This discussion paper synthesises existing perspectives and emerging debates around the interpretation and implementation of Article 2.1(c) of the Paris Agreement. It draws on literature, stakeholder dialogues and submissions to propose a working definition that supports future assessments of progress towards aligning finance with low-emission and climate-resilient development pathways.

Key insights

Origins and diverging interpretations

Article 2.1(c) is intentionally broad and has been subject to varying interpretations:

• As an obligation tied to Article 9, prioritising finance to developing countries
• As a transformation goal, encompassing all financial flows: public and private, domestic and global
• As a complementary element to mitigation and adaptation, working in synergy with Articles 2.1(a) and (b)

These differing views often reflect deeper political concerns, such as perceived obligations or shifts in responsibility.

Key conceptual challenges

A central issue is the interpretation of “consistency” and what constitutes a “pathway” towards climate-resilient development. Diverging views include whether such pathways should reflect 1.5°C-consistent mitigation targets, broader national priorities, or a combination of both. The role of Article 2.1(c) within the Paris Agreement architecture, whether as a means to achieve other objectives or a standalone goal, remains a matter of debate.

Scope of finance and political implications

The goal of Article 2.1(c) applies to all financial flows, but current policy and assessment efforts focus on a narrower subset, especially formal flows and trade-related finance. Tensions persist over how this goal interacts with Article 9 on climate finance. Clarity is needed on the role of private finance, which is often under-addressed despite its recognised importance.

Policy instruments and approaches

Implementation of Article 2.1(c) remains largely context-specific. The paper outlines two key categories of measures:

• Market-led instruments, such as taxonomies and climate disclosure frameworks
• Market-shaping strategies, such as fiscal and trade measures

Both approaches highlight the need for tailored, country-specific strategies, particularly in developing countries.

Systemic challenges and reform needs

Barriers such as debt burdens, high capital costs and limited fiscal space restrict the capacity of many developing countries to implement Article 2.1(c). These constraints point to a broader need for global financial architecture reform and increased international cooperation, particularly involving actors beyond national governments.

A proposed working definition

To inform future assessments, the paper proposes a working definition of Article 2.1(c) that includes all financial flows and reflects responsibilities based on equity and national circumstances. It introduces the idea of transitionally determined pathways, which reflect both national priorities and global climate objectives.

This discussion paper is part of a broader effort to develop a country-level framework to assess progress on aligning finance flows with Article 2.1(c) of the Paris Agreement. The framework will be applied in Germany as a first step, with further assessments to follow as part of an upcoming series. 

The project is jointly implemented NewClimate Institute, Germanwatch, and Frankfurt School of Finance and Management – UNEP Collaborating Centre for Climate and Sustainable Energy Finance.