June2025

Buildingcoalitionsforclimatetransitionandnaturerestoration

JeanPisani-Ferry,abdBeatriceWederdiMaurocdandJerominZettelmeyerad1

aBruegel;bSciencesPo;cGenevaGraduateInstitute;dCEPR

1INTRODUCTION

Theplanet’sfuturedependsincreasinglyonemerginganddevelopingeconomies.Advancedeconomiescontinuetomatterbecauseoftheirhigherper-capitaemissions,theirsharesofglobaltradeandfinance,andtheirinfluencethroughresearch,technologyanddiplomacy;buttheirshareinglobalgreenhousegasemissionsisshrinking.SuccessinstoppingglobalwarmingandhaltingbiodiversitylosshingesonwhethercountriessuchasIndia,Indonesia,BrazilandSouthAfricaadoptlow-carbon,nature-positivedevelopmentpaths,andiftheydosoquickly.ThesameappliestoChina,whichisboththeworld’stopemitterofCO2andthecountryattheforefrontofthegreenindustrialrevolution.

Geopoliticalfragmentation,shiftingprioritiesandahostileUSadministrationareslowingthetransitiontoamoresustainableeconomicmodelinlinewiththelandmarkParisClimateAgreementof2015.Withclimateandnaturedegradationaccelerating,governmentsthatunderstandtheimportanceofclimateandnatureactions–stillinthemajority–arefacedwithhardquestions.Recentinternationaldiscussionsonclimatechangemitigationandthepreservationofbiodiversityhavecentredonambitioustargetsandtheclosingoffundinggaps.Theseremainimportanttopicsfornegotiationbutarenolongersufficient.Instead,abroaderapproachisrequiredtoconnectmitigationwithadaptationandthepreservationofnature.

Thiscallsfordeepercooperationamongcountrieswithcommoninterestsintrade,cleanenergyandnature.RecognisingthatthisgroupwillfornownotincludetheUnitedStates,weproposecoalitionsofthewillingforclimate,biodiversity,tradeandfinance–wherevermutualinterestscanstillalign.

CEPRPOLICYINSIGHTNo.144

TheEuropeanUnionwillneedtoplayaspecialroleinthecreationofthesecoalitions.Becauseofitsstrongconsensusaroundclimatescience,anambitiousdecarbonisationagendaandafunctioning,expandingemissionstradingsystemthathasdeliveredhighcarbonprices,ithasboththecredibilityandtheresponsibilitytolead,engagingemergingmarketsanddevelopingeconomies(EMDEs)andbuildingfinancingallianceswithotheradvancedcountries.

ThisPolicyInsightdistilssomeofthemainmessagesoftheParisReport2025(Pisani-Ferryetal.,2025),ajointinitiativebyCEPRandBruegel.Thisyear’sfocusisonacceleratingtheenergytransitionandrestoringnatureinemerginganddevelopingeconomies.WearegratefultoallcontributorstotheParisReport,andtoPatrickBolton,KimClausing,IgnacioGarciaBercero,HeatherGrabbe,AlissaKleinnijenhuis,MatthiasKalkuhl,JoséScheinkmanandSimoneTagliapietraforcommentsonanearlierdraft.

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THECASEFORACTION

Inadarkeninggeopoliticallandscape,thepaceoftechnologicalinnovationisabrightspot.Renewableenergyandothergreentechnologieshaverapidlygainedcostcompetitivenessandscale.Mostnewrenewablepowerisnowcheaperthanfossilfuel-basedalternatives.IEA(2024),IRENA(2024),Lazard(2024)andWoodMackenzie(2024),amongothers,haveshownthatthelevelisedcostofelectricity(LCOE)ofunsubsidisedsolarandwindisoftenlowerthanthatoffossilfuel-basedelectricitygeneration,especiallywhenconsideringnewpowerplantconstruction.

