As Climate Diplomacy Stalls, the Economics Are Racing Ahead

Julie McCarthy

WARWICK, NEW YORK – The latest United Nations Climate Change Conference ended in a political deadlock. COP30 in Belém produced no agreement to phase out fossil fuels, no binding plan to halt deforestation, and no meaningful increase in support for the countries already drowning – sometimes literally – in climate and ecological losses. For a summit held in the world’s largest rainforest, the symbolism was brutal.

But the real story was not the political paralysis on the negotiating floor. It was the unmistakable signal that the economics of climate change have already moved on. 

To see the developments that really matter, we can look to corporate balance sheets, sovereign credit ratings, supply chains, and risk pricing. These show that the transition to carbon-neutrality is happening despite the dysfunctional politics surrounding the issue.

When it comes to addressing major global risks, politics often fail until the economic math works out. In the case of climate change and nature loss, markets, insurers, lenders, and ratings agencies are now forcing the transitions that governments have been deferring. 

Sovereign credit ratings are being revised to reflect climate- and nature-risk exposure. Insurance markets are collapsing in high-risk regions, leaving households, businesses, and entire municipalities without coverage. Borrowing costs are rising for countries facing drought, flooding, and deforestation, thus narrowing their fiscal space and accelerating capital flight. These mechanisms are doing what politicians will not do: Making inaction more expensive than action.

Across major economies, the energy transition is no longer theoretical. Germany generated about 63% of its electricity from renewables in 2024. 

India reached roughly 46%. In the United States, over 90% of the new power capacity added in 2024 came from renewables – mostly solar. In Brazil, this year’s COP host, 88% of electricity is renewable. Globally, onshore wind and solar are now 40-50% cheaper than the cheapest fossil-fuel options.

Meanwhile, the global auto market is evolving fast. More than half of new vehicles sold in China are plug-ins. In Norway, almost 90% of new cars sold in 2024 were fully electric. Fossil fuels still dominate the existing system, but they are decidedly absent from the future that is being built. 

The economics of clean energy have already won, and these industries’ advantages are widening. The cumulative effect is unmistakable. The cost advantage of low-carbon systems is now structural, not cyclical.

Even the re-emergence of trade issues at COP30 – with emerging economies, including China, objecting to unilateral climate-related trade measures – ultimately points to the same conclusion. Rules that are being rewritten through markets, supply chains, and standards are inevitably ending up on the agenda for consensus-based diplomacy.

Moreover, the economic transition is not only about energy. The global bioeconomy – economic sectors that use renewable biological resources for materials, energy, chemicals, and agriculture – is valued at about $4 trillion today, and is projected to grow to around $30 trillion by 2050 – roughly 30% of current global GDP. 

Nature is becoming a form of strategic infrastructure that offers countries a route to decarbonization, competitiveness, and resilience. The future lies in renewable biological resources, not unsustainable depletion.

In this respect, COP30’s emphasis on inclusion of Indigenous peoples and local communities mattered not for its symbolism, but because markets now recognize that traditional stewardship underpins the increasingly fragile ecosystems – forests, watersheds, soils – upon which our economies depend. 

Just as energy markets are reshaping cost curves, nature-dependent sectors are taking steps to address their economic exposure to risks such as rainfall disruption, soil loss, fisheries collapse, and coastal erosion.

These responses are reshaping markets as powerfully as energy price shocks can. Disaster losses are compounding so fast that insurers are withdrawing from entire regions and product lines. 

Heat stress is shrinking productivity from South Asia to the Gulf of Mexico. From Brazil to Indonesia, deforestation is destabilizing rainfall patterns. Agriculture, fisheries, tourism, and shipping are all absorbing mounting climate- and nature-driven losses, triggering food-price spikes and economic volatility.

Regardless of political gridlock, climate change and ecological degradation are creating undeniable economic momentum. As renewables scale up, fossil fuels will become even less competitive. 

As ecosystems degrade, fiscal burdens will rise. Central banks, sovereign lenders, ratings agencies, and private investors have already begun pricing drought-driven crop failures, flooded infrastructure, eroding coastlines, collapsing fisheries, and other risks. In many countries, climate change is raising borrowing costs, boosting debt, and shaving points off expected growth.

At some point, the financial pressure will become so acute that what was once a political choice will become an economic inevitability. 

Brazil’s launch of the Bioeconomy Challenge – a three-year multi-partner effort to “translate the G20 Bioeconomy High-Level principles into real outcomes” – reinforces this shift. It signals that the transition is increasingly being shaped through economic strategy rather than multilateral consensus.

This pattern is not new. The Cold War superpowers did not pull back from their nuclear arms race because it was morally right; they did it because the costs were unsustainable, and the risks too high. Apartheid didn’t end because of political debate alone; it was brought down by business interests deciding that the system was no longer tenable. When the economics change, the politics eventually follow.

Of course, COP30’s political failure hurts. But it also highlights a deeper truth: climate and nature risks are now materializing faster than the political systems meant to manage them can respond. Today’s leaders can delay commitments on fossil fuels and forests, but they cannot negotiate with droughts, destroyed crops, flooded cities, or with investors and central banks that are increasingly capable of counting the risks.

Even electorates are ahead of current policies. Citizens are demanding action not as a matter of ideology, but because the economic risks – from extreme heat to soaring insurance costs – are increasingly affecting their own lives. The cost of ignoring these forces will be far higher than the cost of acting now. For governments, investors, and multilateral institutions, the task ahead is clear: align with the real-world economics, or be overtaken by them.

Julie McCarthy is CEO of NatureFinance.

Copyright: Project Syndicate, 2026.
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