The global energy landscape is undergoing significant transformations as 53 countries implement carbon pricing mechanisms, covering over 20% of global emissions. These advancements help move the U.S. toward a cleaner energy future and a more climate-resilient future. The European Union (EU) has made impressive moves in setting carbon prices that really drive the economics of decarbonization. Countries are entering a scramble to counteract China’s stranglehold over the clean technology industry. To avoid this risk and diversify their supply chains, many are now exploring nearshoring strategies.
The importance of carbon pricing as a tool to reduce emissions is essential! By putting a price on carbon emissions, governments create an economic reason for industries to invest in cleaner technologies and practices. This targeted approach helps address the larger need to combat climate change and fulfill the U.S.’s international climate obligations.
EU’s Approach to Carbon Pricing
The EU’s ambitious carbon pricing strategies have shown other countries what is possible. The third EU demonstration of seriousness about reducing its heating planet comes by setting high prices. This is leading to massive shifts in the economics of decarbonization. This science-based policy framework encourages industries to find solutions and invest in progressively cleaner technologies. In doing so, they provide themselves a competitive advantage in the global economy.
“The world is entering a new industrial era powered by clean energy. Clean industrial projects are flourishing in diverse geographies, opening opportunities for new trade dynamics. But well-designed policies, including carbon pricing, supply-side financial incentives, and demand-side regulations, are essential to make projects viable and precipitate final investment decisions.” – ETC vice-chair Faustine Delasalle
Countries beyond the EU are looking very closely at this model. And as they implement their carbon pricing policies, they find out just how potent these frameworks can be. Not only can they help accelerate attainment of sustainability objectives, but they help enhance economic sustainability.
China’s Clean Technology Dominance
Since then, China has firmly entrenched itself as a global leader in the clean technology sector, which continues to reshape global energy markets. The country’s amazing progress has resulted in some of the most dramatic price declines in the history of renewable technologies. Notably, since 2011, solar photovoltaic (PV) module prices have decreased an incredible 94%. At the same time, lithium-ion battery pack prices have dropped over 92% since 2010.
Thanks to these economies of scale, electric vehicles have become more affordable than ever. For 2024, that number approaches two-thirds of all EVs sold in China being cheaper than their internal combustion engine equivalents. This major shift helps to advance a more equitable and cleaner transportation landscape. It enhances China’s competitiveness in the global automotive market.
Nearshoring and Supply Chain Diversification
In reaction to China’s industrial dominance, other nations are considering nearshoring tactics to strengthen their supply chains and avoid overreliance on China. This strategy aims to reduce the dangers of depending on one major market. Countries are looking to improve their economic security by reviving domestic production capacity. In tandem with this, they’ve been very strategic about investing in local industries to spur technological innovations.
“In an ideal world, free from geopolitical tensions or supply chain risks, China’s stunning technological progress and cost reduction would be welcomed as enabling a faster and cheaper energy transition worldwide.” – ETC chair Adair Turner
Creating well-designed policies that support the growth of the local industry, while supporting technological innovation and leapfrogging are key to achieving sustainable development goals.