June2025

Solarphotovoltaic(PV)costshaveplummetedtoroughly$0.04perkWh,makingsolarpowermorethan50%cheaperthangenerationfromfossilfuelsornuclearplants(IRENA,2024).Evenaccountingfornetworkandbackupcosts,thisismajorprogressthatisboundtoaffecttheenergypeckingorder.Thisdramaticcostdecline,alongsideimprovementsinwindturbinesandbatterytechnology,meanscleantechnologiesofferbettereconomicreturnsthancoalorgas.Indollarterms,investmentinrenewablesnowoutpacesfossilelectricityinvestmentbytentoone,withmoreinvestmentinsolarthaninallotherpowersourcescombined.Year-on-yearglobalgrowthinelectricitygenerationfromsolarPVwasdoublethegrowthfromallfossilfuelscombinedin2024.2Othergreentechnologiesarealsoscalingquickly.Meanwhile,electricvehiclesaleshaverisenfrom3millionunitsin2020to17millionunitsin2024(IEA,2025).

Butdespitethesedevelopments,investmentinnewcoal-firedpowerplantscontinues,particularlyinChina,whichapproved106gigawattsofnewcoalpowercapacityin2022alone–fourtimestheamountapprovedin2021.3Reasonsforthisincludeconcernsaboutsupplysecurity,localsupportforcoalandthehighupfrontcostofinvestmentinrenewablesthatmanycountriesfinddifficulttofinance.Unlessretiredearly,thesecoalplantswillremaininoperationfordecades,lockinginemissionsfarbeyond2030.Meanwhile,theglobalvehiclefleetremainsoverwhelminglydependentonfossilfuels:in2024,morethan95%ofvehiclesincirculationstillhadinternalcombustionengines4.

Consequently,climatepoliciesandtrajectoriesarefaroffthepathneededtoreachemissionstargetscompatiblewiththeParisAgreement’sobjectiveoflimitingglobalwarmingto1.5°Cabovepre-industriallevels.Continuingwithtoday’spoliciesisprojectedtoleadtoabout2.7°Cofwarmingby2100.5Moreover,aggregateprojectionsmaskstarkdifferencesbetweenadvancedanddevelopingeconomies.Emissionsinmostadvancedeconomieshavealreadypeakedandsteadydeclineshavebegun.Incontrast,emissionsinmanyEMDEsarestillrising,drivenbyeconomicandpopulationgrowthandcontinuedheavyrelianceoncoal,oilandgas.

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Asof2023,EMDEs(includingChina)accountedforroughlytwo-thirdsofglobalemissions.Theirshareisexpectedtogrowfurtherastheycontributethebulkofnewemissions.Advancedeconomiesaccountforashrinkingportionofannualemissions(forexample,theEuropeanUnionandUnitedKingdomtogethernowcontributeonlyabout8%ofglobalemissions).Reachingglobalnetzeroemissionsby2050requiresasharpbreakwiththecurrentemissionstrendinEMDEs(Figure1,takenfromGrabbeetal.,2025).Limitingglobalwarmingto1.5°Cwouldrequireanevenmoreradicalbreak,consistentwithreachingglobalnet-zeroemissionsbythemid-to-late2030sratherthan2050.6

Authors’calculationsbasedontheEmberelectricitydashboard(

/data/electricity-data-

explorer/?data=generation

).

See

/world/asia-pacific/chinas-new-coal-plant-approvals-surge-2022-highest-since-2015-

research-2023-02-27

Source:

/electric-car-sales

(updatedMay2025).

Source:

/global/emissions-pathways/

.

AccordingtothePotsdamInstituteforClimateImpactResearch’s“carbonclock”,theremaining1.5°C-consistentcarbonbudgetisjust173gigatonnes(Gt)ofCO2(aboutfivetimes2023emissions),whiletheremaining

2°C-consistentcarbonbudgetis923Gt.ThecumulativeemissionsimpliedbythenetzeroscenarioshowninFigure1areabout525GtofCO2,consistentwithaglobaltemperatureriseofabout1.7°C–adangerouslyhighlevelgiventheriskofclimatetippingpointsevenfora1.5°Crise(ArmstrongMcKayetal.,2022).

