Policy Watch | June 2026

The International Energy Agency’s latest World Energy Investment Report finds that the Middle East crisis is reinforcing a broader shift toward domestic energy security. Investment continues to shift towards electricity, which now represents nearly 60% of global energy spending with investment in electricity supply and infrastructure expected to reach USD1.6tn in 2026 and rising to USD2tn when end-use electrification is included. At the same time, energy security concerns are driving the strongest fossil gas investment in a decade, with a surge in LNG development, particularly in North America. This shows that energy security is becoming a dominant driver of capital allocation, reinforcing investment in both clean and fossil energy. 

Climate Bonds will be discussing these issues with investors in the context of EU energy policy in a closed-door roundtable on 16 June and you can register here. 

The European Commission’s proposal to exempt certain clean energy investments from EU fiscal spending constraints is a signal that climate and energy-security investments are being elevated to the same strategic priority as defence spending. Under the plan, member states that have triggered the “national escape clause” for defence spending will now be allowed to redirect part of that flexibility - up to 0.3% of GDP per year (0.6% cumulatively over 2026–2028) - into clean energy and electrification investments such as renewables, grids, electric vehicles and heat pumps.  

Importantly, this move establishes a precedent that productive green investment may be treated differently from ordinary public spending under EU fiscal rules. There is also potential for this additional green investment to be financed through increased sovereign and sub-sovereign green bond issuance, which would further deepen Europe’s labelled bond market and reinforce the role of public debt markets in funding the transition. 

The European Commission is reportedly considering a three-year waiver on penalties for oil and gas companies that breach the EU’s forthcoming methane emissions rules. The EU Methane Regulation (EU MER) is set to come into effect over the coming years and enforces penalties for non-compliance with monitoring and emission reduction requirements. In our May update, we highlighted risks that the Commission would weaken the penalty regime, against growing pressure from industry and international stakeholders. Under the latest reported proposals, the emissions framework would still be introduced, but the penalties waiver would effectively suspend its core enforcement mechanism. This would be a significant retreat on climate leadership by the EU. Contrary to representation as a barrier to energy security, the EU MER should be seen as a powerful complementary tool to AccelerateEU, as our latest report makes clear.  

Spain’s government has unveiled a EUR9bn Social Climate Plan ahead of submission to Brussels, signalling a growing pipeline of public-backed investment opportunities in building efficiency, clean transport, and related infrastructure, while helping to de-risk projects supported through the EU’s Social Climate Fund. The package allocates EUR4.7bn to energy-efficient housing upgrades to support vulnerable households and reduce energy bills, with the remaining EUR4.3bn directed towards vehicle renewal schemes and expanded access to affordable public transport, including in rural areas. For sovereign bondholders, the plan signals the continued embedding of climate-related spending within Spain’s fiscal framework. 

The US regulatory outlook for climate disclosure takes a step back following proposals to rescind the Securities and Exchange Commission’s 2024 climate reporting rule, which would have introduced more standardised requirements for companies to disclose emissions and climate-related financial risks. The move increases fragmentation in global reporting regimes, widening the gap between the US approach and frameworks such as the EU’s CSRD and the International Sustainability Standards Board (ISSB) baseline. For investors, this reduces the comparability of climate-risk data across jurisdictions, increases reliance on voluntary disclosures, and adds complexity to portfolio-level risk aggregation and benchmarking. However, many companies will still be subject to disclosure requirements in the EU, UK, and other markets, meaning that in practice large corporates will continue to face tightening reporting expectations despite US federal rollback.