Trade Wars and Climate Impact
15 August 2025
Trade wars impact the environment and the transition to renewable energy. Learn how global disputes influence the climate and what possible solutions exist.
Commercial disputes have shaped the global economy over the centuries, affecting not only markets and industries but also environmental issues. In the current scenario, these tensions directly influence global efforts to combat climate change and accelerate the transition to renewable energy. This article examines how economic rivalries impact environmental policies, the development of clean technologies, and the security of essential resources for the energy transition.
Trade Conflicts and Their Environmental Repercussions
Disputes between major economies can hinder the implementation of sustainable technologies, increase reliance on fossil fuels, and compromise international agreements to mitigate climate change. In the last two years, authorities have tightened export controls on key inputs (e.g., graphite and rare-earth magnets), and major markets have imposed trade remedies on clean-tech products—measures that can raise costs and slow deployment timelines.
USA vs. China: A Battle Over Rare Earths and Green Technologies
China still dominates the production and processing of several critical minerals and components essential to electric vehicles (EVs), wind turbines and solar. In April 2025, Beijing introduced new export-licensing rules covering multiple rare-earth products and tightened scrutiny of the magnet supply chain (including a tracking system for transactions), moves that have already affected overseas buyers. Earlier rounds of controls covered graphite (from Oct 2023) and other strategic materials.
On the demand side, the EU–China EV dispute illustrates how green-tech trade frictions can spill over globally: Brussels has imposed definitive anti-subsidy duties on battery EVs made in China and, in 2025, opened talks with Beijing on minimum price undertakings to stabilize the market.
In the United States, the Department of Commerce issued final anti-dumping and countervailing duty (AD/CVD) determinations in April 2025 on solar cells/modules from Cambodia, Malaysia, Thailand and Vietnam—routes many suppliers used to serve the U.S. market—adding near-term headwinds for project developers.
European Union vs. Russia: Energy and Geopolitics
EU measures adopted since 2022 have curtailed Russian energy flows: coal imports ended in August 2022, and Russian crude oil fell from 27% of EU imports in 2021 to ~3% by mid-2025. In July 2025, the EU adopted its 18th sanctions package targeting energy and agreed changes to tighten the oil price-cap regime (including a reduction to $47.6/bbl effective September 3, 2025), reinforcing incentives to diversify and accelerate clean energy. Some member states temporarily reactivated coal units during the gas crisis, but many of those units are now shutting and phase-out plans are back on track.
Latin America and the Nationalization of Lithium
Policy shifts continue to reshape lithium in the region:
-
Chile is advancing a state-led JV model rather than blanket nationalization. In April 2025, the competition authority cleared the Codelco–SQM partnership (with state control from 2031), and on July 1, 2025 the nuclear regulator approved a new extraction quota, removing a key hurdle. Indigenous consultation remains a live process.
-
Mexico maintained its lithium nationalization: the Supreme Court upheld the 2022 reform in December 2024, while investors (including Ganfeng/Bacanora) brought ICSID arbitration challenging impacts on the Sonora project—adding legal uncertainty for supply chains.
The Energy Transition and Pressure on Natural Resources
The expansion of renewable energy demands a growing supply of minerals such as lithium, cobalt, nickel, copper and rare earths. The IEA’s Global Critical Minerals Outlook 2025 projects that by 2040 (STEPS scenario), lithium demand grows ~5×, graphite and nickel roughly double, and copper demand rises by about 30%, underscoring the scale of upstream investment and recycling required.
At the same time, the environmental footprint of mining is under sharper scrutiny. UNEP and the International Resource Panel (Global Resources Outlook 2024) warn that extraction and processing drive substantial biodiversity loss, water stress and pollution, calling for stronger safeguards across the supply chain.
China’s Advancement, Trade Regulation, and Environmental Issues
Despite friction, China has entrenched leadership in clean-tech manufacturing:
-
Solar PV: China’s share exceeds 80% across major manufacturing stages; global PV installations hit ~600 GW in 2024, with China adding the majority. This scale helped drive down costs worldwide, even as trade disputes complicate flows.
-
Wind: Chinese OEMs (e.g., Goldwind, Envision) topped global turbine supplier rankings in 2024, reflecting expanding domestic and export capacity.
WTO Mediation: Aligning Trade and Environmental Policies
The WTO continues to provide a forum for aligning climate and trade. In 2025, the Trade and Environment Week focused on carbon pricing, circularity and sustainable fuels, complementing the TESSD work programme that delivered outcome documents at MC13 (Feb–Mar 2024). A joint report by the WTO with the IMF, OECD, UNCTAD and the World Bank explores coordinated approaches to carbon pricing and policy spillovers, relevant to avoiding “green trade” fragmentation.
