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New Briefing from the Energy Transitions Commission (ETC) Addresses Global Trade Challenges in the Energy Transition
The cost of several clean energy technologies has plummeted in the last decade. Solar PV module prices dropped 94% since 2011, lithium-ion battery prices fell over 92% since 2010 while doubling in energy density, and in 2024, almost two-thirds of electric vehicles sold in China were cheaper than Internal Combustion Engine (ICE) vehicles of equivalent size and quality.
China has led this progress and now holds dominant market shares in multiple clean technologies: this primarily reflects strategic vision, low capital costs, technological innovation and dynamic entrepreneurship rather than simply low labour cost.
In response to China's dominance, many countries seek to diversify supply chains through nearshoring. This reflects concerns about "energy security" and a desire to grow local value and employment, but badly designed nearshoring could add significantly to the cost of the energy transition. The ETC therefore proposes six principles to guide optimal policy:
1. Aim for diversified supply chains, not complete autarky (i.e. complete self-reliance).
2. Clarify different dimensions of "security" - economic vs national security – with different implications in different sectors.
3. Tailor policy by technology, focussing nearshoring efforts on sectors where cost-competitive domestic production can be achieved.
4. Base any use of tariffs on factual analysis of current subsidies in compliance with World Trade Organization (WTO) rules.
5. Focus primarily on the location of employment and value-add rather than ownership, recognising that inward investment can be a major driver of technology transfer.
6. Work with China to increase climate finance flows to lower-income countries, supporting accelerated deployment of clean technologies.
said
In some sectors of the economy, low-carbon technologies are already cost-competitive, but in "hard to abate" sectors such as steel, cement, chemicals and shipping, using available decarbonisation technologies will entail a "green cost premium". Carbon pricing is therefore required to make decarbonisation in these sectors economically feasible. While 53 countries now have some form of carbon pricing, covering over 20% of global emissions, only the EU has prices high enough to significantly influence the economics of decarbonisation.
But if one country or bloc, such as the EU, imposes carbon prices on energy-intensive internationally traded sectors, production will shift to other countries which do not impose carbon prices, and no emissions reduction will be achieved – unless equivalent carbon prices are in place. The ideal solution would be globally agreed carbon prices applied to "hard to abate" sectors, and the International Maritime Organization recently agreed a crucial step towards that approach for shipping. Until that approach is in place for other "hard to abate" sectors, CBAMs are essential to support decarbonisation, are not protectionist, and are the only way by which developed countries can take responsibility for imported emissions.
The ETC therefore strongly supports the EU imposition of a CBAM and its recent commitment to make the CBAM more robust.
Progress towards the ideal internationally agreed solution should, however, be fostered by:
said
builds on existing ETC analysis, . However, the institutions with which ETC's Commissioners are affiliated have not been asked to formally endorse this briefing.
Download the report: https://www.energy-transitions.org/publications/global-trade-in-the-energy-transition/
For further information on the ETC please visit: https://www.energy-transitions.org
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Note: Volume-weighted average across passenger EVs, commercial vehicles, buses, 2- and 3-wheelers, and stationary storage; includes cell and pack. 2024 saw a 20% year-over-year decrease from 2023, the largest drop since 2017. See BNEF (2024),
BNEF (2023), IEA (2025), World Bank (2025),
Reuters (2025),
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