Emissions of planet-warming greenhouse gases continued to rise in 2025 and promises to cut countries nowhere near where they need to be to avoid catastrophic climate change, but there were silver linings.
According to research by the London-based non-profit Energy and Climate Intelligence Unit, climate change is expected to decarbonize faster than expected 10 years ago and investment in the clean energy transition, which includes everything from wind and solar to batteries and the grid, is set to reach a new record of $2.2 trillion globally in 2025.
“As climate change leads to more extreme weather events, catastrophe bonds are also emerging as a new tool to fund disaster preparedness. These financial instruments, designed to pay a certain amount if damage from climate-driven natural disasters is severe, have traditionally been used to cover inventories.”
“Is that enough to keep us safe? No it’s clearly not,” said Garrett Redmond King, international lead at the ECIU. “Is that a significant improvement over where we were headed? Clearly it is.”
It was also the year that renewable electricity capacity reached new heights, batteries became cheaper than ever and extraordinary levels of safety for the high seas became a reality. Artificial intelligence has made climate research faster and more efficient and weather forecasting more accurate. And even as the devastation of climate change became more apparent, economies and people were able to access an increasing number of tools to protect themselves.
Here’s a look at these and other investments, innovations and policy changes that are climate-friendly in 2025:
Clean energy boom
Global investment in cleantech far exceeded what polluting industries achieved. According to ECIU, for every $1 in funding for fossil fuel projects, $2 went to clean power. For China, the EU, the US and India, the four biggest polluters, it was $2.60.
Funds flowing into renewable electricity set another record in the first half of this year and will rise 10 percent over the same period in 2024, to $386 billion, according to the latest available research from Bloomberg.
According to U.K.-based energy think tank Amber, solar and wind grew fast enough to meet all new global electricity demand in the first three quarters of 2025. This means renewable capacity will set a new global record this year, with Amber predicting an 11% increase from 2024.
Over the last three years, renewable capacity grew by an average of about 30%. This puts the world on track for the 2023 target set at COP 28 in Dubai in 2023.
China is leading the charge, with the world’s biggest polluter expected to account for 66 percent of global air and 69 percent of new air this year, according to Amber. Renewables also advanced in parts of Asia, Europe and South America.
The climate benefit of AI
Explosive electricity demand from artificial intelligence is also turning the tide on green technology investment, which has stagnated in recent years. For the first three quarters of this year, global cleantech investment, which funds next-generation nuclear reactors, renewables and other solutions that help power data centers, has already crossed all of 2024. This marks the sector’s first annual increase since the 2022 peak.
And despite President Donald Trump’s rollback of climate policies, clean energy, tracked by the S&P’s central gauge, has risen nearly 50 percent this year, outperforming most other stock indexes and even gold. The same enthusiasm has also helped the channel invest more in developing and upgrading the power grid, the backbone of the global energy transition.
The rise of artificial intelligence is also playing a role in enabling new climate solutions and accelerating scientific research.
Vemo’s self-driving electric vehicles use AI to optimize and minimize route planning, optimizing route planning and reducing their carbon footprint. Meanwhile, bridge inspectors deploy AI-enabled scanning systems to help protect critical infrastructure against overheating. AI is also helping scientists identify and count endangered species, and weather forecasters are more accurate.
Cheap batteries
Battery prices, a long view in powering a variety of products, continue to drop.
Prices per kilowatt-hour of battery capacity have fallen 8 percent to a record $108 this year and are expected to drop another 3 percent next year, according to Bloomberg. The decline is the result of improved manufacturing, cheaper chemical compositions and a glut of production, factors that have far outweighed the prices of the metals that go into batteries.
Swing pricing improves economics on a range of products, from lawnmowers to commercial drones. Automakers, in particular, will be able to encourage EV adoption with long-range, low-cost vehicles.
The biggest unlock will be in utility-scale storage systems that bottle energy from solar and wind farms and release it during peaks in power demand.
