The world’s energy transition towards clean energy is being hindered by trade barriers, according to the International Energy Agency (IEA) Chief, Fatih Birol. While fair trade is considered essential for a successful clean energy transition, world powers are locked in a struggle over the technologies crucial to combatting climate change. At the World Economic Forum in Davos, Switzerland, China has expressed concern about “barriers to green trade,” while the European Union (EU) has raised the issue of “trade imbalances.” This article explores the impact of trade barriers on the global clean energy transition, the role of China in clean energy production, and the need for fair and balanced trade.
Birol acknowledges that trade barriers can slow down the global clean energy transition, but he also emphasizes the importance of fair trade in this context. While China leads the world in solar and wind energy deployment, as well as electric vehicle production, concerns have arisen regarding trade disputes. The EU has initiated a probe into Beijing’s subsidies for its electric car industry, potentially leading to punitive tariffs. However, EU nations are also worried about losing business to massive energy transition subsidies in the United States, including tax breaks for domestically-made electric vehicles. Birol emphasizes the need for countries to consider the trade implications of clean energy production on their economies, ensuring fairness compared to other forms of production.
China plays a critical role in the global clean energy sector by providing its technologies and expertise to the rest of the world. The country has emerged as a global leader in renewable energy deployment, but questions about fair trade practices persist. Chinese Premier Li Qiang warns against “discriminatory” trade measures that hinder the free flow of high-quality and efficient green technologies and products. The EU has also expressed concerns about trade imbalances with China. As Europe lags behind China in clean technology manufacturing, and possibly the United States in the future, it is crucial for Europe to develop a roadmap to regain its technological leadership. This involves examining new market and technological framework conditions to drive innovation and competitiveness in the clean energy sector.
To achieve the goal of tripling renewable energy capacity by 2030, the wealthiest countries must provide funding for the energy transition in developing nations. This issue was identified as the “single most important item missing” during the UN’s COP28 climate summit in Dubai. Birol stresses the significance of addressing this issue, especially as Azerbaijan prepares to host COP29 later this year. He hopes that discussions around financing for developing countries will take place during the conference, as it plays a crucial role in its success. However, concerns have been raised about Azerbaijan’s appointment of a former state oil company executive as president of COP29. Birol urges giving them the opportunity to prove their commitment to the clean energy transition, despite their past involvement in fossil fuels.
Trade barriers pose a challenge to the global clean energy transition and need to be addressed for a successful shift towards sustainable energy sources. Fair trade practices are crucial to ensure a level playing field and prevent unfair advantages for certain countries or industries. China’s leadership in clean energy production brings both opportunities and concerns regarding trade imbalances. It is imperative for Europe to regain its technological leadership in the sector and for the wealthiest nations to support the energy transition in developing countries. With cooperation and fair trade, the world can work towards achieving the goal of tripling renewable energy capacity by 2030, while transitioning away from fossil fuels.
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