Bad news for the earth: Climate action scepticism rises among policymaker

Germany’s elections, which were held on Sunday, represent a turning point in the battle against climate change. The world has gone through a decade since just before the Paris Agreement was signed, during which taking action against carbon emissions had become a matter of political consensus across the major economies. This is now poised to change. 

Friedrich Merz, who leads Germany’s conservative parties, has been quite clear about what he thinks. Speaking in January in an industrial West German town, he warned that German economic policies had been “almost exclusively geared towards climate protection”, and that “we will and must change that”. Decommissioning coal and nuclear power plants without an adequate replacement in place would “massively jeopardise Germany as an industrial location”, and thus was “out of the question”.

  Mr Merz’s words are a fair representation of what the core base of his Christian Democrats feels. The small business and medium-sized industries, or Mittelstand, that power the German economy have begun to worry that their export-led growth is not replicable in a future in which Europe’s energy costs are consistently higher than those of its competitors. Mr Merz himself is unusual in German politics in that he took a long break in the private sector whose concerns he was so effectively representing. He worked for an American law firm, and then sat on the boards of vast companies from BASF to Bayer, Airbus, AXA and Commerzbank.

  A Germany less committed to climate action would swing Europe in a very different direction from the one it has been going for some time. Many other major polities — such as Poland — are not particularly committed to the fight against climate change. France and Sweden have the luxury of getting their electricity almost exclusively from low-emission sources — nuclear power and hydropower, respectively. Italy’s Prime Minister, Giorgia Meloni, had raised eyebrows in the past by avoiding talking about climate change domestically although she has stuck to the common European line in foreign engagements. Her government has sought to increase Italian access to natural gas through both newly laid undersea pipelines and freshly built terminals for liquefied natural gas.

  This is particularly significant given that other major emitters — the United States (US), China, and India — clearly expected the Europeans to shoulder the largest part of the burden of reducing emissions. Under its new President, the US may abandon climate action at the federal level altogether. But even the previous Democratic administration did little to make carbon emissions more expensive. They preferred to spend billions on subsidising renewable energy projects, which were then caught up in their own red tape. This was the worst of both worlds, and it is not entirely surprising that it turned out to be unpopular at the ballot box.

  Meanwhile, China — which still pretends to be a developing country, in spite of being five times richer than India and the world’s largest emitter for decades now — makes a great deal of noise about its action on climate change but that is not entirely justified by the facts. The country has now emitted more carbon than the European Union ever has, and its per capita carbon emissions are double the global average and still growing.

  Beijing’s domestic policy does not match its global rhetoric. China’s leaders have responded to a slowing local economy by subsidising carbon-intensive sectors, and so many believe it will miss its self-imposed targets for a peak in its emissions. Meanwhile, the construction of new coal-fired thermal power plants on the mainland reached a 10-year high in 2024, with almost 100 gigawatts of additional capacity being added to the pipeline. Fewer plants are being shut down as well; about 13 gigawatts of capacity went offline in 2020, as compared to 2.5 gigawatts in 2024.

  When Donald Trump was first elected President eight years ago he took the US out of the Paris Agreement just as he did again in 2025. But many believed that American climate action could and would continue even without the assistance of the federal government. Indeed, it seemed that large companies and the financial markets would work to ensure that emission-intensive sectors would see less investment and face a higher cost of capital.

  But this time around appears different — not least because financial institutions are less enamoured of climate issues than they were in the past. Multiple large groupings of companies, investors or banks that were constructed to create peer pressure for greening the financial sector have become moribund or been tacitly disbanded. The premium for green bonds — which represents how much extra investors are willing to pay for environmentally-sustainable investments — almost vanished in 2024. Meanwhile, issuances of green bonds from US-based sources are half of what they used to be, and dollar-denominated green bonds now represent only 14 per cent of the global green bond market.

  Thus finance does not appear as willing to pick up the slack if governments avoid fulfilling their commitments on climate change. If not, it is hard to see where the next impetus for climate action will come from.

  From an Indian perspective, this is all very bad news. India is more exposed to the dangers of a warming world — unpredictable agriculture, drying water sources, natural disasters, heat stress — than any other nation. It has less money per capita available for adaptation to climate change than most other parts of the world, and it is unusually dependent on reliable weather patterns for its food security and affordability.

  But we also have no domestic energy resources other than coal. Renewable energy has been seen as a source of energy security for India because it reduces our dependence on the imports of oil and gas. But, on the other hand, China’s outsize presence in the rare earths and solar panel supply chain has begun to raise questions about whether we are substituting one danger for another. Unlike China, India’s per capita emissions are well below the global average, and by any principle of natural justice should be allowed to rise considerably as others’ fall to compensate. But if everybody — from China to the US to even Europe — begins to postpone or slow their emissions reductions, where does it leave India’s carbon budget?

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  The author is director, Centre for the Economy and Growth, Observer Research Foundation, New Delhi