The U.S. Energy Information Administration estimates that 18.2 gigawatts of storage capacity will come online in 2025, representing a 77 percent increase over the previous year and nearly a third of the nation’s new power. These facilities are now the cheapest options for utilities looking to build power plants. Soon, they will still be cheap.
International developments
The international community won some big wins this year when Trump withdrew the United States from the Paris Agreement and rallied against cleantech.
Three years after its adoption, the so-called High Seas Treaty finally got the necessary numbers to enter into force in January 2026. It would allow the protection of 60 percent of the oceans that cannot fall under the jurisdiction of any country, and regulate what can and cannot happen in international waters for the first time.
It sets the framework for the establishment of marine protected areas and requires that environmental impact assessments be conducted for activities that may have a harmful or unknown impact on the high seas. It comes at a time when interest is growing in using the ocean to absorb and store carbon dioxide and mine the rare minerals sitting on its bed.
Meanwhile, the International Court of Justice issued its first ruling in favor of climate action, promising to change the way NGOs and campaigning governments are held to account. In July, the court ruled that countries risk being in breach of international law if they do not act to keep global warming to a 1.5C threshold at the Paris climate conference in 2015. It is an advisory opinion, but representatives from Vanuatu, the country that brought the case, said it could be used to pressure more governments on climate change.
Climate policy
While America rolled back its environmental policy, others pushed forward. Australia, Denmark and the UK announced more ambitious emissions targets. Although China has been more timid in its goals, most experts expect it to beat its target to cut emissions by 7 to 10 percent from peak levels by 2035, at the rate at which it is expanding its clean energy capacity.
World capitals historically dominated by cars have started to push back, and instead try to encourage their residents to walk and get around. Cities in Europe are further down the road, but in January, New York City introduced measures designed to prevent drivers from entering certain parts of the city. By April it was already clear that the change was reducing congestion and shortening journey times. More recently, researchers have observed a 22% reduction in harmful particulate pollution in the area where the charges are applied.
Overall, climate policy shows signs of being firmly embedded in national government policies, the ECIU found in its research. The Trump administration’s rollbacks of key climate and environmental regulations mean the share of the global economy covered by net-zero goals in 2024 falls below 80 percent, but state-level targets and policies are preventing that number from holding the line and falling further.
Win for adaptation
Meanwhile, climate change adaptation is also attracting more funding. Billionaire philanthropist Bill Gates’ foundation announced in November that it would commit $1.4 billion over four years to expand access to innovations that help farmers in Africa and Asia become more resilient. This year’s annual UN climate summit concluded with a new agreement on triple adaptation finance of $120 billion per year until 2035.
Hurricane Melissa — a tragedy that killed dozens of people in Jamaica and wiped out about 40% of the country’s annual economic output — is also a dark example of how catastrophic bonds can help transfer climate risks to capital markets. The deadly storm triggered the full repayment of Jamaica’s $150 million cat bond, and has eased doubts about whether such instruments work.
As climate change prepares for more extreme weather events, catastrophe bonds are also emerging as a new tool to fund disaster preparedness. These financial instruments, designed to pay a certain amount if damage from climate-driven natural disasters is severe, have traditionally been used to cover losses. But this year, hurricane-ravaged North Carolina expanded the use case by issuing a new cat bond that encourages adaptation.
If there is no major damage, $2 million goes back to the North Carolina Insurance Underwriting Association, the bond issuer, which then uses the money to help install wind-resistant “super roofs.” As more homeowners add these roofs, annual rates on the bond reset to factor in the changing exposure.
The new bond attracted $600 million in investor interest, nearly doubling its initial offering. The NCIUA, which acts as the state-sponsored insurer in North Carolina, also expects the new flexible roofs to contribute to fewer insurance claims and lower insurance costs.
Top image: Wind turbines and solar panels in Khoda, Gujarat, India. Photo credit: Somit Dayal/Bloomberg
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