The amount of foreign aid the UK spends on climate action reached a record high of around £3bn last year, according to government figures obtained by Carbon Brief.
However, Carbon Brief analysis shows that more than £500m of this sum comes from controversial changes in the way the UK calculates its climate aid for developing countries.
By leaning on private-sector investment and including existing aid projects in the total, the government is able to inflate its figures without providing as much new climate funding.
Including this money puts the UK on track for its five-year goal of providing £11.6bn by 2026 to support climate action in developing countries, even as it cuts the overall aid budget.
Climate aid – which is often referred to as “international climate finance” (ICF) – will likely still need to rise above £3bn in 2025, if the UK is to achieve its target over the next year.
The new data, released to Carbon Brief via freedom-of-information (FOI) requests, covers provisional 2024-25 spending across the three major government departments that fund climate projects overseas.
This analysis is the latest in a series of articles by Carbon Brief documenting the UK’s ICF contributions since 2011.
Key findings from the most recent year include:
- By far the largest payment last year was a £482.3m contribution to boost British International Investment’s (BII) private-sector interests in developing countries.
- Ethiopia was the largest recipient of bilateral climate finance (£92.3m). Other major recipients include Pakistan (£55.8m), Afghanistan (£43.7m) and Sudan (£41.1m).
- The biggest single project to receive funding was a World Bank initiative helping developing countries to sell carbon offsets, which received £153.9m.
- Large portions of climate finance also went to the Green Climate Fund (£227m) and the Global Environment Facility (£64.8m).
- Without the government’s changes, which mimic the looser accounting used by some other countries, climate finance would have needed to increase 78% this year. With the changes, climate finance only has to increase by 2%.
- Around £1.3bn – nearly a sixth of the UK’s ICF over the past four years – can be linked to the government’s accounting changes.
Target achieved?
After it was elected last year, Labour confirmed that it would honour the previous government’s pledge to provide £11.6bn of climate finance over the five-year period ending in 2025-26.
This money is the UK’s contribution, under the Paris Agreement, to help developing countries cut emissions and protect themselves from the threat of climate change.
Since the goal was first announced in 2019, experts have regularly voiced doubts that it can be achieved due to major cuts to the foreign-aid budget by successive governments.
More uncertainty followed the announcement in February that the Labour government would cut aid further – from 0.5% of gross national income to 0.3% – ostensibly to fund defence spending. (The government insisted that the remaining aid would “prioritise” climate.)
Despite these changes and uncertainty, the figures provided to Carbon Brief via FOI reveal that the UK is, in fact, on track to meet its £11.6bn target.
Climate-finance spending reached a record high of just under £3bn in the financial year 2024-25, more than £700m higher than the previous year.
(Note that these figures are “provisional” and subject to revision. Due to methodology changes, the final figures for UK climate finance in 2023-24 were much higher than those provided to Carbon Brief via a previous FOI. See the Methodology for more details.)
Assuming the provisional figures for 2024-25 are accurate, the UK would still need to raise its climate finance to £3.1bn in 2025-26 in order to meet the £11.6bn target, as shown in the figure below.
This level of climate finance would need to be maintained, even as the government scales back its overall aid budget in 2025.
When asked at a recent committee hearing whether there would be any new money for the £11.6bn goal, international development minister Baroness Chapman spoke frankly:
“I think the search for new money at the moment is going to be pretty fruitless…Is there going to be any new money for climate in a world where we have just gone from 0.5% to 0.3%? I think you can probably work that out.”
Instead of new funding, the upward trajectory of climate aid has been largely driven by the UK expanding what it counts towards the total. These changes were initially made under the Conservatives, but Labour has retained them.
By relabelling existing funding for multilateral development banks (MDBs), humanitarian aid and private-sector investments via BII as “climate finance”, the UK has inflated the figures without allocating genuinely new funds, making the £11.6bn goal easier to achieve.
Based on data acquired through successive FOIs, Carbon Brief estimates that £528m, or 18% of climate finance provided in 2024-25, can be linked to these accounting changes.
Since 2021, the running total of climate finance resulting from these changes is more than £1.3bn, Carbon Brief analysis suggests, amounting to nearly a sixth of spending to date.
Experts have pointed out that this amounts to a real-world cut in climate aid, as it means less additional funding than was originally pledged.
Without the accounting changes, UK climate finance would only have reached around £2.5bn last year, as the chart below shows.
To achieve the £11.6bn goal from this position, climate finance would have needed to increase by 78% this year, nearly doubling from a year earlier. In comparison, the accounting changes mean it only has to increase by 2%.