Figure1 Historicalemissions,1970-2023,andrequirementsforreachingnetzeroin2050

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NetGHGemissions,includingLULUF,GtCO2e

35

30

25

20

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June2025

0

197019751980198519901995200020052010201520202025

Year

203520402045

2050

2030

EMDENetEmissions

EMDEBAUProjection

EMDENDC2030Target

AdvancedEconomiesNetEmissions

ChinaBAU

AdvancedEconomiesBAU EMDENetZeroTrajectoryProjection

AdvancedEconomiesNDC2030 AdvancedEconomies

Target

NetZerotrajectory

Note:Severalcountries,includingChinaandIndia,havesetlessambitioustargets.*EMDEsincludesChina.The2050projectionisgivenforEMDEsasawholeandnotseparatelyforChina.

Source:Grabbeetal.(2025),basedontheIMFClimateChangeDashboard.

EMDEsarealsocustodiansofmuchoftheplanet’snaturalcapital,sothatcollectiveclimateoutcomesareintertwinedwithhowthosecountriesmanagenatureandbiodiversity.Manyoftheworld’scriticalcarbonsinksandbiodiversityhotspots(includingtropicalforestsandwetlands)arelocatedindevelopingregionsacrossLatinAmerica,AfricaandAsia.TheseecosystemsbolsterclimateresiliencebyabsorbingCO?andprovidingabufferagainstextremeweather.Conversely,theirdestructionwouldaccelerateclimatechangeandundermineadaptationefforts.Nature-basedsolutions,suchasreforestationandecosystemrestoration,couldprovide20%to30%oftheemissionsreductionsneededtolimitwarmingto1.5°C.7However,continueddeforestationorecosystemcollapse(forinstance,oftheAmazonrainforest)wouldreleasevastamountsofcarbonanddestabiliseregionalclimates.Climatechangeandbiodiversitylossaremutuallyreinforcing:climatechangeisnowaleadingdriverofbiodiversityloss,andinturntheerosionofbiodiversityunderminesnaturalcarbonsinksandecosystemresilience.Itfollowsthatpreservingnature–alongsidecuttingemissions–isessentialforclimatestabilityandnaturesustainability.

CEPRPOLICYINSIGHTNo.144

Thecostsofthegreentransitionandofrestoring/protectingnatureinemergingeconomiesareoftendisproportionatelyhighrelativetotheirGDPsandfiscalcapacities.OurbestguessestimatesoftheinvestmentsneededarefarabovecurrentinvestmentlevelsinEMDEs(excludingChina).Inpractice,annualclean-energyinvestmentindevelopingregionswouldneedtomorethanquadruplefrom2022levelsby2030.Thiswouldbeunprecedented.ItreflectstherealitythatmanyEMDEeconomiesarebothcarbon-intensive(hencerequiringmoreinvestmenttodecarbonise)andgrowingrapidly(henceneedingmoreenergyinfrastructureoverall).

FinancingtheseinvestmentsischallengingbecauseofthehighcostofcapitalinEMDEs.Capitalforcleanenergyprojectsisconsiderablymoreexpensiveindevelopingmarkets,reflectinghighermacroeconomicrisks,regulatoryandpoliticaluncertainty,andlessdevelopedfinancialsystems(Berglofetal.,2025;Fornaroetal.,2025;Sen,

SeeChapter7inIPCC(2022).

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2025).Forexample,in2021therealcostofcapitalforautility-scalesolarPVprojectwasabout3%inEuropeandtheUS,butroughly7%inIndiaandMexico,over9%inBrazilandashighas10–15%insub-SaharanAfricancountries(IEA,2023).Thissteepdisparityinfinancingcostsgreatlyinflatesthelevelisedcostofrenewableenergyinemergingeconomies,oftenoffsettingtheirnaturaladvantages,suchasabundantsolarirradiation.

Internationalclimatefinanceissupposedtohelpbridgethisgap,butitremainsinsufficient.Supporthasfallenshortagainstloftypledges.Inlate2024,advancedcountriesagreedinprinciple(the‘Bakucommitment’)toprovideabout$300billionperyearinclimatefinancefordevelopingnations,buttheflowsin2022werearound

June2025

$100billion.Thegapsinnatureconservationareequallymind-boggling.Toreversebiodiversitydecline,theKunming-MontrealGlobalBiodiversityFramework(2025)callsforafinancinggapofabout$700billionperyeartobeclosed.Ofthis,$500billionperyearshouldcomefromphasingoutharmfulsubsidies,reflectingthefactthat,atpresent,natureconservationspendingisvastlyovershadowedbyexpendituresthatharmnature.

