- Not a technology problem: Solar, wind, and battery costs have fallen sharply, yet global fossil-fuel dependence remains entrenched for financial rather than technical reasons.
- Fiscal survival: Many developing economies rely on oil, gas, and coal revenues simply to stay solvent, making an abrupt phase-out a risk of balance-of-payments crisis.
- The cost of capital: Poorer countries face far higher borrowing costs than wealthy ones, so they pay significantly more to finance the very same green technologies.
- Loans, not grants: Just Energy Transition Partnerships are financed largely through loans, raising future debt burdens and handing investors influence over national energy policy.
- A new dependency: As demand for lithium, cobalt, and rare earths surges, the Global South risks entering the transition as a raw-materials supplier rather than an industrial beneficiary.
For years, climate politics was organised around a single technological question: could renewable energy become efficient and cheap enough to replace fossil fuels? That question has now largely been answered. Solar and wind costs have fallen dramatically over the past decade, battery technology keeps improving, and renewable deployment has accelerated across much of the world. Yet despite this progress, global dependence on fossil fuels remains stubbornly entrenched.
The problem today is not primarily technological. It is financial.
This contradiction was on display again at the recent summit hosted by Colombia on financing a fossil-fuel phase-out across the Global South. Leaders and policymakers gathered to consider how developing economies might move away from oil, gas, and coal without triggering economic crisis or deepening inequality. The discussions exposed a hardening reality in climate politics: many countries are now willing, at least in principle, to abandon fossil fuels, yet the global financial system is not built to let them do so easily.
To be sure, climate finance has become one of the dominant themes of international negotiations. Wealthy countries routinely promise support for mitigation, adaptation, and green development. Multilateral institutions increasingly speak the language of sustainability and just transition. Yet much of the financing actually available to developing economies remains expensive, debt-based, and heavily conditioned by investor priorities.
This is especially difficult because many fossil-fuel-dependent economies rely on oil, gas, or coal revenues not merely for export earnings but for fiscal survival. Governments contending with heavy debt burdens, weak currencies, and limited industrial diversification cannot simply abandon production overnight. To do so risks severe balance-of-payments crises, unemployment, and political instability.
The dilemma, then, is not simply ecological. It is geopolitical and financial.
Countries in the Global South are repeatedly told they must decarbonise rapidly to meet global climate targets. Yet they are simultaneously locked into an international financial order that rewards extractive exports, penalises fiscal expansion, and raises borrowing costs precisely when large-scale public investment is most needed.
The contradiction has grown increasingly visible in debates over Just Energy Transition Partnerships (JETPs), the financing arrangements promoted by Western governments and development banks in countries such as South Africa, Indonesia, and Vietnam. These agreements are often presented as models of equitable climate transition. Yet critics have pointed out that much of the funding arrives as loans rather than grants, raising concerns about future debt burdens and investor influence over domestic energy policy.
The very language of “green transition” can obscure how unevenly its costs are distributed across the world. Wealthier economies enjoy greater fiscal flexibility, more advanced industrial capacity, and cheaper access to capital markets. The United States and the European Union can subsidise green industry on a vast scale through industrial-policy packages and state support. Many developing countries, by contrast, face far higher borrowing costs even for renewable-energy investment.
The result is a profoundly unequal transition landscape.
Consider the basic economics of energy investment. Renewable infrastructure demands substantial upfront capital, even where operating costs later fall to relatively low levels. Countries that borrow cheaply can therefore finance renewable expansion far more easily than those wrestling with high interest rates and currency volatility. In many cases, poorer countries end up paying significantly more to finance the very same green technologies.
This dynamic helps explain why fossil-fuel extraction still appears economically rational across much of the Global South, despite the climate crisis. Oil and gas projects often attract foreign investment more readily than renewable infrastructure, because they remain deeply embedded in existing financial and trade networks. Governments under debt pressure may therefore keep expanding fossil-fuel production — not because they deny climate change, but because the structure of global finance leaves them few viable alternatives.
The current geopolitical environment is reinforcing these pressures. Wars in Ukraine and the Middle East, disruptions to shipping routes, and renewed energy-security anxieties have pushed many governments back towards short-term fossil-fuel pragmatism. European states that once spoke confidently of rapid decarbonisation reopened coal plants after Russia’s invasion of Ukraine choked off gas supplies. Energy-importing countries across the Global South, meanwhile, are still scrambling to secure affordable fuel amid volatile markets.
Against this backdrop, calls for a rapid fossil-fuel phase-out collide ever more sharply with the realities of uneven development.
None of this dismisses the urgency of climate action. The scientific case for rapid decarbonisation remains overwhelming. The Intergovernmental Panel on Climate Change has repeatedly warned that delaying emissions cuts will intensify climate disasters, food insecurity, and displacement worldwide. But climate policy cannot succeed if it ignores the financial structures that shape development itself.
This is why the Colombia discussions matter. They point towards a growing recognition that climate politics can no longer revolve solely around emissions targets and technological innovation. Questions of debt relief, capital controls, public investment, and development finance are becoming central to the energy transition itself.
The deeper issue, though, is whether the existing global financial order is compatible with a genuinely equitable transition at all.
A system organised around high returns to private capital, volatile commodity dependence, and unequal borrowing costs inevitably constrains decarbonisation in poorer economies. A transition pursued under those conditions risks reproducing older forms of dependency in greener language.
This tension is already visible in the struggle over critical minerals. As demand for lithium, cobalt, and rare earths accelerates, many developing economies risk being absorbed into the green transition mainly as suppliers of raw materials rather than as beneficiaries of industrial upgrading. The transition, in other words, may transform the energy system without transforming global inequality.
The danger, then, is not simply that decarbonisation will proceed too slowly. It is that it will proceed unevenly — widening the divide between countries able to finance green industrial transformation and those left dependent on extractive exports and expensive foreign capital.
Accordingly, the central political question today is no longer whether renewable technologies work. They plainly do. The question is who can afford the transition, under what conditions, and at whose expense.
That is why climate politics is increasingly inseparable from political economy. The fossil-fuel exit is not being blocked chiefly by technological incapacity, nor even by public disbelief in climate science. It is being constrained by debt structures, investor power, and an international financial system that continues to reward extraction while making an equitable transition prohibitively costly for much of the world.
Until that changes, the green transition will remain financially possible for some countries and structurally precarious for many more.
