2024 was the hottest year ever recorded. According to the Copernicus Climate Change Service, it was also the first calendar year reaching more than 1.5°C above pre-industrial levels. As temperatures grew, cataclysmic wildfires burned on all corners of the planet, from the US and Canada to Australia, Greece, Spain and Portugal.

And yet, the resolve for effective climate action remains woefully inadequate. COP29 in Baku ended with rich countries pledging an annual 300 billion dollars to the global fight against climate change. Developing countries, which had requested over a trillion dollars, say the agreed sum is too low and condemn it as an insult. To put things into perspective, different institutions such as the Organisation for Economic Co-operation and Development, Goldman Sachs, and the Climate Policy Initiative put the cost of reaching net-zero emissions in the coming years in the tens of trillions.

In Europe, the world’s fastest-warming continent and increasingly a site of extreme weather events, the need for a greener economy has become more evident than ever in the wake of Russia’s invasion of Ukraine and the ensuing energy insecurity. Former Italian premier Mario Draghi made decarbonisation a centrepiece of his long-awaited report on Europe’s economic competitiveness. Still, the appetite for ambitious climate investments is not growing at the same rate as the frequency and scale of the climate crisis. But why is that?

Inevitably, the answer lies in politics. Within the European Union, climate investment is hampered by an economic orthodoxy which tilts towards austerity. This structural obstacle to meaningful climate action has been compounded in recent years by growing right-wing opposition to climate policies, which threatens the implementation of Europe’s green agenda.

From Paris to Berlin, governments are prioritising defence spending and cutting red tape for corporations over climate action, and the results of the recent German federal elections will only worsen this trend. CDU/CSU, the party that finished first in the vote, has openly expressed concern about the impact of climate policy on businesses and led a call to roll back several EU green regulations. In addition, The European People’s Party (EPP) – the biggest force in the European Parliament, of which CDU/CSU is a member – has pushed to water down the EU deforestation law to appease the far-right. Amidst this anti-green politicking, what is too often overlooked is that climate austerity and the growing “greenlash” are closely related.

The first echoes of austerity 

The shortcomings of the European fiscal framework started to become visible in the aftermath of the 2009 eurozone crisis. The bloc was going through one of its major economic and social upheavals, with peripheral member states being particularly affected by the budgetary restrictions imposed on public finances. The EU fiscal and economic framework, one of the union’s most debated structures, was emerging as a major culprit of austerity.

Dating back to the 1992 ratification of the Maastricht Treaty, which included fiscal rules limiting headline deficit to 3 per cent and debt to 60 per cent of member states’ gross domestic product (GDP), the core of Europe’s fiscal framework has changed very little in the past years despite significant shifts in the macroeconomic landscape of the Union. It was a fiscal system that was typical of the prevailing economic ideas of the day, prioritising austerity over public investments.

In the wake of the 2008 global financial crisis, the EU remained captive to the faulty design of the Maastricht Treaty and so arrived at a false diagnosis of the problem. Austerity, as political economist Mark Blyth​​ described it, is the deliberate deflation of domestic wages and prices through cuts to public spending. In Europe, this fiscal obedience proved fateful as, far from reducing debts, many member states’ debt levels rose sharply. The consequences particularly affected countries in ​​Southern Europe – Portugal, Italy, Greece, and Spain, pejoratively called the “PIGS”.

The EU’s misguided response to the crisis was politically organised through a system of loans entailing strong conditionality. Some would go as far as to say that the Maastricht Treaty and its rigid criteria impose straightjackets on member states every time they exceed those parameters, thus creating a vicious circle of austerity – “austerity by default”. In other words, European fiscal rules were flawed at the start as they are grounded in a neoliberal framework that seeks to keep “wasteful” states in check.  

Within the European Union, climate investment is hampered by an economic orthodoxy which tilts towards austerity.

Climate blind spots 

As austerity was being rolled out, the effects of climate change were becomingincreasingly tangible. In the face of EU-imposed fiscal constraints, many member states prioritised reducing deficits over investments in climate resilience and adaptation. Climate-related initiatives and infrastructure projects were delayed or cancelled due to budget constraints.  

In the aftermath of the Greek financial crisis and for the years that followed, austerity measures severely impacted the country’s public services, and thus its environmental funding and capacity to implement climate resilience initiatives. ​Many crucial initiatives, including waste management systems and flood defences, faced significant cutbacks. This left communities increasingly vulnerable to climate-related disasters, exacerbating existing environmental degradation. Between 2016 and 2020, spending directed to the Greek Forest Guard was reduced significantly, and thousands of firefighters were made redundant. Such neglect became glaringly evident as Greece faced extreme weather events, with wildfires in Evia, Athens, and the Peloponnese being ignited by extreme heatwaves. Meanwhile, thousands of firefighters in the country continue to face precarious conditions, which has led to protests in the capital Athens.