Oneofthemainproblemswiththewidelycitedfinancegapestimatesisthattheyarerarelyaccompaniedbycrediblestrategiestoclosethem.Instead,thesefiguresareoftenpresentedasargumentstomobilisefunding,particularlyfromtheprivatesectororthroughblendedfinancemechanisms.However,asthedisparitybetweenestimatedneedsandactualflowsincreases,theeffectivenessofgapestimatesasmobilisationtoolsdiminishes.Ratherthangalvanisingaction,theyriskfosteringresignation–orworse,anewformofdenial,wherebytheevidencefromclimatesciencemaynolongerbequestionedbutthepoliciesneededtocombatclimatechangewill.Inwealthiercountries,particularlythoseintemperateclimatezones,thiscanleadtoaquietacceptanceoffailureandashiftinfocustoadaptation,theimplicitmessagebeingthatthebattlehasbeenlost.

Inaddition,globalcollectiveactiontocombatclimatechangefacesseveralnewproblems:

Adisjointedapproachtoaddresshighlyconnectedissues:althoughthecontainmentofglobalwarmingandthepreservationofnaturearelinkedinmultipleways,theyaremostlytackledseparately.

Thefrayingofmultilateralism:thepreviousremedytotheshortcomingsofadisjointedapproachwouldhavebeentoembraceamoreholisticstrategy,yetnationalismandgeopoliticaltensionshamperthesearchforencompassingsolutions.

Alackofadequateincentives:developingcountries(fortheirmitigationefforts)andadvancedcountries(fortheircontributionstothefinancingoftheseefforts)bothfacecollectiveactionproblems,butincentivesarenotadequatelyaligned.

CEPRPOLICYINSIGHTNo.144

Toaddresstheseproblems,arobustandrealisticarchitectureisneeded.Inthecurrentgeopoliticalcontext,suchanarchitecturemustbeflexible,recognisingthatarequirementforagreementbyconsensuswillholdthetransitionbackandwillgivetoomuchsaytothosethataredraggingtheirfeet.Coalitionsofcountriesthatarereadytomovemorequicklyofferthebestwayforward,andaremorelikelytoalignincentives.Weproposearedesignbasedonfourpillars:

Pillar1:Atieredcarbonpricingcoalitionwithacommoncarbonborderadjustmentmechanism(CBAM).

Pillar2:Ascaling-upofclimatefinance,conditionaloneffectivedecarbonisationcommitments.

Pillar3:Greenindustrialpartnershipsbetweenadvancedanddevelopingcountries.

Pillar4:Aneffectivemarketarchitectureforlarge-scalecarbonremovalandnaturerestoration,tocomplementpublicfunding.

AFOUR-PILLARSTRATEGY

Pillar1:AplurilateralcarbonpricingcoalitionwithacommonCBAM

June2025

The2015ParisAgreementachievednear-universalparticipation,with196countriesagreeingtocommittoclimateaction.Thisbroadinvolvementwasunprecedented,particularlycomparedtoearlieragreementssuchastheKyotoProtocol,inwhichnotalldevelopednationsparticipated(seeGuérinandTubiana,2025).Unlikeprevioustop-downapproaches,Parisallowedcountriestodeterminetheirownclimatecommitments,makingitpoliticallyfeasibleformanycountriestojoinandofferpledgesaccordingtotheircapabilities.EMDEscouldpresentbothunconditionalandconditionaltargets,explicitlylinkinggoalstofinancialsupportfromrichcountries.Subsequentclimatesummitshavealsointroducedsystematictransparencymeasures,requiringregularprogressreportsonemissionsreductions,withpeerreviewandpressure.

