Trade conflicts among countries are becoming a critical feature in the race toward decarbonization, says climate journalist Robinson Meyer in this illuminating article. Calls to address climate change have typically appealed to safeguarding the public good, but opportunities to jumpstart new green industries and secure market positions in crucial components are now creating friction among trading nations. Meyer explains what’s at stake – both geopolitically and economically – for Europe, China and the United States in tackling climate change.
- Protectionism is creeping into climate change policy.
- Low-cost clean energy promises greater global economic growth than nonrenewable energy.
- Trade disputes will inevitably arise, but how countries respond will spell the difference between success and failure.
Protectionism is creeping into climate change policy.
European officials bristled at America’s passage of the Inflation Reduction Act in 2022, which calls for a minimum of $370 billion for climate initiatives in hydrogen technology, solar panels and zero-carbon aviation fuel. One of the Act’s provisions, a $7,500 tax credit for electric vehicles, is strictly for North American-assembled vehicles with primarily US batteries produced with US- or partner-sourced minerals.
“There’s now reason to think that certain kinds of competition — not cooperation — might be inherent to solving the climate problem itself: that all else being equal, fighting climate change might lead to more protectionism, more economic tension, more trade wars.”
It’s clear that a healthy environment is a public good. Yet economists have long understood the interrelationship between nonrenewable energy consumption and economic growth, and many saw it as a trade-off. Countries could either collaborate with each other to reduce greenhouse gases, or they could take advantage of their neighbors’ emission-reduction efforts to strengthen their own economies. Each nation’s motivations seemed to conflict with any global effort to address climate change.
Low-cost clean energy promises greater global economic growth than nonrenewable energy.
Yet since the 2010s, developed nations’ economies have grown as their carbon emissions dropped, and so greenhouse gas reduction is no longer synonymous with declining economic growth. Climate change strategies can feature energy production that is less costly than that of fossil fuels, spurring the development of new industries, specializations and jobs.
“Clean energy is a growing and highly strategic industry, and trade conflict always arises from these very industries.”
Businesses are seeing the potential in clean energy. Recent studies have shown that nations with strong industrial sectors were in the forefront of climate action, when they saw the chance to protect and grow their commerce. Similarly, those behind the Inflation Reduction Act expect the new green sectors to expand the US economy.
Trade disputes will inevitably arise, but how countries respond will spell the difference between success and failure.
Countries’ internal politics drive climate policy, with different factions – energy producers, industrialists, workers, activists, lobbyists and consumers – jockeying for position. As more nations vie for a piece of a growing green economy, trade conflicts will ensue. Governments need to be aware of some potentially unfavorable outcomes from all that competition: One might be that Western companies engage in counterproductive battles among themselves, failing to make progress and ceding ground to China, which could become a supply chain hegemon. Another could see the creation of green-energy silos in the United States, China, Europe and East Asia, with no one country able to scale costs meaningfully.
“Managing trade disputes isn’t some sideshow to the real work of fighting climate change. It IS fighting climate change.”
But the worst-case scenario would involve decaying relations between China and the United States, to the point that trade links crumble and global military conflict follows. A thoughtful and measured approach from all parties should entail collaboration rather than confrontation.
About the Author
Robinson Meyer is the founder and executive editor of Heatmap News, a media concern focusing on climate issues.