Crypto News: Europe diverts climate funds for defense

Today's newsletter looks at how Europe's defense budget is ripping through its climate-crisis buffer. You can also read and share this story on Bloomberg.com. For unlimited access to climate and energy news, please subscribe.

Europe diverts climate funds for war chest

By Gautam Naik

Europe's race to build a war economy has led the bloc to pull spending desperately needed for another crisis: the climate.

The redirection of billions of euros away from development finance meant to fight the fallout of floods, droughts and cyclones in poorer countries has the potential to fuel European inflation, drive up immigration and weaken the bloc's standing abroad.

"We are mutually dependent on these countries," said Gareth Redmond-King, head of international program at Energy and Climate Intelligence Unit, a nonprofit.

In the UK, Prime Minister Keir Starmer has announced plans to cut aid spending by £6 billion ($7.6 billion) to make room for increased military spending. Germany intends to scale back development finance by almost $1 billion, while the Netherlands has unveiled €2.4 billion ($2.5 billion) of cuts. Across Europe, governments including Finland, Sweden and Switzerland are releasing similar plans.

Volodymyr Zelenskiy, Ukraine's president, left, and Keir Starmer, UK prime minister, ahead of a summit in London on March 2. Photographer: Chris J. Ratcliffe/Bloomberg

Redmond-King said the pullback has implications for a whole range of soft commodities in countries that export to Europe. Fewer protections against climate disasters will likely result in higher prices on everything from coffee to cocoa and bananas, he said. He also warns that spending cuts here and now mean future climate costs may rise.

The UK imports two-fifths of its food from abroad, half of which comes from areas where crops face an increase in heat waves, floods and other impacts of climate change, according to the ECIU.

David Miliband, a former Labour foreign secretary who's now chief executive of the International Rescue Committee, said the UK's decision to withdraw development finance marks "a blow to Britain's proud reputation as a global humanitarian and development leader." Meanwhile, Anneliese Dodds, the UK's minister for international development, has resigned in protest.

Ironically, the retreat by western governments from development finance risks ceding soft power in strategically important geographies to nations that Europe considers hostile, according to Redmond-King.

"The world has changed a lot in the last month and there's no question we have to raise defense spending," he said. But by cutting climate aid to developing nations "we risk withdrawing something that stabilizes those countries and opens up an opportunity for others – like Russia – to step in."

Europe's retreat from development finance adds to the blow delivered by the policies of US President Donald Trump, which froze foreign aid and began dismantling the US Agency for International Development. The agency managed $43 billion of foreign aid in 2023.

The hollowing out of development budgets comes just three months after the COP29 summit in Baku, Azerbaijan, where rich countries finalized a hard-won agreement to provide $300 billion of annual climate aid to poorer nations.

That pledge is now in jeopardy.

"It will be much more difficult to live up to the commitments signed up to at Baku," said Redmond-King.

Meanwhile, investors are turning their backs on stocks whose value is tied to climate spending. The S&P Global Clean Energy Index has lost about 40% of its value since Russia invaded Ukraine in February 2022. The S&P Global 1200 Aerospace & Defense Index climbed 64% in the same period.

Read and share this story on Bloomberg.com.

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$200 billion

This is how much 140 countries agreed to mobilize each year by the end of the decade to help reverse dramatic losses in biodiversity.

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"Globally, these fires are happening everywhere. Places that haven't had wildfires are now burning. Japan hasn't had a wildfire problem, and now it's burning."

Samuel Manzello

Visiting professor at Tohoku University's Institute of Fluid Science

More From Green

Decarbonizing your life will get more expensive as President Donald Trump imposes tariffs on the US' top trading partners, spiking the cost of home heat pumps, battery storage systems and electric cars, according to economists.

Trump on Tuesday levied 25% tariffs on goods imported from Canada and Mexico, a day after he signed an executive order doubling a tariff on Chinese products to 20%. The administration has said it intends to put a tax on imports from the European Union and collect a 25% tariff on aluminum and steel imports.

