The time is now to put arms industry profiteers and polluters in the climate finance frame

Deborah Burton and Ho-Chih Lin reflect on why we need to put the global arms industry in the climate finance frame.

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The time is now to put arms industry profiteers and polluters in the climate finance frame.

As we write this, the world has been witnessing Israel’s indiscriminate carpet bombing in Gaza. It is the most destructive of this century and among the worst in history with respect to the size and density of the area, the built environment and the population. In just the first two months the Israeli military campaign has created even more destruction than the razing of Syria’s Aleppo between 2012 and 2016, Ukraine’s Mariupol, or proportionally the Allied bombing of Germany in World War II. So much ammunition has been used that the total explosive yield was compared to multiple nuclear bombs on an area a quarter of the size of London but as densely populated. All this destruction is not possible without the ammunition supplied by Israel’s allies.

Gaza, Ukraine and many other such wars and conflicts be they past, present or future, have the highly profitable global arms industry at their heart which is why there is an urgent need for action on one of the most abhorrent business practices imaginable: the excess profits accruing from war, conflict and militarism – activities which are also significant polluters.

Our latest publication is the concept paper ‘Excess profits tax on the arms industry – to fund climate finance’.

TPNS’s Transform Defence project proposes an excess profits tax on the arms industry to be applied to fund climate finance needs. It estimates that a global excess profits tax on arms companies could deliver $30 billion dollars every year to fund international climate finance. In times of war, we estimate that an additional punitive excess profits tax on war profiteers could deliver considerably more. Had this war profiteers tax been applied in 2024 (for Ukraine and Gaza wars), an extra $52bn would have brought the 2024 annual total to $82 billion. This tax alone would be more than four fifths of the pledged (but never fully fulfilled) $100 billion a year climate finance by developed countries to developing countries.

For context:

• The top 100 arms companies accounted for $592 billion in arms sales in 2021 (pre Gaza, pre Ukraine).
• The top 20 arms companies account for two thirds of the total arms sales in the world
• Those companies come from just a handful of countries: USA, China, Russia, UK, France and Italy.
• The global military and its supply chain – the arms industry – is estimated to be responsible for 5.5% of global greenhouse gas (GHG) This figure does not include emissions from conflict or post-conflict reconstruction.

Why an excess profits tax?

References to WW3 are becoming ever more prevalent across all news outlets.  Wars in Ukraine and Gaza are driving this narrative and, if polls are to be believed, leading to resignation to such a fate. In a recent poll in the UK, 56% thought WW3 was inevitable.

The profound absence of public engagement with foreign and defence policy-making turns citizens into captive hostages when it comes to their respective governments war-making decisions.

Meantime, ‘Code Red for Humanity’ is no longer the urgent matter it should be for the political or media agendas. And recent research from the Guardian showing that 80% of top climate scientists (all from IPCC) believe we are now on course for at least 2.5C of heating above pre-industrial levels – a terrifying scenario – did not secure a fraction of the political, public or media attention it demanded.

To turn the spotlight on the arms industry – especially now, with Gaza and Ukraine dominating news coverage – could help shape a different narrative:

Firstly, given the scale of the climate emergency, we need routes by which to expose and – critically – reverse the appalling ratio of governments’ military spending to climate finance for vulnerable countries. Between 2013 and 2020, the richest (Annex II) countries spent $7.3 trillion on the military compared to an estimated $243.9 billion on additional climate finance for the world’s most vulnerable countries. At least a quarter (and potentially as high as 50%) of that military spending finds its way to defence contractors – in other words, the arms industry.

Secondly, it can become an easy-to-understand entry point to the bigger policy-making picture. A route by which to reveal the revolving door relationship of governments to the arms industry, from policy-making to (war) profiteering. Lifting the veil on – often immoral – arms industry profiteering, in peace and war, is a good place to start if citizens are then to appreciate the wider ‘eco-system’ of military spending, foreign and defence policy-making and the ultimate state action: war-making.

