#None #Clean Energy #Energy Transitions Commission #Carbon Pricing

New Energy Transitions Commission Report Highlights Trade Challenges During Energy Transition

Overview

On June 13, 2025, the Energy Transitions Commission (ETC) published an insightful report titled "Global Trade in the Energy Transition: Principles for Clean Energy Supply Chains and Carbon Pricing.” The report discusses the evolving landscape of global commerce concerning the ongoing energy transition. It details how technological advancements and carbon pricing strategies can significantly expedite this transition, while also highlighting serious concerns regarding concentrated supply chains and perceptions of protectionism, which may hinder progress on a global scale.

Key Findings

The ETC emphasizes two key dimensions in addressing trade-related issues:
1. Development of domestic supply chains through six essential political principles.
2. Implementing effective carbon pricing and Border Carbon Adjustment Mechanisms (CBAMs) to attain global consensus on decarbonizing hard-to-abate sectors.

Nearshoring and Clean Technology

The costs associated with several clean energy technologies have drastically decreased over the past decade. For instance, prices for solar photovoltaic (PV) modules plummeted by 94% since 2011, and lithium-ion battery prices dropped by over 92% since 2010, effectively doubling their energy density. By 2024, nearly two-thirds of electric vehicles sold in China were more affordable than comparable internal combustion engine vehicles. This decline in costs has positioned China as a formidable leader in clean technologies.

In response to China's dominance, various nations are striving to diversify their supply chains through nearshoring. This approach reflects concerns about energy security and desires to bolster local value creation and employment opportunities. However, the ETC warns that poorly structured nearshoring could lead to increased costs associated with the energy transition. Thus, the report proposes six guiding principles for effective nearshoring policies:
1. Aim for diversified supply chains rather than complete self-sufficiency.
2. Clarify different dimensions of "security" – economic vs. national security – which can impact various sectors differently.
3. Tailor policies to each technology, focusing nearshoring efforts on sectors capable of achieving cost-effective domestic production.
4. Base the application of tariffs on objective analyses of existing subsidies in accordance with World Trade Organization (WTO) rules.
5. Prioritize job creation and value generation over ownership, as foreign investments can drive technological transfer.
6. Collaborate with China to enhance climate financing for lower-income countries and facilitate the rapid deployment of clean technologies.

Carbon Pricing and Global Cooperation

In sectors where carbon-neutral technologies are already economically viable, such as renewable energy, challenges remain in the "hard-to-abate" sectors like steel, cement, chemicals, and shipping. The use of available decarbonization technologies in these domains often incurs a "green premium." Therefore, the implementation of carbon pricing is crucial to render decarbonization economically feasible.
While 53 countries have established some form of carbon pricing covering over 20% of global emissions, only the European Union has sufficiently high prices to impact decarbonization effectively. However, when a nation or economic bloc, such as the EU, sets carbon prices for energy-intensive sectors, production could shift to countries with no carbon pricing, resulting in no overall emission reductions.
To mitigate this issue, globally consensus carbon pricing mechanisms for hard-to-abate sectors are needed, and recent discussions at the International Maritime Organization represent significant progress in this direction. Until then, CBAMs are crucial for supporting decarbonization efforts and are not inherently protectionist; they are the only means through which developed nations can address imported emissions responsibly.
The ETC strongly endorses the EU's implementation of a robust CBAM and urges further advancements toward ideally agreed-upon solutions, encouraging:

• - Establishing international standards for measuring carbon intensity via bodies such as the WTO.
• - Providing technical assistance for developing countries aiming to adopt carbon pricing.
• - Channeling a portion of the revenue from the EU’s CBAM to support climate financing in lower-income countries.

Conclusion

As the world enters a new industrial age driven by clean energy, it is fortuitous that clean industry projects are proliferating across various regions, creating new opportunities for trade dynamics. However, well-structured policy initiatives, inclusive of carbon pricing, financial incentives on the supply side, and regulatory frameworks on the demand side, are essential to ensure the profitability of projects and accelerate final investment decisions amid the global energy transition.

For further details, the report can be downloaded from ETC's official publication page. For more information about the ETC, visit Energy Transitions Commission.