#Clean Energy #Energy Transitions Commission #Carbon Pricing

Addressing Global Trade Challenges in the Energy Transition

Introduction

On June 11, 2025, the Energy Transitions Commission (ETC) released a critically important briefing paper titled Global Trade in the Energy Transition: Principles for Clean Energy Supply Chains and Carbon Pricing. This document explores essential strategies to facilitate a worldwide transition to clean energy while addressing significant global trade challenges.

The Impact of Technology and Carbon Pricing

The report emphasizes how advancements in technology and effective carbon pricing can significantly accelerate the global energy transition. Notably, the pricing of carbon emissions is highlighted as a crucial mechanism, particularly in sectors that are challenging to decarbonize, such as cement, steel, and maritime transport. Yet, concerns regarding the concentration of supply chains affect the pace of this transition; fears that carbon adjustments at borders may be perceived as protectionist could undermine progress.

Key Trade Principles in Clean Energy

The ETC outlines specific trade principles that nations must adopt to navigate the transition effectively. These include:
1. Develop National Supply Chains: Countries should focus on building diversified supply chains, rather than aiming for complete self-sufficiency.
2. Define Security Dimensions: There’s a need to differentiate between economic security and national security, which has varied implications across different sectors.
3. Technology-Specific Policies: Policies must be tailored to specific technologies to ensure that local production can be cost-competitive.
4. Fact-Based Tariff Policies: Any imposition of tariffs must be justified with factual analyses of current subsidies and must align with World Trade Organization (WTO) rules.
5. Emphasize Job Localisation: The focus should primarily be on generating local jobs and value rather than simply on ownership, recognizing that foreign investment can drive technological advancement.
6. Cooperation with China: It's recommended to partner with China to enhance climate financing for low-income countries, promoting a faster deployment of clean technologies.

Nearshoring: A Strategic Shift

The document also addresses the trend of nearshoring, where countries seek to relocate supply chains closer to home. This move potentially reduces reliance on distant economies, like China, but must be carefully managed to avoid escalating costs in the energy transition process. The ETC introduces six guiding principles to ensure that nearshoring is conducted effectively. These principles advocate for a balanced approach that fosters domestic resilience while leveraging international partnerships.

The Necessity of Carbon Pricing

While some sectors have made significant strides towards adopting low-carbon technologies, many still face economic challenges linked to the