"It's definitely going to slow down the shift to electric vehicles in particular," said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. "Once you include taxes on Canada and Mexico, you are going to be hard-pressed to find anything that isn't in some way or another subject to these taxes."

In addition to finished goods, the US imports components from those countries to assemble cars and other products domestically.

A technician installs an electric heat pump. Photographer: The Washington Post/The Washington Post/Getty Images

In other news

United States

The trade war is adding strain to New York City's climate goals. The city's access to clean electricity took another blow as a key Canadian province moved to respond to US tariffs with a 25% surcharge on power exports across the border.

A climate finance co-founder is arrested on fraud charges. Joseph Sanberg of the unicorn startup Aspiration Partners — once valued at $2 billion — was arrested on charges linked to loans he took out using shares of the company's stock as collateral.

The EPA unfreezes funds for solar grants. A $7 billion US government grant program for solar energy has been unfrozen by the Environmental Protection Agency following a review of Biden-era climate spending mandated by the White House.

Europe

Belgium's EV market gets a boost from company cars. EV sales surged 37% last year after the government introduced new tax policies that make it more favorable for companies' to buy all-electric corporate cars. The policy is now seen as a potential model for other European nations.

A surge in electric-powered company cars has triggered an expansion of charging points, like this one in Brussels. Photographer: Ksenia Kuleshova/Bloomberg

Ireland rolls back on climate in favor of security. The nation approved a plan to develop an emergency gas facility amid energy security concerns. It's a departure from the country's previous stance on what energy facilities it approves as it tries to meet ambitious climate goals.

A huge Nordic battery-storage facility gets the green light. The 70-megawatt project, led by SEB Nordic Energy's Locus Energy and Ingrid Capacity AB, is starting construction in Nivala, Finland. The unit will be able to store power for two hours when it's expected to be operational in the second half of the year.

Asia

China plans to cut energy use per unit of GDP. China plans to reduce energy used to grow its GDP by around 3% in 2025, slightly higher than its 2024 goal but below last year's result. As part of this push, the country's top leaders also pledged to expand the nation's emissions trading system to cover more industries.

Japan's second-largest bank exits industry's net zero pact. Sumitomo Mitsui Financial Group is the first major Japanese lender to withdraw from the Net-Zero Banking Alliance, joining an exodus led by institutions from Wall Street and Canada. Goldman Sachs, Morgan Stanley and Bank of America have also departed.

US halts global air pollution monitoring program. The State Department first began collecting and publishing air quality data from its embassy in Beijing in 2008 and expanded the program to cover dozens of locations. The program has now been halted on budget grounds.

Weather watch

By Ben Westcott

A tropical cyclone off Australia's northeast coast that's menacing the city of Brisbane could derail the government's plans to call an election this weekend — after speculation mounted that Prime Minister Anthony Albanese was on the verge of setting an April 12 ballot.

While Australia must hold a vote by mid-May, there has been a growing view in and around Parliament House in Canberra that the prime minister will call an election slightly earlier to capitalize on improved economic data and the first interest-rate cut in more than four years.

That plan risks unraveling asCyclone Alfred heads toward Brisbane, Australia's third-largest city with 2.5 million people, and is due to cross the coast early Friday. The likelihood of torrential rains and widespread flooding suggests it would be wrong to announce an election in the wake of a natural disaster.

Cyclone Alfred on March 5. Source: RAMMB/CIRA

Worth a listen

The world of ESG regulation and investing was already suffering a period of shaky confidence even before President Donald Trump returned to the White House. Now, companies are facing a new period of uncertainty when it comes to Environmental, Social, and Governance policies. Reporter Frances Schwartzkopff tells Akshat Rathi why the EU is rolling back some ESG legislation. And reporter Saijel Kishan explains that many companies today are still keeping their ESG plans in place — but just not talking about it. Listen now, and subscribe on Apple, Spotify, or YouTube to get new episodes of Zero every Thursday.