As the Coalition of Finance Ministers for Climate Action, the Danish Ministry of Foreign Affairs, the Danish Ministry of Finance and the Grantham Research Institute prepare to launch a new work programme at COP 31, Ole Thonke, Mads Dalum Libergren, Ana Zorić, Sam Mugume, Nick Godfrey and Sharon S. Yang [i] explain the issues it is designed to address – and how it will do so.
Climate change and the energy transition pose fundamental economic and fiscal challenges for Ministries of Finance. Climate impacts, the transition to low-carbon economies and the policies needed to support it have far-reaching implications for growth, public finances, investment and economic competitiveness. These challenges are becoming more urgent. This year’s energy price shock has pushed oil and gas prices sharply higher, straining budgets in import-dependent economies and feeding through supply chains into higher prices for consumers and businesses. An exceptionally strong El Niño is building, raising the risk of floods, droughts and heatwaves. For Ministries of Finance, these are not abstract or distant threats. They are already affecting economic forecasts, government budgets and borrowing needs.
Responding effectively requires Ministries of Finance to be at the centre of economic and climate policymaking, not only to manage risks, but also to identify and realise opportunities for climate smart growth, jobs, investment and greater economic resilience. The Coalition of Finance Ministers for Climate Action, bringing together Ministries of Finance from more than 100 countries, reflects their recognition that climate risks and the energy transition are now central issues for economic policy.
Ministries of Finance hold many of the levers that determine how economies respond to these challenges and drive green and resilient investment forward. They shape budgets and tax systems, which influence incentives across the economy. They plan and appraise public investment and, through fiscal policy, guarantees and public financial institutions, influence how much private investment flows into resilience and the energy transition. And they coordinate economic policy across government, helping determine how climate-related risks and opportunities are reflected in national plans and ensuring that climate policies are integrated into broader economic strategies, making them more effective, economically sustainable and durable.
Their role therefore matters for the climate finance discussions at COP31. Governments meeting in Antalya will discuss how to follow up on the New Collective Quantified Goal on climate finance agreed in Baku, and how to make wider financial flows consistent with low-emission, climate-resilient development. Both depend in large part on decisions taken within Ministries of Finance. Mobilising new investment matters. So does aligning the much larger financial flows that ministries already shape through budgets, tax policy, financial regulation and public institutions.
But using these levers effectively, to manage risks and seize the opportunities of the transition, requires strong analytical capabilities. At COP31, the Coalition of Finance Ministers for Climate Action, the Danish Ministry of Foreign Affairs, the Danish Ministry of Finance and the Grantham Research Institute are launching a new work programme to build those capabilities under the Coalition’s Economic Analysis for Green and Resilient Transitions Initiative.
Analysis is central to finance ministries’ ability to steer economies
Economic analysis is core to how Ministries of Finance work. Macroeconomic forecasts underpin budgets. Debt sustainability analysis informs borrowing decisions. Investment appraisal helps determine which projects get funded. But many of these tools were not designed to capture the economic consequences of climate shocks or the structural changes involved in the green transition.
Climate-related challenges bring a new set of questions. How will physical climate risks affect the budget and debt? How much adaptation investment is needed, and who pays? Which policy mix reduces emissions and energy import dependence at least cost, while protecting jobs, competitiveness and vulnerable households? Where can green and resilient transitions create opportunities for economic growth, jobs and investment, and how can fiscal policy help realise them? Are budget, tax and investment decisions consistent with the country’s own climate and development objectives? Answering these questions is essential to managing risks and unlocking green and resilient investment.
Good analysis hinges as much on knowing which investments and policies to avoid as identifying those worth pursuing. Without sound analysis, governments risk investing in the wrong infrastructure, overlooking fiscal vulnerabilities or introducing policies whose economic and distributional consequences are not fully understood. Equally, they risk missing opportunities for productive investment, economic diversification and long-term growth.
Yet many Ministries of Finance are not fully equipped to answer these questions. According to a 2025 Coalition survey of nearly 60 ministries, only around a quarter had analysed public expenditure needs for climate adaptation. Few had built climate risks into their core macroeconomic, budget or tax tools. Shortages of skills, data and models were the most commonly cited barriers.
Experience shows how these gaps can be narrowed. Denmark’s Ministry of Finance funded a dedicated team to develop GreenREFORM, a climate–economy model that provided the analytical foundation for a political agreement to introduce a tax on agricultural greenhouse gas emissions. This shows how investment in analytical capability can directly inform major policy choices. Jamaica, meanwhile, illustrates the value of climate-informed analysis in strengthening fiscal preparedness. Over the past decade, it has worked to better understand and estimate its fiscal exposure to disasters and used that analysis to inform a layered financing strategy of reserves, contingent credit, parametric insurance and a catastrophe bond, alongside sustained fiscal discipline. When Hurricane Melissa caused damage equivalent to around 40 per cent of GDP, pre-arranged instruments released liquidity within days, and Moody’s upgraded Jamaica’s credit rating less than two months later.
Together, these experiences underscore the importance of equipping Ministries of Finance to make informed policy choices and prepare for major economic shocks.
The lessons from country experience are increasingly clear. Start with the policy question rather than the models. Invest in skilled teams, institutions and getting the governance right, not just analytical tools. And build on the wider national institutions and expertise that Ministries of Finance can draw upon.
What the Coalition of Finance Ministers for Climate Action will do
The Coalition’s Economic Analysis for Green and Resilient Transitions Initiative will put these lessons into practice at four levels.
Within the Coalition, the Economic Analysis Initiative will serve as a cross-cutting working group, translating analytical tools, data and country experience into practical support for the Coalition’s wider policy priorities, from macro-fiscal policy and debt sustainability to decarbonisation, private finance mobilisation, adaptation and nature.
Globally, the Forum on the Macroeconomics of Green and Resilient Transitions will bring Ministries of Finance and leading analysts together. The Compendium of Practice will document how ministries apply economic analysis, and new knowledge products will respond to gaps and priorities identified by ministries themselves.
Regionally, the Initiative will work with Ministry of Finance platforms in Latin America and the Caribbean, Asia-Pacific and Africa, helping ministries pool expertise, tools and data on a small number of shared macro-fiscal challenges.
Nationally, the Initiative will support Ministries of Finance seeking to strengthen their analytical capabilities, working alongside the domestic institutions they rely on, including statistical offices, central banks, line ministries and researchers. Support will be driven by each ministry’s own priorities. It may include assessing existing capabilities using the Coalition’s Capability Assessment Framework, agreeing a roadmap for strengthening these capabilities and connecting priority analytical work with the expertise and financing needed to deliver this task. In a small number of developing countries, this will take the form of deeper, multi-year programmes.
Throughout, Ministries of Finance will be in the driving seat, domestic institutions will be strengthened, and support will be adapted as experience grows.
The goal is a Ministry of Finance that can ask its own questions, run its own analysis and defend its own choices.
The resources described above, along with practical guidance, analytical tools and details of country experiences, are available at greenandresilienteconomics.org. Further information about the Coalition of Finance Ministers for Climate Action, including its work, initiatives and knowledge products, can be found at www.financeministersforclimate.org.