Paths to Converge Trade and Sustainability
-
Diversification of Suppliers: The EU’s Critical Raw Materials Act designated strategic projects in 2025 to de-risk supply; G7 leaders launched a Critical Minerals Action Plan (June 2025) to coordinate standards, investment and resilience.
-
Circular Economy: The EU Battery Regulation (2023/1542) is phasing in recycled-content, recovery-rate and carbon-footprint requirements, with new implementation rules published in July 2025—a blueprint for other jurisdictions.
-
International Cooperation: WTO processes (CTE/TESSD) and the climate-pricing joint report encourage interoperability of trade and climate policies, helping reduce frictions that slow clean-tech deployment.
Final Thoughts
Commercial disputes and environmental policies are deeply interconnected, affecting the pace of the energy transition and global economic stability. With targeted diversification, stronger recycling rules, and trade–climate coordination, countries can reduce the collateral damage of economic rivalries while accelerating a low-carbon shift. The latest policy and market moves above reflect that this alignment is already underway—but consistent, cooperative follow-through will determine how fast the transition can go.
References
ALTERNATIVE FUELS DATA CENTER (U.S. DOE). Electric Vehicle (EV) Definition. [n.d.]. Available at: https://afdc.energy.gov/laws/12660. Accessed: August 14, 2025.
BLOOMBERGNEF. Chinese manufacturers lead global wind turbine installations (2024 ranking). [n.d.]. Available at: https://about.bnef.com/insights/clean-energy/chinese-manufacturers-lead-global-wind-turbine-installations-bloombergnef-report-shows/. Accessed: August 14, 2025.
COMISIÓN CHILENA DE ENERGÍA NUCLEAR (CChEN). Resolución que fija cuotas y condiciones para extracción de litio (01/07/2025). [n.d.]. Available at: https://www.cchen.cl/2025/07/01/resolucion-cuotas-litio-2025/. Accessed: August 14, 2025.
COUNCIL OF THE EUROPEAN UNION. EU adopts 19th package of sanctions against Russia (including adjustment of the oil price cap). [n.d.]. Available at: https://www.consilium.europa.eu/en/press/press-releases/2025/07/15/russia-s-ongoing-war-of-aggression-the-council-adopts-19th-package-of-sanctions/. Accessed: August 14, 2025.
EMBER. European Electricity Review 2024 – coal decline and temporary coal returns context. [n.d.]. Available at: https://ember-energy.org/latest-insights/european-electricity-review-2024/insights/. Accessed: August 14, 2025.
EUR-Lex. Council Regulation (EU) 2025/1678 of 3 September 2025 amending Regulation (EU) No 833/2014 (oil price cap adjustment). [n.d.]. Available at: https://eur-lex.europa.eu/eli/reg/2025/1678/oj. Accessed: August 14, 2025.
EUROPEAN COMMISSION. Batteries and Waste Batteries (EU Battery Regulation 2023/1542 – implementation). [n.d.]. Available at: https://environment.ec.europa.eu/topics/waste-and-recycling/batteries-and-waste-batteries_en. Accessed: August 14, 2025.
EUROPEAN COMMISSION. Commission confirms undertakings discussions with Chinese EV producers (anti-subsidy case). [n.d.]. Available at: https://ec.europa.eu/commission/presscorner
/detail/en/ip_25_1414. Accessed: August 14, 2025.
EUROPEAN COMMISSION. EU coal regions in transition (latest coal production/consumption trends). [n.d.]. Available at: https://energy.ec.europa.eu/topics/clean-energy-transition/eu-coal-regions-transition_en. Accessed: August 14, 2025.
EUROPEAN COMMISSION. Press release: Commission adopts list of 47 Strategic Projects under the CRMA. [n.d.]. Available at: https://ec.europa.eu/commission/presscorner
/detail/en/ip_25_864. Accessed: August 14, 2025.
EUROPEAN COMMISSION. Questions and Answers: anti-subsidy investigation into imports of electric vehicles from China. [n.d.]. Available at: https://ec.europa.eu/commission/presscorner/detail
/en/qanda_24_3426. Accessed: August 14, 2025.
EUROPEAN COMMISSION. Strategic Projects under the Critical Raw Materials Act – Selected Projects (EU list: March 25, 2025; third countries: June 4, 2025). [n.d.]. Available at: https://single-market-economy.ec.europa.eu/sectors/raw-materials/areas-specific-interest/critical-raw-materials/strategic-projects-under-crma/selected-projects_en. Accessed: August 14, 2025.
