This chapter explores the pivotal role of climate finance in driving energy transition and fostering the development of a green, low-carbon economy. It begins by defining climate finance and tracing its evolution, highlighting the shift from addressing climate change to meeting the financial demands of low-carbon economic transformation. The chapter examines global trends, emphasizing the growth of climate finance and its innovative products. It discusses the significant contributions of climate finance to optimizing energy structures, promoting clean energy, and supporting green recovery initiatives. The analysis also delves into policy frameworks, detailing the influence of international standards, agreements, and domestic policies. A comprehensive review of climate finance tools—such as climate credit, bonds, funds, and insurance—is provided, along with successful international and domestic case studies. Finally, the chapter addresses key challenges, including funding gaps and market barriers, while exploring innovations and future trends in climate finance to ensure sustainable economic recovery and transformation.