Tenyearson,theParisAgreementpledgesformulatedbycountries(theirNationallyDeterminedContributions,orNDCs)makeitpossibletoassessiftheyadduptothelevelofeffortrequiredtohaltglobalwarming(theydonot).However,thereisnobindingenforcementmechanismtoensurethatcountriesmeettheircommitments.TheParisAgreementcannotadequatelyaddressthefree-riderproblemassociatedwithemissions:thebenefitsofemissionsreductionsareglobal,butthecostsarebornebyeachcountry.

ThesecondwithdrawaloftheUnitedStatesfromtheParisAgreement,inJanuary2025atthedirectionofthere-electedPresidentTrump,wasasignificantsetback.Butitisalsoastrategicopportunityforothernationstostrengtheninternationalclimatecooperation.TheabsenceoftheUnitedStatesfromglobalclimatenegotiationscouldenabletheEuropeanUnionandothermajorglobaleconomiessuchasChina,BrazilandIndiatoagreeambitiousandcoherentinternationalclimatestrategies,withoutneedingtoaccommodateconstraintscreatedbyUSdomesticpoliticsandpreferences.Atthesametime,itisimportantthatanyagreementshouldbeopentofutureUSparticipation.

Scaling-upeffectiveclimateactionrequiresastrongerlinkbetweenclimatepoliciesandtrade.8Wepropose,buildingonClausingetal.(2025),thatinternationalcollaborationtaketheformofanopenandinclusive‘climatecoalition’.Membershipobligationswouldinclude:

adoptionofatieredcarbonpricingmechanism;and

adoptionofacommoncarbonborderadjustmentmechanism(andnocarbonborderadjustmentwithinthecoalition).

CEPRPOLICYINSIGHTNo.144

TheEUdecisiontointroduceaCBAMwouldbeanincentiveforcountriestojointheclubofclimate-ambitiouscountries.TheywouldgainCBAMexemption,alongwithpossibleadditionalincentivesinvolvingtechnologytransfer,climatefinance,technicalassistance,andcleanenergytradeliberalisation.Clubmemberswouldcommittoenforcedomesticcarbonpricingthroughtaxationorequivalentemissionstradingsystems.TheywouldalsoadoptCBAMsthatimposetariffsequivalenttotheirdomesticcarbonpricesonimportsfromnon-membernations.Thiswouldreducecarbonleakageandmaintaincompetitivefairness.

8SeetheG7Leaders’Statement,12December2022(

https://www.g7germany.de/resource/blob/997532/2153142/960bf

2bf29ddb2253fca0c3bf8f983e7/2022-12-12-g7leadersstatement-data.pdf

).

Importantly,Clausingetal.proposethatparticipationbestructuredthroughatieredcarbonpricingsystem,suchasthatproposedbytheInternationalMonetaryFund(Parryetal.,2021).Forexample,lower-incomecountriescouldimplementlowercarbonpricefloors(e.g.,€25pertonne);middle-incomecountrieswouldberequestedtoadoptahigher,butstillmoderatelevel(e.g.,€50pertonne);andhigher-incomeeconomieswouldhavehigherrates(atleast€75pertonne),withpricesadjustedregularlyforinflation.Othervariations,includingdifferentiationbetweenlower-andupper-middle-incomecountries,couldalsobeconsidered.

June2025

Thisdifferentiatedapproachalignswiththeprincipleofcommonbutdifferentiatedresponsibilities,acornerstoneofpreviousglobalclimateagreements,andaddressesequityconcernsbymitigatingpotentialeconomicimpactsondevelopingnations.Thedifferentiatedscheduleshouldserveasatransitionalmeasure,withcarbontaxratesincreasingascountriesachievehigherlevelsofincome.Thisexpectationofcarbonpriceconvergenceshouldreduceincentivesforcarbon-intensiveindustriestorelocatetojurisdictionswithlowercarbonprices.Boththelevelsofthetiersandthepaceofconvergencewouldbesubjecttonegotiation(seeClausingetal.,2025).