The government says that its accounting changes merely brought it in line with other countries. A Foreign, Commonwealth and Development Office (FCDO) spokesperson tells Carbon Brief:
“We will continue to account for all of our international climate finance using internationally agreed OECD guidelines. Meeting our £11.6bn commitment by March 2026 remains our ambition and it is only right that we accurately reflect the funding going to support this aim.”
In response, NGOs and aid experts have argued the UK should have retained its former position as a leader in climate-finance accounting standards, rather than aligning with the looser methodologies used by many others, such as Germany and France.
Moreover, the £11.6bn goal was meant to be a doubling of the government’s previous £5.8bn target, which was based on the original accounting methodology. If the previous target had also been based on a broader definition of climate aid, then the current £11.6bn target would have needed to be higher to represent a doubling.
As the UK nears the end of its third five-year ICF target, it is expected to announce another goal covering the period 2026-27 onwards. This will feed into the $300bn global climate finance target that nations agreed at the COP29 climate summit last year.
Amid the aid cuts, climate NGOs say that the accounting changes should be reversed and the UK should turn to “polluter-pays” measures to generate the required public funds. Catherine Pettengell, executive director of Climate Action Network UK, tells Carbon Brief:
“Our main concern is that we now have the spending review, but there is still no clarity – or vision – on current or future climate finance from the UK.”
Big investments
The UK is now leaning heavily on private-sector investments to achieve its climate-finance goals, according to Carbon Brief’s analysis.
By far the largest climate-finance input last year was a £482m contribution to the UK’s development finance institution, BII.
This is the biggest climate-finance contribution the UK has ever made in a single year, according to the data that Carbon Brief has collected in recent years.
It also amounted to nearly a fifth of the total climate finance last year and almost three times more than the UK has ever channelled into BII before.
BII is a publicly owned, for-profit company that largely supports itself with its £7.3bn portfolio of investments in developing countries, but it also receives regular injections of aid money.
The surge in BII climate finance last year can be attributed to two things.
First, the government now counts more of its BII investments as climate finance than it did previously, following the accounting changes. It argues that this more accurately reflects BII’s expanding focus on investing in clean-energy projects overseas.
The government also decided to invest an extra £400m – largely from underspending on housing asylum seekers in the UK – into BII, bringing its total budget for the year up to £881m.
Prior to these changes, the government expected BII climate finance to be worth £126m in 2024-25, according to forecasts previously obtained by Carbon Brief.
It has, therefore, added an extra £356m to BII’s contribution. Carbon Brief estimates that £218m of this can be attributed to the accounting changes, rather than the increase in funding. (See: Methodology.)
Critics argue that BII, which focuses on loans and equity finance rather than grants, is not capable of supporting climate action in the poorest and most climate-vulnerable nations. (Separately, it has also been criticised for continuing to support fossil-fuel developments.)
Last week’s spending review provided the FCDO with at least £300m annually out to 2029-30 for BII and similar organisations, even as billions are cut from its aid budget. In this context, Ian Mitchell, a senior policy fellow at the Center for Global Development, tells Carbon Brief:
“BII looks set to become the government’s main climate-finance vehicle. Though, whether this is compatible with its historic focus on Africa and the poorest countries remains to be seen.”
Meanwhile, the biggest single project to receive funding from the UK last year was the World Bank initiative titled: “Scaling Climate Action by Lowering Emissions (SCALE).” The government provided it with an initial contribution of £154m.
SCALE aims to help around 20 countries generate carbon credits that can be sold by companies on the voluntary offset market or internationally via Article 6 carbon markets.
According to the UK government, one aim is to “maximise the mobilisation of additional finance through the sale of carbon credits”.
Selling carbon offsets has long been touted as a way to channel climate finance into developing countries, but the practice has faced intense scrutiny and accusations of “greenwashing” in recent years.
Accounting changes
Other large portions of funding in the UK’s 2024-25 climate-finance budget can also be attributed to changes in the government’s accounting methodology.
For example, as of 2023, the UK started counting portions of its “core” payments into MDBs as climate finance, significantly inflating its climate-aid total.
This money is used by the banks to issue loans and – to a lesser extent – grants for projects in developing countries. While many of these projects will be climate-related, relabelling some of the UK’s contributions as “climate finance” does not result in any additional funds being distributed.
In 2024-25, this relabelling accounted for at least £103m of the total climate finance, including £84m for the African Development Bank (AfDB), £11m for the Asian Development Bank (ADB) and £8m for the Caribbean Development Bank (CDB) Special Development Fund.
In terms of bilateral aid from the UK, several of the projects with the largest share of climate finance last year were in nations facing war, famine and natural disasters.