G7 (GOVERNMENT OF CANADA). G7 Leaders’ Statement: Critical Minerals Action Plan. [n.d.]. Available at: https://www.canada.ca/en/privy-council/campaigns/g7-summit-2025/leaders-statement-critical-minerals.html. Accessed: August 14, 2025.
IEA PVPS. Snapshot of Global PV Markets 2025. [n.d.]. Available at: https://iea-pvps.org/snapshot-reports/snapshot-2025/. Accessed: August 14, 2025.
INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES. Bacanora Lithium Limited, Sonora Lithium Ltd., and Ganfeng International Trading (Shanghai) Co. Ltd. v. United Mexican States (ICSID Case No. ARB/24/21) – Procedural documents. [n.d.]. Available at: https://icsid.worldbank.org/cases/pending. Accessed: August 14, 2025.
INTERNATIONAL ENERGY AGENCY. Global Critical Minerals Outlook 2025. [n.d.]. Available at: https://www.iea.org/reports/global-critical-minerals-outlook-2025. Accessed: August 14, 2025.
INTERNATIONAL ENERGY AGENCY. Mineral Requirements for Clean Energy Transitions. [n.d.]. Available at: https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions/mineral-requirements-for-clean-energy-transitions. Accessed: August 14, 2025.
INTERNATIONAL ENERGY AGENCY. Solar PV Global Supply Chains – Special Report (China’s share of manufacturing). [n.d.]. Available at: https://www.iea.org/reports/solar-pv-global-supply-chains. Accessed: August 14, 2025.
REUTERS. Chile regulator clears Codelco–SQM lithium partnership (April 8, 2025). [n.d.]. Available at: https://www.reuters.com/markets/commodities/chiles-antitrust-regulator-approves-codelco-sqm-lithium-partnership-2025-04-08/. Accessed: August 14, 2025.
REUTERS. China imposes rare earth export licences, sets magnet transaction tracking (April 4, 2025). [n.d.]. Available at: https://www.reuters.com/world/china/china-issues-rare-earth-export-licences-sets-magnet-transaction-tracking-2025-04-04/. Accessed: August 14, 2025.
REUTERS. China to require export permits for some graphite products used in EVs (Oct. 2023). [n.d.]. Available at: https://www.reuters.com/markets/asia/china-require-export-permits-some-graphite-products-used-evs-2023-10-20/. Accessed: August 14, 2025.
SOLARPOWER EUROPE. New report: World installed 600 GW of solar in 2024. [n.d.]. Available at: https://www.solarpowereurope.org/press-releases/new-report-world-installed-600-gw-of-solar-in-2024-could-be-installing-1-tw-per-year-by-2030. Accessed: August 14, 2025.
SUPREMA CORTE DE JUSTICIA DE LA NACIÓN (MÉXICO). Amparo en revisión 540/2024 (resolución vinculada a la reforma de litio). [n.d.]. Available at: https://www.scjn.gob.mx/sites/default/files/listas
/documento_dos/2024-11/AR 540.pdf. Accessed: August 14, 2025.
U.S. DEPARTMENT OF COMMERCE (ITA). Final Determinations in the AD/CVD Investigations of Solar Cells and Modules from Cambodia, Malaysia, Thailand, and Vietnam. [n.d.]. Available at: https://www.commerce.gov/news/press-releases/2025/04/final-determinations-adcvd-investigations-solar-cells-and-modules. Accessed: August 14, 2025.
UNITED NATIONS ENVIRONMENT PROGRAMME. What are energy transition minerals and how can they unlock a clean energy age? [n.d.]. Available at: https://www.unep.org/news-and-stories/story/what-are-energy-transition-minerals-and-how-can-they-unlock-clean-energy-age. Accessed: August 14, 2025.
UNITED NATIONS ENVIRONMENT PROGRAMME – WCMC. The Green Energy Transition and Mining. [n.d.]. Available at: https://www.unep-wcmc.org/en/news/the-green-energy-transition-and-mining. Accessed: August 14, 2025.
WORLD TRADE ORGANIZATION. Climate Change and the Environment (trade and environment overview). [n.d.]. Available at: https://www.wto.org/english/tratop_e/
envir_e/climate_intro_e.htm. Accessed: August 14, 2025.
WORLD TRADE ORGANIZATION. Trade and Environment Week 2025. [n.d.]. Available at: https://www.wto.org/english/tratop_e/envir_e/envir
_30062025_e/envir_30062025_e.htm. Accessed: August 14, 2025.
WORLD TRADE ORGANIZATION. Trade and Environmental Sustainability Structured Discussions (TESSD). [n.d.]. Available at: https://www.wto.org/english/tratop_e/tessd_e/tessd_e.htm. Accessed: August 14, 2025.