Climate transfers for mitigation and adaptation under 1.5°C and 2.0°C targets

Climate finance transfers from developed to developing countries have been central to international climate negotiations. However, existing climate transfer commitments lack a dynamic quantification of mitigation and adaptation finance under specific temperature targets. This study integrates regional climate transfer strategies into an integrated assessment model to evaluate optimal trajectories, composition, and allocation of climate finance consistent with the 1.5°C and 2.0°C targets. We first contrast two extreme strategies— “mitigation-only” and “adaptation-only” transfers. Results indicate that mitigation transfers yield slow benefits due to climate inertia, while adaptation transfers act as “short-term painkillers” but exacerbate long-term warming. We then quantify the optimal combination of mitigation and adaptation transfers, revealing that tighter climate targets reshape the timing and composition of transfers, and the 1.5°C target does not require more long-term finance than the 2°C target. By 2035, annual grants-equivalent transfers are projected to reach $378 billion (2 °C) to $699 billion (1.5 °C), rising to $2.32 trillion (2 °C) and $1.50 trillion (1.5 °C) by 2100. Lastly, we show that delaying transfers increases welfare losses for donor countries and diminishes benefits for recipients. Thus, earlier implementation of existing commitments benefits both sides. Even in the Nash equilibrium case, climate transfers hold potential to further reduce climate risks compared to no transfer case. However, no adaptation transfers are provided.