Covid-19 is a blunt reminder of how interconnected the world is. So is climate change. As memories of COP26 are overshadowed by the war in Europe, record inflation, and intensifying geopolitics, here’s another interesting reality to ponder over.

In 2021, total spending for energy transition attracted a record US$755 billion of investment, according to a report by BloombergNEF ( BNEF ), a research provider. Investment surged by 27%, the report notes, driven by electric transport. “However, spending must ramp up significantly to reach net-zero carbon emissions by the middle of the century,” it says. BNEF estimates that US$2.1 trillion of investment is needed in the energy transition from 2022 to 2025.

That amount is what in 2021 was the total military expenditure globally. Not only that. It is the seventh consecutive year that spending increased, according to new data on global military spending published on April 25 by the Stockholm International Peace Research Institute ( SIPRI ).

“Even amid the economic fallout of the Covid-19 pandemic, world military spending hit record levels,” writes Diego Lopes da Silva, senior researcher with SIPRI’s Military Expenditure and Arms Production Programme. “There was a slowdown in the rate of real-terms growth due to inflation. In nominal terms, however, military spending grew by 6.1%.”

With attention of the world elsewhere, the challenge of bringing down greenhouse gas ( GHG ) emissions seems that much more formidable. The pandemic, with the resulting lockdowns and the curtailment of economic activity, resulted in a 7% to 8% decline in CO2 emissions, the largest contributor to GHG emissions, according to the International Energy Agency comparing 2020 data with 2019.

With the recovery in world GDP in 2021, however, emissions likewise have also increased. It is the first year since 2010 when the carbon intensity of global GDP ( emissions per unit of GDP ) failed to improve, a Fitch Ratings commentary notes.

“Volatility in global economic activity in the past two years has highlighted the linkages that still remain between global CO2 emissions and world GDP growth,” the rating agency says. In its latest Economic Dashboard, Fitch examined the historical relationship between GDP and emissions decomposing movements in the carbon intensity of GDP into changes in energy efficiency ( energy consumption/GDP ) and the carbon intensity of energy consumption ( CO2 emissions/energy consumption ).

Improved energy efficiency contributed the most to the fall in carbon intensity of GDP by 45% since 1965. Since the late 1990s, however, the carbon intensity of energy has improved only very modestly, “reflecting the rapid increase in China’s share of global energy consumption after 2000 and its relatively high reliance on coal”.

In 2021, energy efficiency improved further, “but this was fully offset by an estimated 1.4% increase in carbon intensity of energy, the worst performance since 2003”, Fitch continues. This coincided with the reopening of many economies. “Breaking the link between emissions and GDP will be crucial to achieving climate goals given that the world’s GDP is expected to continue rising at around 2.5% to 3% over the next two decades.”

The United Nations Environment Programme Emissions Gap Report has warned that global temperature is set to rise by at least 2.7 degrees this century unless countries make much greater efforts to reduce emissions. To limit global warming to 1.5 degrees compared to pre-industrial levels by the end of the century, GHG emissions need to be halved by 2030.

To meet that target, the Global Energy Perspective 2022 report from McKinsey published in April 2022 suggests “mature economies would likely need to accelerate their annual emissions’ decline, on average, by a factor of eight to nine times compared to efforts in the last ten years. Emissions from emerging economies are projected to continue to grow over the next decade; these countries may need to move to lower-carbon growth paths sooner and reach their emission peaks earlier”.

US President Joe Biden proposed an additional US$33 billion assistance to support Ukraine, including more than US$20 billion in military aid. He said, “It is not cheap”. Neither will the cost of battling climate change. The intensification of the war in Europe with additional funding has one goal: to end up with a winner.  On the other hand, unless the world can come together to bring down GHG emissions sooner with critical funding, break the linkages that still remain between global CO2 emissions and world GDP growth, there will no winners.