Thecoalitionwouldinitiallyfocusonthecarbon-intensivegoodsincludedintheEUCBAM:aluminium,ironandsteel,cement,fertilisersandhydrogenproduction.Theseindustriescompriseasignificantshareofglobalcarbonemissions(about20%),includingbothdirectemissionsandtheemissionsfromtheelectricityusedintheirproduction.ButtheCBAMcouldbeenlargedifsimilarmeasuresareadoptedbyothercountries,forexampleinEastAsia,andbebroadenedifothergoodsendupbeingaddedtotheintermediateproductsoftheinitiallist.

Thesizeandeconomicvalueofthemarketcreatedbytheclubwilldeterminetheincentivestojoin.Theeconomicvaluewoulddeterminetheclub’sabilitytointernalisetheclimatebenefitsofcollectivemitigationefforts.

ThisproposedclimateclubwouldcomplementtheUnitedNationsFrameworkConventiononClimateChangeConferenceoftheParties(COP)processbydeepeningcollaborationamongcoalitionmembers–primarilybecauseitreliesonreciprocityandmeaningfulincentivesratherthanvoluntarycommitmentsandpeerpressure.Countrieswouldgaineconomicbenefitsfromparticipationandthereciprocalstructurewouldincentivisesustainedparticipationandclimateaction,whileaddressingcarbonleakageandcompetitivenessconcerns.

AviablecoalitionshouldquicklyexpandfromtheEuropeanUnionanditsmainsupplierstootherlargecountries,includingChina,Korea,Japan,India,SouthAfricaandBrazil.Thesecountriesare,ofcourse,atverydifferentstagesofdevelopment,andtheirrespectiveincentiveswillneedtobecalibratedcarefully.Inadditiontoatieredscheduleforcarbonpricing,thedesignshouldincludecommitmentstotechnologytransferandfinancialsupportforgreentransitionsinlower-incomecountries.Inlightofconcernsaboutindustrialovercapacityinsectorssuchassteel,itmayalsorequireanagreementtolimitoreliminatesubsidies.TheEuropeanUnionwouldneedtoplayaleadingroleinestablishingthisframework.

CEPRPOLICYINSIGHTNo.144

Pillar2:Scaled-upclimatefinanceconditionaloneffectivedecarbonisationcommitments

ThecurrentcommitmentsofadvancedcountriestofinanceEMDEdecarbonisationareinsufficientandarenotmatchedbydevelopingcountrycommitmentstodecarbonise.Therefore,theimplicitcontractbetweenNorthandSouthcan(andinmanyinstancesdoes)resultinanunproductiveexchangeoffalsepromises:advancedcountriespretendtheywillfinancedecarbonisationintheSouth,whiledevelopingcountriespretendthattheywilldecarbonise.

Awayoutofthisconundrumwouldbetoform‘climatefinancecoalitions’involvingsubsetsofadvancedcountrieswillingtofunddecarbonisationintheSouthandsubsetsofdevelopingcountrieswillingtodecarbonisetheireconomiesifgivenaccess

tofundingonreasonableterms(seeChapter5byBoltonandKleinnijenhuis).Thismutualcommitmentwouldbeintheself-interestofallparticipatingcountries:allwouldgainfromtheavoidanceofphysical,healthandeconomicdamagethankstoloweremissionsinEMDEs,whileeconomicbenefitswouldberoughlyinproportiontocountries’GDP.Asaresult,fiscalsupportforthedecarbonisationofEMDEs(exceptChina)wouldbeintheeconomicinterestofadvancedcountriesandChina,eveniftheEMDEsdonotcontribute(BoltonandKleinnijenhuis,2025).

ThecostoffundingdevelopingcountrydecarbonisationasashareoftheGDPofthefinanciercoalitionwoulddependonthesizeofthatcoalition.AcoalitionofalladvancedcountriesandChinawouldpaylessthan0.2%ofGDPannuallyforEMDEpower-sectordecarbonisationconsistentwiththeParis1.5°Cobjective.ForafundingcoalitionthatexcludestheUnitedStatesbutincludesChina,theEuropeanUnion,Canada,Japan,SouthKoreaandsomeadditionalsmallerindustrialpartners,thefiscalburdenwouldbeabout0.2%ofGDP.IfChinaisalsoexcludedfromthefinanciercoalition,thecostwouldriseto0.3%ofGDP/year.

