Climate policy eases pressure on EU defence spending by lowering Russian oil revenues – research report

Europe could reduce its spending on security and defence by cutting its reliance on fossil fuels – thereby starving Russia of funds from oil exports which are critical to financing Vladimir Putin’s war machine, the Institute for the World Economy (IfW Kiel) said in a policy brief. Ambitious EU climate policies which reduce demand for oil and natural gas would allow countries to curb defence spending without losing geopolitical strength relative to Russia, which would see fossil fuel revenues plummet, IfW Kiel said.

“Climate policy is not a competing priority to defence – it is its strategic complement,” said Joschka Wanner, author of the brief and researcher at the University of Würzburg.

Lower demand for oil in the EU lowers the global market price, said the brief. As a sizeable chunk of Russia’s state revenues comes from fossil fuel exports, it would have a lower budget for military expenses “to sustain its aggression on Ukraine and beyond”, IfW said. “If European countries reduce their spending on oil by 1 euro, Russia loses about 13 cents in revenue for its state budget,” said IfW in a press release, adding that compensation through increased imports by other countries is already priced in. “In times of war, this reduction is likely to be reflected one-to-one in Russian military spending.”

IfW said that these calculations could be used to “quantify the geopolitical benefit or damage” of individual climate policies. The introduction of a speed limit on Germany's motorways would not only save millions of tonnes of CO₂, but also reduce demand for oil, which would generate a “security dividend” of around 2 billion euros that would not have to be spent on a defence budget, it said.

The European Union and its member states aim to massively increase defence spending amid an increasingly unstable geopolitical environment and growing uncertainty over whether the bloc can rely on Donald Trump’s US for support and protection.

Climate policy advocates are worried that the rise in defence spending will come at the expense of necessary emissions reduction measures. Germany has introduced constitutional changes which allow the country to incur hundreds of billions of euros in new debt for defence, infrastructure and climate investments.