This can partly be attributed to accounting changes that mean 30% of all humanitarian funding in the most climate-vulnerable countries – including Afghanistan, Sudan and Somalia – is now automatically counted as climate finance within government accounting.
Some of these nations have, therefore, risen to be top recipients of bilateral “climate aid” from the UK – as shown in the figure below – through programmes such as Sudan Humanitarian Preparedness and Response.
(Such programmes tend to involve the UK supporting NGOs rather than providing funds to governments. For example, FCDO has two “flagship” humanitarian programmes in Afghanistan – both with an ICF component – but does not provide funds to the Taliban.)
This accounting change was viewed by the previous Conservative government as a way to avoid a “trade-off” between climate and humanitarian projects, amid aid budget cuts.
As the map above shows, Ethiopia remained the largest recipient of UK climate finance via single-country projects last year, with £92.3m in total. This has been the case for more than a decade.
The finance largely comes from two programmes, which aim to improve climate resilience in regions of Ethiopia that have been afflicted by drought and flooding. The country has faced years of regional conflicts that have been exacerbated by climate shocks.
Rather than directly supporting individual projects in individual countries, most UK climate finance is distributed to international bodies and initiatives that serve many countries.
Some of the biggest payments are to well-established international grant providers. These include £227m for the Green Climate Fund, £64m for the Global Environment Facility and £26m for the Global Biodiversity Framework Fund (GBFF).
Other large payments went to long-running initiatives to help “build financial markets and institutions” in Africa and “mobilise private investment in infrastructure” in developing countries.
Methodology
This analysis is the latest part of Carbon Brief’s efforts to assess the UK’s ICF contributions by financial year. Detailed data underpinning these contributions is not released publicly, but is required to track progress towards the UK’s ICF targets.
Total ICF figures for the years 2011-12 to 2023-24 are based on summary public statements made by the government. Ministers have quoted different figures on different occasions, but Carbon Brief is using a March statement from FCDO minister Stephen Doughty for the 2011-12 to 2023-24 period, as this is understood to be the most up-to-date.
The figures for 2024-25 are based on FOI responses from the three major departments responsible for the UK’s overseas climate-related aid projects: FCDO, the Department for Energy Security and Net Zero (DESNZ) and the Department for Environment Food and Rural Affairs (Defra). Around 80% of climate finance provided by the UK is overseen by the FCDO.
All three of these departments provided the data for 2024-25, stressing that it is provisional. This means it is “subject to year-end accounting and audit adjustments, which are still being processed”. Carbon Brief also received the final (i.e. non-provisional) figures for 2023-24, having been given the provisional figures last year.
(The provisional figures released to Carbon Brief in 2023-24 last year were significantly lower than the final figures – amounting to £1.8bn rather than £2.3bn. This is almost entirely due to the provisional data not factoring in most of the accounting methodology changes described in this article. The provisional figures for 2024-25 appear to have factored in these methodology changes already.)
The Department for Science, Innovation and Technology (DSIT) also oversees a small number of ICF projects overseas. Unlike the other departments, DSIT rejected Carbon Brief’s FOI requests. Carbon Brief understands that its projects were worth £42m in 2023-24, roughly 1% of the total. For the sake of this analysis, Carbon Brief assumes that this amount remained the same in 2024-25.
Carbon Brief relied on previous FOI results to calculate how much of the UK’s climate finance derives from accounting changes in recent years:
- BII: According to an internal document, under its old methodology, the government originally forecast 30% of BII core capital to be climate finance in 2024-25, amounting to £126m. The final figure provided to Carbon Brief, which is also based on a higher core capital figure, is £482m. If the government had counted 30% of the higher core capital contribution as ICF, under its old methodology, the total would be £264.3. This suggests the remaining £218m of the £482m could be attributed to the methodology changes.
- MDBs: The FOI results provided to Carbon Brief show contributions to the AfDB, ADB and CDB amounting to £103m.
- Humanitarian projects: Carbon Brief has used the estimates from an internal document showing how much climate finance the government expects humanitarian aid projects to provide, including £69m in 2024-25. This may be an underestimate, as some of the projects listed in this document have higher ICF totals in the new FOI data released to Carbon Brief.
- “Scrubbed” projects: The government also asked civil servants to reappraise the existing aid portfolio in order to identify any extra ICF that could be counted. Carbon Brief has obtained an incomplete list of these projects, which states that £138m was added to the 2024-25 total in this way.
Together, these changes add up to £528m. The actual figure may be higher, as these are provisional figures.
