Europe’s defense pivot to drain climate funding for emerging markets

Europe slashes climate funds to fuel military build-up: European governments are diverting EUR bns in climate finance to ramp up defense spending, putting climate aid commitments on the back burner, Bloomberg reported last week. The UK is cutting USD 7.6 bn in aid to fund military expansion, while Germany plans to slash development finance by nearly USD 1 bn. The Netherlands is also trimming USD 2.5 bn, with similar reductions reported from Finland, Sweden, and Switzerland.

Commitment issues: The spending cut follows pledges at COP29 to provide USD 300 bn of climate financing to emerging economies, a figure that is far below the USD 1.3 tn that emerging countries and experts say is needed to keep global warming below 1.5 C°. Developed countries — led by the European Union — have also blocked attempts during COP29 to raise their pledged public financing, arguing that emerging nations should also seek more debt-based private financing.

The stock market tells a similar story, with the S&P Global Clean Energy Index declining 40% since the Russian-Ukrainian conflict, while the S&P Global 1200 Aerospace & Defense index went up 64% in the same period.