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New Insights from the Energy Transitions Commission on Global Trade in Energy Transformation

On June 11, 2025, the Energy Transitions Commission (ETC) released a significant briefing note focusing on the challenges of global trade in the context of energy transformation. This document, titled "Global trade in the energy transition: principles for clean energy supply chains and carbon pricing," underscores the pivotal roles that technological advancement and carbon pricing play in accelerating the global energy transition.

The Current Landscape

The energy transformation is a pressing issue confronting nations worldwide, with clean energy supply chains increasingly crucial for sustainable economic growth. The report highlights that while many clean energy technologies have seen substantial cost reductions over the past decade—such as a 94% decrease in solar PV module prices since 2011 and a significant drop in lithium-ion battery prices—concerns surrounding concentrated supply chains and perceptions of protective carbon border adjustments (CBAMs) could impede progress.

Key Issues Addressed

ETC identifies two major topics requiring attention: 1. Establishing local supply chains and 2. Formulating effective carbon pricing policies that can facilitate decarbonization, particularly in sectors deemed hard to abate, such as steel, cement, chemical, and shipping.

Development of Local Supply Chains

The briefing proposes six principles for enhancing local supply chains, contrasting the idea of complete self-sufficiency with the goal of diversified supply chains. The six key principles are:
1. Target diversified supply chains over complete self-sufficiency.
2. Clearly define the various dimensions of "security"—including economic and national security—across different sectors.
3. Adapt policies to technology, focusing efforts on sectors where nearshoring can provide cost-competitive domestic production.
4. Base the application of tariffs on data-driven analyses of existing subsidies in accordance with World Trade Organization (WTO) rules.
5. Recognize that inward investment can be a vital driver of technology transfer, emphasizing employment and value addition as primary concerns over ownership issues.
6. Collaborate with China to boost climate finance flows to low-income countries and support the rapid dissemination of clean technologies.

Adair Turner, Chairman of the ETC, remarked, "In an ideal world without geopolitical tensions or supply chain risks, China's rapid technological advancements and cost reductions would facilitate a faster and cheaper global energy transition. However, the push for developing local supply chains stems from both economic and security concerns, and well-designed policies can help achieve these objectives while promoting further technological progress and cost reduction."

Carbon Pricing as a Policy Lever

Simultaneously, the report emphasizes the necessity of carbon pricing mechanisms for sectors that currently utilize hard-to-abate technologies. While many sectors already have access to cost-competitive low-carbon technologies, there remains a need for a 'green cost premium' to make decarbonization financially viable in challenging industries. Although 53 countries have adopted some form of carbon pricing that collectively covers over 20% of global emissions, only the EU levies prices high enough to significantly impact decarbonization.

One potential issue arises when countries like those in the EU impose carbon pricing on energy-intensive sectors, potentially driving production to nations without such pricing, thus failing to facilitate emission reductions. The ETC proposes the implementation of globally accepted carbon prices for hard-to-abate sectors to ensure a level playing field globally. Recently, the International Maritime Organization (IMO) acknowledged this approach regarding shipping emissions, marking a significant step forward.

In the interim, CBAMs are essential to support decarbonization efforts without being protectionist, allowing developed nations to take responsibility for emissions from imported goods. The ETC firmly supports the EU's commitment to implementing and strengthening the CBAM framework.

Moving Forward

The report calls for international progress toward a globally acceptable solution, including:

• - Seeking agreements on international standards for measuring carbon intensity through channels like the WTO.
• - Providing technical assistance to developing nations wishing to implement carbon pricing.
• - Allocating a portion of revenues generated from the EU's CBAM to support climate finance flows to low-income countries.

Faustine Delasalle, Vice Chair of the ETC and CEO of Mission Possible Partnership, stated, "The world is entering a new industrial era powered by clean energy. Clean industrial projects are emerging across various geographies, creating new opportunities for trade dynamics. However, well-designed policies, including carbon pricing and incentives, are necessary to make these projects viable and expedite final investment decisions."

This briefing from the ETC builds upon its existing analysis to ensure clean energy technology supply chains are secured. However, it is critical to note that official endorsement of this communication has not been sought from the institutions connected to ETC's Commission Members.

To download the full report, visit ETC Publications.

For more information about the Energy Transitions Commission, please visit their website at energy-transitions.org.