Carbon Brief’s estimate of the cumulative impact of the accounting changes by 2024-25 – some £1.3bn – aligns with an estimate of £1.72bn for the entire five-year period out to 2025-26, made by the Independent Commission for Aid Impact (ICAI). The final figure may be higher, as ICAI’s calculation was based on government documents that did not, for example, include the increased capital contribution to BII in 2024-25.
The post Analysis: UK climate aid to hit £11.6bn goal – but only due to accounting rule change appeared first on Carbon Brief.
Analysis: UK climate aid to hit £11.6bn goal – but only due to accounting rule change
In 2026, the dangers of fossil fuel dependence have been laid bare like never before. The illegal invasion of Iran has brought pain and destruction to millions across the Middle East and triggered a global energy crisis impacting us all. Communities in the Pacific have been hit especially hard by rising fuel prices, and Australians have seen their cost-of-living woes deepen.
Such moments of crisis and upheaval can lead to positive transformation. But only when leaders act with courage and foresight.
There is no clearer statement of a government’s plans and priorities for the nation than its budget — how it plans to raise money, and what services, communities, and industries it will invest in.
As we count down the days to the 2026-27 Federal Budget, will the Albanese Government deliver a budget for our times? One that starts breaking the shackles of fossil fuels, accelerates the shift to clean energy, protects nature, and sees us work together with other countries towards a safer future for all? Or one that doubles down on coal and gas, locks in more climate chaos, and keeps us beholden to the whims of tyrants and billionaires.
Here’s what we think the moment demands, and what we’ll be looking out for when Treasurer Jim Chalmers steps up to the dispatch box on 12 May.
1. Stop fuelling the fire
2. Make big polluters pay
3. Support everyone to be part of the solution
4. Build the industries of the future
5. Build community resilience
6. Be a better neighbour
7. Protect nature
1. Stop fuelling the fire
In mid-April, Pacific governments and civil society met to redouble their efforts towards a Fossil Fuel Free Pacific. Moving beyond coal, oil and gas is fundamental to limiting warming to 1.5°C — a survival line for vulnerable communities and ecosystems. And as our Head of Pacific, Shiva Gounden, explained, it is “also a path of liberation that frees us from expensive, extractive and polluting fossil fuel imports and uplifts our communities”.
Pacific countries are at the forefront of growing global momentum towards a just transition away from fossil fuels, and it is way past time for Australia to get with the program. It is no longer a question of whether fossil fuel extraction will end, but whether that end will be appropriately managed and see communities supported through the transition, or whether it will be chaotic and disruptive.
So will this budget support the transition away from fossil fuels, or will it continue to prop up coal and gas?
When it comes to sensible moves the government can make right now, one stands out as a genuine low hanging fruit. Mining companies get a full rebate of the excise (or tax) that the rest of us pay on diesel fuel. This lowers their operating costs and acts as a large, ongoing subsidy on fossil fuel production — to the tune of $11 billion a year!
Greenpeace has long called for coal and gas companies to be removed from this outdated scheme, and for the billions in savings to be used to support the clean energy transition and to assist communities with adapting to the impacts of climate change. Will we see the government finally make this long overdue change, or will it once again cave to the fossil fuel lobby?
2. Make big polluters pay
While our communities continue to suffer the escalating costs of climate-fuelled disasters, our Government continues to support a massive expansion of Australia’s export gas industry. Gas is a dangerous fossil fuel, with every tonne of Australian gas adding to the global heating that endangers us all.
Moreover, companies like Santos and Woodside pay very little tax for the privilege of digging up and selling Australians’ natural endowment of fossil gas. Remarkably, the Government currently raises more tax from beer than from the Petroleum Resource Rent Tax (PRRT) — the main tax on gas profits.
Momentum has been building to replace or supplement the PRRT with a 25% tax on gas exports. This could raise up to $17 billion a year — funds that, like savings from removing the diesel tax rebate for coal and gas companies, could be spent on supporting the clean energy transition and assisting communities with adapting to worsening fires, floods, heatwaves and other impacts of climate change.
As politicians arrive in Canberra for budget week, they will be confronted by billboards calling for a fair tax on gas exports. The push now has the support of dozens of organisations and a growing number of politicians. Let’s hope the Treasurer seizes this rare window for reform.
3. Support everyone to be part of the solution
As the price of petrol and diesel rises, electric vehicles (EVs) are helping people cut fuel use and save money. However, while EV sales have jumped since the invasion of Iran sent fuel prices rising, they still only make up a fraction of total new car sales. This budget should help more Australians switch to electric vehicles and, even more importantly, enable more Australians to get around by bike, on foot, and on public transport. This means maintaining the EV discount, investing in public and active transport, and removing tax breaks for fuel-hungry utes and vans.
