The global climate finance gap – estimated at $2.4 trillion annually for developing countries – is not just a number. It’s a reflection of the scale of ambition needed to avert climate catastrophe. While international support remains vital, the reality is that over $1 trillion must come from domestic sources. That’s why domestic resource mobilisation (DRM) must be at the heart of climate finance strategies.

In the forthcoming publication Policy-Driven Climate and Development Finance: Strategies for Equitable Solutions, a dedicated chapter explores the broad range of fiscal, monetary, administrative, capacity-building and regulatory measures needed to unlock the full potential of domestic resources in bridging the financing gap for climate action. The chapter emphasises that an enabling international economic and financial environment, together with targeted development co-operation, is essential to help countries fully realise their potential in mobilising domestic resources.

DRM is not merely a technical fix – it’s a political imperative. Countries must deploy a full spectrum of fiscal, monetary and regulatory tools to raise climate finance from within. But these efforts must be matched by international co-operation that addresses systemic barriers, enhances fiscal space, reduces debt burdens and ensures access to affordable finance and technology. Only through such an enabling global environment can national efforts translate into real climate and development gains.

A comprehensive DRM strategy should include several things. First, it should make climate finance a strategic objective of national budgets. Climate action must be embedded in fiscal planning, with dedicated revenue streams and expenditure frameworks that prioritise resilience and decarbonisation.

It must also implement carbon taxation and pricing tailored to national contexts. These instruments can generate revenue, send clear price signals and incentivise low-carbon behaviour, while remaining administratively feasible.

Strong domestic capital markets are essential for financing long-term climate projects

And it is critical to phase out harmful fossil fuel subsidies. Reforming subsidies frees up public resources and corrects market distortions.