Key findings of the report “Landscape of Climate Finance in Ethiopia” published by the Climate Policy Initiative are:

  • Ethiopia’s climate finance has gradually increased but must rise by at least fourfold to meet identified needs. Tracked flows averaged USD 2.3 billion annually in 2022/23, equivalent to approximately 1.7% of GDP. This is an 11% increase from the annual average of USD 2.1 billion in 2020/21 but still well below the estimated USD 10.6 billion annual requirement under the NDC 3.0 (2025-2035) 
  • Ethiopia’s heavy reliance on international public sources exposes its climate agenda to the constraints of external concessional finance. In 2022/23, 93% of tracked flows originated from international public sources. This concentration underscores the urgency of mobilizing broader and more sustainable domestic and private funding sources.
  • Ethiopia’s shallow capital markets and regulatory uncertainty have limited private climate finance. Private actors contributed USD 113 million annually in 2022/23, representing less than 5% of total flows. This is insufficient to signal a functioning market or provide any buffer against public finance volatility. Macroeconomic risk, currency constraints, shallow capital markets, and regulatory uncertainty continue to deter private participation at scale. 
  • Adaptation finance accounts for the majority of Ethiopia’s climate flows, reflecting the country’s high vulnerability to drought, hydrological variability, and disaster risk. Adaptation represented 59% of tracked climate finance in 2022/23 (USD 1.4 billion annually), a slight rise from 56% in 2019/20. While they exceed mitigation in volume, adaptation flows remain far below the estimated USD 4 billion annual need. 
  • Mitigation finance remains insufficient relative to emissions structure and targets and cost needs. These flows averaged approximately USD 500 million annually, compared to the estimated USD 6.6 billion requirement under NDC 3.0. The AFOLU sector, a large source of emissions, received a small share of mitigation finance, highlighting a structural imbalance between emissions sources and investment patterns.
  • Cross-sectoral and resilience-oriented programs feature prominently across both mitigation and adaptation. In 2022/23, adaptation investment averaged USD 644 million, mitigation investment USD 77 million, and dual-benefit projects received USD 306 million.
  • Ethiopia has implemented several climate-related reforms, including fuel subsidy reform, electric mobility incentives, financial sector greening initiatives, carbon market readiness efforts, and capital market development. These reforms can help to mobilize domestic and private capital. Yet fragmented governance structures, limited project preparation capacity, incomplete climate finance tracking systems, and constrained fiscal space continue to limit the scale and predictability of flows. 

Access the report here