Millions of Australians already enjoy the cost-saving benefits of rooftop solar, batteries, and getting off gas. This budget should enable more households, and in particular those on lower incomes, to access these benefits. This means maintaining the Cheaper Home Batteries Program, and building on the Household Energy Upgrades Fund.
4. Build the industries of the future
If we’re to transition away from fossil fuels, we need to be building the clean industries of the future.
No state is more pivotal to Australia’s energy and industrial transformation than Western Australia. The state has unrivaled potential for renewable energy development and for replacing fossil fuel exports with clean exports like green iron. Such industries offer Western Australia the promise of a vibrant economic future, and for Australia to play an outsized positive role in the world’s efforts to reduce emissions.
However, realising this potential will require focussed support from the Federal Government. Among other measures, Greenpeace has recommended establishing the Australasian Green Iron Corporation as a joint venture between the Australian and Western Australian governments, a key trading partner, a major iron ore miner and steel makers. This would unite these central players around the complex task of building a large-scale green iron industry, and unleash Western Australia’s potential as a green industrial powerhouse.
5. Build community resilience
Believe it or not, our Government continues to spend far more on subsidising fossil fuel production — and on clearing up after climate-fuelled disasters — than it does on helping communities and industries reduce disaster costs through practical, proven methods for building their resilience.
Last year, the Government estimated that the cost of recovery from disasters like the devastating 2022 east coast floods on 2019-20 fires will rise to $13.5 billion. For contrast, the Government’s Disaster Ready Fund – the main national source of funding for disaster resilience – invests just $200 million a year in grants to support disaster preparedness and resilience building. This is despite the Government’s own National Emergency Management Agency (NEMA) estimating that for every dollar spent on disaster risk reduction, there is a $9.60 return on investment.
By redirecting funds currently spent on subsidising fossil fuel production, the Government can both stop incentivising climate destruction in the first place, and ensure that Australian communities and industries are better protected from worsening climate extremes.
No communities have more to lose from climate damage, or carry more knowledge of practical solutions, than Aboriginal and Torres Strait Islander peoples. The budget should include a dedicated First Nations climate adaptation fund, ensuring First Nations communities can develop solutions on their own terms, and access the support they need with adapting to extreme heat, coastal erosion and other escalating challenges.
6. Be a better neighbour
The global response to climate change depends on the adequate flow of support from developed economies like Australia to lower income nations with shifting to clean energy, adapting to the impacts of climate change, and addressing loss and damage.
Such support is vital to building trust and cooperation, reducing global emissions, and supporting regional and global security by enabling countries to transition away from fossil fuels and build greater resilience.
Despite its central leadership role in this year’s global climate negotiations, our Government is yet to announce its contribution to international climate finance for 2025-2030. Greenpeace recommends a commitment of $11 billion for this five year period, which is aligned with the global goal under the Paris Agreement to triple international climate finance from current levels.
This new commitment should include additional funding to address loss and damage from climate change and a substantial contribution to the Pacific Resilience Facility, ensuring support is accessible to countries and communities that need it most. It should also see Australia get firmly behind the vision of a Fossil Fuel Free Pacific.
7. Protect nature
There is no safe planet without protection of the ecosystems and biodiversity that sustain us and regulate our climate.
Last year the Parliament passed important and long overdue reforms to our national environment laws to ensure better protection for our forests and other critical ecosystems. However, the Government will need to provide sufficient funding to ensure the effective implementation of these reforms.
Greenpeace has recommended $500 million over four years to establish the National Environment Agency — the body responsible for enforcing and monitoring the new laws — and a further $50 million to Environment Information Australia for providing critical information and tools.
Further resourcing will also be required to fulfil the crucial goal of fully protecting 30% of Australian land and seas by 2030. This should include $1 billion towards ending deforestation by enabling farmers and loggers to retool away from destructive practices, $2 billion a year for restoring degraded lands, $5 billion for purchasing and creating new protected areas, and $200 million for expanding domestic and international marine protected areas.
Conclusion
This is not the first time that conflict overseas has triggered an energy crisis, or that a budget has been preceded by a summer of extreme weather disasters, highlighting the urgent need to phase out fossil fuels. What’s different in 2026 is the availability of solutions. Renewable energy is now cheaper and more accessible than ever before. Global momentum is firmly behind the transition away from fossil fuels. The Albanese Government, with its overwhelming majority, has the chance to set our nation up for the future, or keep us stranded in the past. Let’s hope it makes some smart choices.
The 2026 budget test: Will Australia break free from fossil fuels?
Anne Jellema is Executive Director of 350.org.