Finally, let’s not forget GHG emissions. The brand new Lockheed Martin F-35 fighter jet being sold around the world drinks 5,800 litres of jet fuel per flying hour, will be in service for more than 30 years (beyond net-zero 2050) and costs more than $100m per jet. The global military and its supply chain – the arms industry – are estimated to be responsible for 5.5% of total global annual GHG emissions. To give context to this, the 1.4bn people of the 54 countries on the African continent are responsible for under 4%. It is also more than civilian aviation and shipping emissions combined. And this 5.5% does not include conflict emissions.

The $2.4 trillion dollar question

While the global south faces the ever greater onslaught of climate change, for which they have no historic responsibility, those with the greatest responsibility – rich countries – are spending 30 times more on their own militaries than providing climate finance to vulnerable countries.

And military spending is rising. We are in a new arms race and the big winners are the arms companies. And their ever-increasing bottom-line does not end with conventional wars being fought, or even the expansion of AI. The USA’s ‘full-spectrum dominance’ doctrine is also in play: military space dominance. While the planet burns, the dominant military spenders are looking to ways to fight and win in space.

And there is one number that brings home the nature of the problem we face. That number is $2.4 trillion.

The UN Climate Chief, Simon Stiell, is pleading for $2.4 trillion p/a to keep climate change goals within reach, with the warning that we have 2 years left to save humanity. His plea comes in this same year, 2024, that saw the $2.4 trillion high peak of annual spending on our militaries and by extension, arms industries. That is a very deep $2.4 trillion feeding trough for arms companies in a sector infamous for corruption (an estimated 40% of all trade corruption) and with scant regard for human rights.

Arms companies by definition profit from the human, environmental and climate destruction of war.  Moreover, many of these companies are also profiting by securing government contracts for border militarisation to manage refugees as part of the militarisation of emergency response to conflict and climate disasters.

And yet, and yet.

No F-35 will stop New York City, Alexandria, Shanghai, Amsterdam, Rio de Janeiro, Tokyo, Venice, Bangkok, Mumbai and London going under water; no nuclear warhead will solve India and Pakistan’s disappearing water-table; no anti-terror AI will stop West Africa’s growing desertification.

Every person, community, society, nation, region needs protection from aggressors and terrorists and it is the job of government to defend its citizens from such threats. But these threats need to be in their place, proportionately, alongside much greater but entirely marginalised human safety threats such as climate breakdown and pandemic.

Secretary-General of the United Nations, Antonio Gutterres, said on his first visit to Ukraine, ‘war is an absurdity in the 21^st century’. Civil society needs a much-enhanced understanding of why this is the case in the face of catastrophic climate change. A spotlight on arms industry profiteering and polluting, in peace-time and war, is one way to do this.

Arms companies can never make good the profound cost to humanity that they have caused over very many decades. But the time has certainly come to put them in the climate polluter and profiteer frame. It is time for them to pay up.

Recommendations

1. An excess profits tax on top 100 arms companies (ranked by SIPRI). A typical profit margin for an arms company is 10%. A 100% excess profits tax on profits over 5%, i.e. 5% on revenue in this case, will bring the profit margin down to the more reasonable level at 5%.
2. A war profiteers’ tax on arms companies’ revenue generated by wartime sales.
   Arms companies greatly inflate their product prices during wartime, taking advantage of scarcity and urgency. Assuming an inflated profit margin of 50%, a 100% war profiteers’ tax on profits over 5%, i.e. 45% on revenue in this case, will bring the profit margin down to the more reasonable level at 5%.
3. All excess profit tax revenue to be directed toward the climate finance needs of the most climate vulnerable nations, many of whom have been or are on the frontline of both conflict and climate change, with the former also a contributor to latter, in the form of military/arms trade GHG emissions.
4. Calls for an excess profits tax on the arms industry and cuts to military spending (such as the Five Percent Formula) to be included in all climate finance demands at relevant international climate and finance meetings including annual COP meetings and the Bonn Climate Conferences.
5. Support for UN New Agenda for Peace. Transformation of our collective foreign, security and defence policy making to rely less on arms and aggression and more on diplomacy and peaceful means. Without change, the oil industry and the arms industry will always be the most influential stakeholders / lobbyists in our governments that inevitably always makes decisions that deteriorate our and the environment’s wellbeing but benefit these industries greatly financially. [Note that there is no modern military without the arms and oil industries.
6. Call for the term ‘military aid’ to be replaced by ‘military finance’.