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Thegreatertheeconomicdamagefromclimatechange,thesmallerthecriticalmassofparticipantswouldneedtobeforcoalitionfinancingtobeprofitable.Butevenifglobaleconomicdamage(thesocialcostofcarbon)wererelativelylow($190/tCO2,asassumedbyRennertetal.,2022),afinanciercoalitionconsistingoftheEuropeanUnionandadvancedcountriesexcepttheUnitedStateswouldbenefiteconomicallyfromfinancingthedecarbonisationofmostofthelargestdevelopingcountrypower-sectoremitters.IftheUnitedStatesorChinaweretojoin,thecoalitionwouldfinditinitsinteresttofinancethedecarbonisationofalmostalldevelopingcountryemitters.Iftheassumeddamagesaresignificantlyhigher,asarguedbyBilalandK?nzig(2025),largeentitiesincludingtheEuropeanUnion,China(andtheUnitedStates)wouldfinditprofitabletoembarkondecarbonisationsupportalone,evenifnotjoinedbyotherpartners.

UndertheParisAgreement,allsignatoriesmustoffernewNDCsatCOP30inBrazilinNovember2025.Withthenextversionsnotdueuntil2030,thissetofNDCsrepresentsthelastchancetoputemissionsonanet-zeroconsistentpath.TheEuropeanUnionanditsclimatefinancecoalitionpartnersshouldofferconditionalfiscalsupporttoalldevelopingcountries(exceptChinaandoilandgasproducers)thatarewillingtocommittonet-zero-consistentdecarbonisationoftheirpowersectors.Whileonlyaccountingforabout40%ofdevelopingcountries’emissions,powersectordecarbonisationisanecessarystepforthedecarbonisationofindustryandtransport.

Pillar3:GreenindustrialpartnershipsbetweentheEuropeanUnionanddevelopingcountries

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Europecurrentlyimportsmostofitsoilandgasatrelativelyhighcost.Thecontinent’stransitiontocleanenergywillenditsdependencyonimportedfossilfuels,butnotitsrelativeenergyscarcity(McWilliamsetal.,2025).Europeisnotwell-endowedingreenenergy.Limitedlandavailabilityandarelativelypoorsolarpotential(exceptinSouthernEurope)implythatthecostofproducingelectricitywillbehigherthanincountriesontheothersideoftheMediterranean,intheMiddleEastorinAfrica.Nuclearpowercanhelp,butnottothepointofeliminatingEurope’sstructuralcostdisadvantage,asnuclearisrelativelyexpensivecomparedtorenewablesoncethepossibilityofelectricitystorageisfactoredin.

Asaresult,Europewillremainanenergyimporterinthemediumandpossiblylongterm.However,transportingelectricityismuchmorecostlythantransportingfossilfuels,eventakingintoaccountthepossibilityofproducinghydrogenandtransportingitbyseaorthroughpipelines.Incontrast,energy-intensiveintermediateproductsinthevaluechainsofthechemicalandsteelindustries,suchasammonia,fertilisers,methanolandreducediron,canbeeasilyandcost-effectivelytransportedbysea.

Forthisreason,thegreentransitionisboundtotransformtheinternationaldivisionoflabouralongvaluechains.Developingcountryexportersofprimaryproductssuchasironorearelikelytomovedownthevaluechainandexportprocessedproducts,suchasdirectreducediron,insteadofrawcommodities.Consequently,someupstreamsegmentsofEuropeanenergy-intensiveindustries(EIIs)wouldmoveSouth.ThisrestructuringofglobalvaluechainswouldbeeconomicallyefficientandwouldhelptheindustrialisationoftheSouth.Totheextentthatenergy-intensiveintermediateinputs,suchasammoniaordirectreducediron,areproducedwithgreenelectricityorgreenhydrogen,itwouldalsoleadtosignificantgreenhousegasesemissionreductions.

Thisleavestwoimportantquestionsunanswered:

howtoensurethatthemigrati