The war on Iran and Lebanon is a deeply unjust and devastating conflict, killing civilians at home, destroying lives, and at the same time sending shockwaves through the global economy. We, at 350.org, have calculated, drawing on price forecasts from the International Monetary Fund (IMF) and Goldman Sachs, just how much that volatility is costing us.
Even under the IMF’s baseline scenario – a de facto “best case” scenario with a near-term end to the war and related supply chain disruptions – oil and gas price spikes are projected to cost households and businesses globally more than $600 billion by the end of the year. Under the IMF’s “adverse scenario”, with prolonged conflict and sustained price pressures, we estimate those additional costs could exceed $1 trillion, even after accounting for reduced demand.
Which is why we urgently need a power shift. Governments are under growing pressure to respond to rising fuel and food costs and deepening energy poverty. And it’s becoming clearer to both voters and elected officials that fossil dependence is not only expensive and risky, but unnecessary.
People who can are voting with their wallets: sales of solar panels and electric vehicles are increasing sharply in many countries. But the working people who have nothing to spare, ironically, are the ones stuck with using oil and gas that is either exorbitantly expensive or simply impossible to get.
Drain on households and economies
In India, street food vendors can’t get cooking gas and in the Philippines, fishermen can’t afford to take their boats to sea. A quarter of British people say that rising energy tariffs will leave them completely unable to pay their bills. This is the moment for a global push to bring abundant and affordable clean energy to all.
In April, we released Out of Pocket, our new research report on how fossil fuels are draining households and economies. We were surprised by the scale of what we found. For decades, governments have reassured people that energy price spikes are unfortunate but unavoidable – the result of distant conflicts, market forces or geopolitical shocks beyond anyone’s control. But the numbers tell a different story.
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Santa Marta: Ministers grapple with practicalities of fossil fuel phase-out
Around 60 governments that want to make progress on transitioning away from coal, oil and gas are meeting in Colombia to work out how they can do it an equitable way -
Why the transition beyond fossil fuels depends on cities and collective action
Cities will help identify concrete pathways for an equitable shift to clean energy at the Santa Marta conference, with C40 members aiming to halve their fossil fuel use by 2030
What we are living through today is not an energy crisis. It is a fossil fuel crisis. In just the first 50 days of the Middle East conflict, soaring oil and gas prices have siphoned an estimated $158 billion–$166 billion from households and businesses worldwide. That is money extracted directly from people’s pockets and transferred, almost instantly, into fossil fuel company balance sheets. And this figure only captures the immediate impact of price spikes, not the permanent economic drain of fossil dependence. Fossil fuels don’t just cost us once, they cost us over and over again.
First, through our bills. Every time there is a war, an embargo or a supply disruption, fossil fuel prices surge. For ordinary people, this means higher costs for energy, transport and food. Many Global South countries have little or no fiscal space to buffer the shock; instead, workers and families pay the price.
Second, through our taxes. Governments around the world continue to pour vast sums of public money into fossil fuel subsidies. These are often justified as a way to protect the most vulnerable at the petrol pump or in their homes. But in reality, the benefits are overwhelmingly captured by wealthier households and corporations. The poorest 20% receive just a fraction of this support, while public finances are drained.
Third, through climate impacts. New research across more than 24,000 global locations gives a granular account of the true costs of extreme heat, sea level rise and falling agricultural yields. Using this data to update IMF modelling of the social cost of carbon, we found that fossil fuel impacts on health and livelihoods amount to over $9 trillion a year. This is the biggest subsidy of all, because these massive and mounting costs are not charged to Big Oil – they are paid for by governments and households, with the poorest shouldering the lion’s share.
Massive transfer of wealth to fossil fuel industry
Adding up direct subsidies, tax breaks and the unpaid bill for climate damages, the total transfer of wealth from the public to the fossil fuel industry amounts to $12 trillion even in a “normal” year without a global oil shock. That’s more than 50% higher than the IMF has previously estimated, and equivalent to a staggering $23 million a minute.
The fossil fuel industry has become extraordinarily adept at profiting from instability. When conflict drives up prices, companies do not lose, they gain. In the current crisis, oil producers and commodity traders are on track to secure tens of billions of dollars in additional windfall profits, even as households face rising bills and governments struggle to manage the fallout.
Fossil fuel crisis offers chance to speed up energy transition, ministers say
This growing disconnect is impossible to ignore. Investors are advised to buy into fossil fuel firms precisely because of their ability to generate profits in times of crisis. Meanwhile, ordinary people are told to tighten their belts.