In Spain, authorities froze public sector wages and halted recruitment following the eurozone crisis, ​​allowing only a small number of workers to be replaced. This directly affected the environmental sector, as the Ministry of Environment saw its funding slashed and its workforce reduced by 7 per cent between 2009 and 2011. Budget cuts also forced freezes on key environmental initiatives, prompting a drastic review of Spain’s significant expenditure on renewable energy and suspending energy subsidies in January 2012, which effectively closed feed-in tariffs for solar, wind, and other renewables. This move disrupted Spain’s renewable energy sector, which had been heavily reliant on these incentives, leading to significant setbacks in both private investment and the sector’s employment opportunities. Energy poverty was also a byproduct of such measures, with households facing energy deprivation and adding up to pre-existing levels of inequalities. 

A boon for the far right

The rigidity of the EU’s fiscal rules had unintended but predictable political consequences. The austerity of the 2010s helped pave the way for a wave of far-right populism. Across Europe, new brands of populists leveraged fears within the electorate. Anxieties around economic recession, job insecurity, and housing were tied to the migration “crisis”. The governments that had embraced austerity programmes and failed to distribute the costs of structural adjustments equitably among social groups fell victim to their own politics, creating fertile ground for the far right to capitalise on social rage and rising Euroscepticism.  

“The tragedy of the European fiscal rules”, as economic journalist Wolfgang Munchau writes, “is that the Left invented them”. Austerity was not different: it was mainly liberal and social democratic parties in Europe which endorsed or implemented these measures, often under pressure from EU institutions and international lenders. Being committed to the logic of fiscal austerity, the centre-left was unable to answer the growing weight of crude arguments from the extreme right (and the extreme left, though these groups were far less successful).

European fiscal rules were flawed at the start as they are grounded in a neoliberal framework that seeks to keep ‘wasteful’ states in check.  

This became evident early on in France, with fire-brand Marine Le Pen from far-right Rassemblement National twice making it to the Presidential run-off. The extreme right also surged in Italy, first with the success of Lega’s Matteo Salvini’s, and then with  Giorgia Meloni’s triumph with the neo-fascist party Fratelli D’Italia. In the UK, Nigel Farage orchestrated the watershed Brexit referendum, causing the Conservative Party to careen ever more towards the right. And in Germany, neo-Nazi Alternative für Deutschland (AFD), became the largest opposition party by 2017, only four years after it was formed (and is now the second-biggest party in the Bundestag following its historic performance in federal elections in February). In just a few years, a European Union caught in the straitjacket of its own fiscal rules led to the far-right moving from the fringes and into the spotlight across the continent.  

Today, right-wing movements are increasingly challenging Europe’s climate agenda, often framing climate policies as an elite-driven imposition on ordinary citizens. ​These parties claim that climate measures are unaffordable and prioritise elites over the needs of the general public. By dismissing or outright denying climate change, they appeal to segments of the population concerned about rising costs, particularly in rural and working-class communities.​

There is another way

Against this backdrop of austerity, a brief moment of hope seemed to emerge ​from ​the ​Covid-19 ​pandemic. ​​In 2020, ​EU leaders and member states decided in favour of common debt issuance. Economic policy had nothing to do with this decision; it was squarely the by-product of a sudden stop imposed on the global economy. Europe had to come back as a competitive and forward-moving, united bloc.  

The result: The EU’s Recovery Fund, officially known as NextGenerationEU (NGEU), a temporary recovery instrument amounting to800 billion euros in grants and loans to support member states. Crucially, member states were required to submit recovery and resilience plans aligned with EU priorities, including by spending around 40 per cent of the recovery fund on climate measures. Lauded as a significant step in the bloc’s history towards fiscal solidarity, the NGEU seemed to herald a change of direction.  

Alongside this unprecedented macroeconomic shift, something equally rare happened in 2020: CO2 emissions dropped as well. As Andreas Malm and Wim Carton write in Overshoot: How the World Surrendered to Climate Breakdown, COVID-19 could do more for the environment than all the social movements which marched in the streets of Europe. 

This pivotal moment signalled a new approach to fiscal policy; one that not only acknowledged the uneven impact of economic crises across member states but also embraced investments in public health and sustainability.

And yet, five years later, the spectre of austerity is still haunting the EU. The new economic governance framework, which came into force in April 2024, will force most member states to implement budget cuts. Surveillance mechanisms will continue to monitor member states’ expenditure deviations through what is called the “control account.” In addition to the expenditure agreed upon with the  Commission and the Council, countries cannot deviate more than 0.3 or 0.6 percentage points of GDP annually or cumulatively. If they fail, a first warning will be issued – austerity by default.  

Today’s challenges demand proactive investment rather than fiscal retrenchment.

