledges.

The current global collective effort also faces several challenges: a fragmented approach to interconnected issues, the erosion of multilateralism, and a lack of adequate incentives. The US, for example, withdrew from the Paris Agreement again in January 2025, which is both an obstacle and a strategic opportunity for other states.

To solve these problems, a flexible and robust architecture based on four pillarswhich relies on coalition of willing countries:

• Pillar 1: Multi-stakeholder Coalition for Carbon Pricing with a Common Carbon Border Adjustment Mechanism (CBAM). This coalition would require the adoption of a tiered carbon pricing mechanism and a common CBAM. Countries would commit to promoting domestic carbon pricing (through taxes or emissions trading) and to introducing a CBAM on imports from non-member countries. Participation would be structured through a tiered system, with lower-income countries having lower carbon price floors (e.g. €25/tonne), middle-income countries having intermediate levels (e.g. €50/tonne) and higher-income economies having higher rates (at least €75/tonne). The EU would play a leading role.
• Pillar 2: Expanded climate finance conditional on effective decarbonisation commitments. “Climate financing coalitions” are proposed, involving subsets of developed and developing countries. A financing coalition of all developed countries and China would pay less than 0.2 % of GDP per year to decarbonize the power sector of EMDEs. It would be in the economic interest of developed countries (and China) to finance the decarbonization of most developing countries. This support would be conditional on developing countries committing to decarbonizing their power sectors in line with the goals of the Paris Agreement.
• Pillar 3: Green industrial partnerships between the EU and developing countries. The EU will remain an energy importer in the medium and long term. A green transition would transform the international division of labour, with energy-intensive industries moving to developing countries with rich renewable energy potential. The EU should link its industrial policy with trade, investment and climate policies that integrate low-carbon, energy-intensive manufacturing in developing countries into EU value chains. These partnerships should focus on improving access to the EU market and technology transfer.
• Pillar 4: Efficient markets for carbon removal and nature restorationGiven the likely overshoot of climate targets, investments in carbon dioxide removal (CDR) technologies are essential. Two market innovations are proposed:
  • Market mechanism for negative emissions: Integrating “cleaning certificates” into compliance markets (e.g. the EU ETS). These certificates would allow companies to emit today with the obligation to remove an equivalent amount of CO₂ in the future, creating a form of carbon debt. It is also proposed to create a European Central Carbon Bank (ECCB) to oversee these certificates.
  • Trusted markets for long-term natural carbon sequestration and nature restoration: A new design for nature markets at the regional level is proposed, where jurisdictions would sell “shares” in a portfolio of nature-based projects, entitling holders to “dividends” in the form of measured carbon and biodiversity benefits.

These four coalitions overlap and reinforce each other. For example, membership of the Carbon Pricing Coalition would reduce the need for fiscal subsidies, while financial support and partnerships would make membership of the CBAM Coalition more attractive for EMDEs. The EU has a key role in initiating and designing a comprehensive agreement for these coalitions, given its legitimacy and resources. Spring

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