In 2026, unlike during the oil shocks of the 1970s, clean energy is no longer a distant alternative. Now, even more than when gas prices spiked due to Russia’s invasion of Ukraine in 2022, renewables are often the cheapest option available. Solar and wind can be deployed quickly, at scale, and without the volatility that defines fossil fuel markets.
How to transition from dirty to clean energy
The solutions are clear. Governments must implement permanent windfall taxes on fossil fuel companies to ensure that extraordinary profits generated during crises are redirected to support households. These revenues can be used to reduce energy bills, invest in public services, and accelerate the rollout of clean energy.
Second, we must shift subsidies away from fossil fuels and towards renewable solutions, particularly those that can be deployed quickly and equitably, such as rooftop and community solar. This is not just about cutting emissions. It is about building a more stable, fair and resilient energy system.
Finally, we need binding plans to phase out fossil fuels altogether, replacing them with homegrown renewable energy that can shield economies from future shocks. Because what the current crisis has made clear is this: as long as we remain dependent on fossil fuels, we remain vulnerable – to conflict, to price volatility and to the escalating impacts of climate change.
The true price of fossil fuels is no longer hidden. It is visible in rising bills, strained public finances and communities pushed to the brink. And it is being paid, every day, by ordinary people around the world.
It’s time for the great power shift.
Full details on the methodology used for this report are available here.
The Great Power Shift is a new campaign by 350.org global campaign to pressure governments to bring down energy bills for good by ending fossil fuel dependence and investing in clean, affordable energy for all
The post What fossil fuels really cost us in a world at war appeared first on Climate Home News.
Computer models that use artificial intelligence (AI) cannot forecast record-breaking weather as well as traditional climate models, according to a new study.
It is well established that AI climate models have surpassed traditional, physics-based climate models for some aspects of weather forecasting.
However, new research published in Science Advances finds that AI models still “underperform” in forecasting record-breaking extreme weather events.
The authors tested how well both AI and traditional weather models could simulate thousands of record-breaking hot, cold and windy events that were recorded in 2018 and 2020.
They find that AI models underestimate both the frequency and intensity of record-breaking events.
A study author tells Carbon Brief that the analysis is a “warning shot” against replacing traditional models with AI models for weather forecasting “too quickly”.
AI weather forecasts
Extreme weather events, such as floods, heatwaves and storms, drive hundreds of billions of dollars in damages every year through the destruction of cropland, impacts on infrastructure and the loss of human life.
Many governments have developed early warning systems to prepare the general public and mobilise disaster response teams for imminent extreme weather events. These systems have been shown to minimise damages and save lives.
For decades, scientists have used numerical weather prediction models to simulate the weather days, or weeks, in advance.
These models rely on a series of complex equations that reproduce processes in the atmosphere and ocean. The equations are rooted in fundamental laws of physics, based on decades of research by climate scientists. As a result, these models are referred to as “physics-based” models.
However, AI-based climate models are gaining popularity as an alternative for weather forecasting.
Instead of using physics, these models use a statistical approach. Scientists present AI models with a large batch of historical weather data, known as training data, which teaches the model to recognise patterns and make predictions.
To produce a new forecast, the AI model draws on this bank of knowledge and follows the patterns that it knows.
There are many advantages to AI weather forecasts. For example, they use less computing power than physics-based models, because they do not have to run thousands of mathematical equations.
Furthermore, many AI models have been found to perform better than traditional physics-based models at weather forecasts.
However, these models also have drawbacks.
Study author Prof Sebastian Engelke, a professor at the research institute for statistics and information science at the University of Geneva, tells Carbon Brief that AI models “depend strongly on the training data” and are “relatively constrained to the range of this dataset”.
In other words, AI models struggle to simulate brand new weather patterns, instead tending forecast events of a similar strength to those seen before. As a result, it is unclear whether AI models can simulate unprecedented, record-breaking extreme events that, by definition, have never been seen before.
Record-breaking extremes
Extreme weather events are becoming more intense and frequent as the climate warms. Record-shattering extremes – those that break existing records by large margins – are also becoming more regular.
For example, during a 2021 heatwave in north-western US and Canada, local temperature records were broken by up to 5C. According to one study, the heatwave would have been “impossible” without human-caused climate change.
The new study explores how accurately AI and physics-based models can forecast such record-breaking extremes.
First, the authors identified every heat, cold and wind event in 2018 and 2020 that broke a record previously set between 1979 and 2017. (They chose these years due to data availability.) The authors use ERA5 reanalysis data to identify these records.
This produced a large sample size of record-breaking events. For the year 2020, the authors identified around 160,000 heat, 33,000 cold and 53,000 wind records, spread across different seasons and world regions.