But while in the years of the Eurozone crisis the impact of austerity on climate politics was  largely unnoticed, now the stakes are much higher and impossible to ignore. Today’s challenges demand proactive investment rather than fiscal retrenchment, with progressive forces now finding themselves waging a dual battle: confronting the escalating climate crisis while tackling a return of austerity, which in turn feeds far-right propaganda.

The return of austerity is easy to detect. In France, in spite of the political chaos which brought an end to the premiership of Michel Barnier after two brief months, the impact of economic orthodoxy on climate policies was clear. In his first address, the short-lived prime minister made oblique references to the need to do more with less across the entire economy. Of Barnier’s hour-long speech, a mere five minutes was dedicated to climate issues. Further fuelling environmentalists’ concerns were comments critical of wind turbines, a valuable asset to the energy transition but a longtime bête noire for the far right in France. In another concession to the extreme right, he promised to review the Zero Net Land Take regulation (ZAN), which emerged from a Citizens’ Convention for Climate, with the aim of limiting the consumption of natural, agricultural, or forest land. The chaotic churn of recent French political developments demonstrates how easily neoliberal orthodoxy will doff its cap in the direction of those further on the right.  

Meanwhile, In Germany, the chancellor-in-waiting Friedrich Merz has promised to weaken green policy, claiming it has gone too far. By repeatedly expressing concern for the state of the economy, which he says was exacerbated by his predecessor’s excessive environmentalism, Merz has pandered to the country’s industrial leaders as well as the anti-climate party AfD. He has also promised to decouple the ministry of the economy from that of the environment, currently held by the Greens. The reason? Germany cannot afford unnecessary red tape and green investments. Another sovereign debt crisis, Merz argues, is looming large and the answer is a new round of austerity – cutting, among other things, unemployment benefits and social spending.

The cost of cutting climate funds

Similar stories are playing out across Europe, with economic priorities pushing climate action to the wings​. Without sufficient financial support for vulnerable communities, the far right may once again exploit economic hardship and resentment toward political elites. Just as the austerity measures imposed after the 2008 financial crisis created “winners and losers”, a new wave of climate austerity risks repeating the same dynamics.  

The experience of the gilets jaunes (‘yellow vests’) movement in France serves as a reminder that strategies centred solely on discouraging the use of fossil fuels and increasing carbon prices for consumers can encounter strong popular resistance, undermining the overarching goals of sustainability and climate transition. 

With insufficient investments in green infrastructure, social protection programmes, and adaptive strategies, working-class and rural communities are bearing the brunt of the economic costs – fuel taxes, farming regulations, and the phasing out of polluting industries – without seeing the benefits of green policies. Far-right parties have been quick to frame these climate measures as evidence of EU elites betraying ordinary Europeans, stoking fears of economic hardship and regional decline.  

Just as the austerity measures imposed after the 2008 financial crisis created winners and losers, a new wave of climate austerity risks repeating the same dynamics.  

As a result, the far right made sweeping gains in last year’s European parliamentary elections, becoming a major force and a significant obstacle to climate policies. Last month, Jordan Bardella, the president of Rassemblement National and the chair of the Patriots for Europe Group even called on right-wing forces in the EU parliament to come together to end the European Green Deal (EGD).

Launched in 2019, the EGD set the bold target of reducing emissions by 55 per cent by 2030, but many of its measures and appendices revolve around competitiveness and growth, without clear references to social protection or quality jobs for those who are meant to make the transition happen. Moreover, it promised to mobilize a trillion euros during this decade, but today, that sum looks implausible if not outright impossible.

The road ahead

The new legislative cycle will likely see an intensified struggle over the EU’s climate policies. With populist forces framing green initiatives as elitist and out of touch with economic realities, the Green Deal’s success depends on addressing inequities and ensuring that the green transition tangibly benefits all Europeans, leaving no one behind. Without this, mounting resistance could undermine Europe’s climate ambitions and its broader socio-economic cohesion.

With Donald Trump’s return to power, Europe’s far right now has an important trans-Atlantic ally. Among the first executive orders that Trump issued after his inauguration was to immediately withdraw the US from the Paris Climate Accords and to halt over 300 billion dollars in green infrastructure projects. From Hungary’s Viktor Orbán and Slovakia’s Robert Fico to France’s Marine Le Pen and the UK’s Nigel Farage, European far-right leaders are busy cosying up to the American President and taking lessons from his populist playbook – with climate action foremost among their policy targets.  

In the European Parliament, we will regularly see far-right MEPs rising to their feet to denounce “costly” climate action, finding increasing support in the centre-right and right-wing parties. To defeat them, the EU will need to move away from the austerity model that enabled right-wing populism to surge in the first place, and start rebuilding and refunding welfare states to incorporate green policies The imperative is to deliver the green transition in a speedy manner, with robust social security schemes capable of buffering the political consequences of climate austerity. From now on, every fiscal, social and economic policy should be an environmental one.  

Political and economic circumstances change, but the climate emergency does not. It only gets worse – unless we are ready to do something about it.