For their traditional, physics-based model, the authors selected the High RESolution forecast model from the Integrated Forecasting System of the European Centre for Medium-Range Weather Forecasts. This is “widely considered as the leading physics-based numerical weather prediction model”, according to the paper.
They also selected three “leading” AI weather models – the GraphCast model from Google Deepmind, Pangu-Weather developed by Huawei Cloud and the Fuxi model, developed by a team from Shanghai.
The authors then assessed how accurately each model could forecast the extremes observed in the year 2020.
Dr Zhongwei Zhang is the lead author on the study and a researcher at Karlsruhe Institute of Technology. He tells Carbon Brief that many AI weather forecast models were built for “general weather conditions”, as they use all historical weather data to train the models. Meanwhile, forecasting extremes is considered a “secondary task” by the models.
The authors explored a range of different “lead times” – in other words, how far into the future the model is forecasting. For example, a lead time of two days could mean the model uses the weather conditions at midnight on 1 January to simulate weather conditions at midnight on 3 January.
The plot below shows how accurately the models forecasted all extreme events (left) and heat extremes (right) under different lead times. This is measured using “root mean square error” – a metric of how accurate a model is, where a lower value indicates lower error and higher accuracy.
The chart on the left shows how two of the AI models (blue and green) performed better than the physics-based model (black) when forecasting all weather across the year 2020.
However, the chart on the right illustrates how the physics-based model (black) performed better than all three AI models (blue, red and green) when it came to forecasting heat extremes.
The authors note that the performance gap between AI and physics-based models is widest for lower lead times, indicating that AI models have greater difficulty making predictions in the near future.
They find similar results for cold and wind records.
In addition, the authors find that AI models generally “underpredict” temperature during heat records and “overpredict” during cold records.
The study finds that the larger the margin that the record is broken by, the less well the AI model predicts the intensity of the event.
‘Warning shot’
Study author Prof Erich Fischer is a climate scientist at ETH Zurich and a Carbon Brief contributing editor. He tells Carbon Brief that the result is “not unexpected”.
He adds that the analysis is a “warning shot” against replacing traditional models with AI models for weather forecasting “too quickly”.
The analysis, he continues, is a “warning shot” against replacing traditional models with AI models for weather forecasting “too quickly”.
AI models are likely to continue to improve, but scientists should “not yet” fully replace traditional forecasting models with AI ones, according to Fischer.
He explains that accurate forecasts are “most needed” in the runup to potential record-breaking extremes, because they are the trigger for early warning systems that help minimise damages caused by extreme weather.
Leonardo Olivetti is a PhD student at Uppsala University, who has published work on AI weather forecasting and was not involved in the study.
He tells Carbon Brief that “many other studies” have identified issues with using AI models for “extremes”, but this paper is novel for its specific focus on extremes.
Olivetti notes that AI models are already used alongside physics-based models at “some of the major weather forecasting centres around the world”. However, the study results suggest “caution against relying too heavily on these [AI] models”, he says.
Prof Martin Schultz, a professor in computational earth system science at the University of Cologne who was not involved in the study, tells Carbon Brief that the results of the analysis are “very interesting, but not too surprising”.
He adds that the study “justifies the continued use of classical numerical weather models in operational forecasts, in spite of their tremendous computational costs”.
Advances in forecasting
The field of AI weather forecasting is evolving rapidly.
Olivetti notes that the three AI models tested in the study are an “older generation” of AI models. In the last two years, newer “probabilistic” forecast models have emerged that “claim to better capture extremes”, he explains.
The three AI models used in the analysis are “deterministic”, meaning that they only simulate one possible future outcome.
In contrast, study author Engelke tells Carbon Brief that probabilistic models “create several possible future states of the weather” and are therefore more likely to capture record-breaking extremes.
Engelke says it is “important” to evaluate the newer generation of models for their ability to forecast weather extremes.
He adds that this paper has set out a “protocol” for testing the ability of AI models to predict unprecedented extreme events, which he hopes other researchers will go on to use.
The study says that another “promising direction” for future research is to develop models that combine aspects of traditional, physics-based weather forecasts with AI models.
Engelke says this approach would be “best of both worlds”, as it would combine the ability of physics-based models to simulate record-breaking weather with the computational efficiency of AI models.
Dr Kyle Hilburn, a research scientist at Colorado State University, notes that the study does not address extreme rainfall, which he says “presents challenges for both modelling and observing”. This, he says, is an “important” area for future research.
The post Traditional models still ‘outperform AI’ for extreme weather forecasts appeared first on Carbon Brief.
Traditional models still ‘outperform AI’ for extreme weather forecasts
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