Energy Transition Trade, Climate, and Net Zero Pathways: Scenarios and Implications for Developing Countries and Climate-Resilient Development

This briefing note by the Forum on Trade, Environment, & the SDGs (TESS) and E3G examines the intersection of global trade, climate policy, and the energy transition. It analyzes how the shift away from fossil fuels reshapes geopolitical power and trade flows, highlighting the disproportionate risks and opportunities for developing countries. The document advocates for proactive trade policy reforms, increased financial support, and international coordination to ensure an equitable transition that avoids protectionism and supports climate-resilient development in the Global South.

• To meet the Paris Agreement goal of limiting global warming to 1.5°C, the world must halve greenhouse gas emissions by 2030 and reach net zero by 2050. This requires fossil fuels to decrease from 80% to 16% of the global energy supply according to the IEA's Net Zero Emissions by 2050 Scenario.
• China currently dominates the clean energy market, accounting for approximately 60% of global production and 85% of global processing capacity for critical minerals like lithium, cobalt, and graphite. In the first half of 2023, Chinese solar panel exports grew by 34% year-on-year, with over half going to Europe.
• Developing countries face severe investment barriers in the clean energy transition. While they represent two-thirds of the global population, they account for only one-fifth of global clean energy investment. Africa, despite having significant potential—including 30% of the world's solar energy reserves—attracts only about 2% of global renewable energy investment.
• Global fossil fuel subsidies remain at record levels, totaling $7 trillion globally (7.1% of global GDP) when including implicit subsidies. Public support for fossil fuels from G20 countries nearly doubled between 2019 and 2022, with G20 public financial flows to production reaching $1.4 trillion in 2022.
• Trade protectionism and unilateral measures create barriers for developing nations. The EU's Carbon Border Adjustment Mechanism (CBAM) is expected to disproportionately impact African countries due to the emissions-intensity of their exports. Additionally, tariffs of up to 100% on Chinese electric vehicles by the EU, US, and other G7 economies may increase the overall cost of low-carbon technologies.
• Investment treaties and Investor-State Dispute Settlement (ISDS) provisions hinder climate action by protecting fossil fuel investments. Middle- and low-income countries are vulnerable to approximately 60% of ISDS claims, which allow investors to sue governments over climate policies that harm their business interests.
• Fossil fuel-dependent developing countries risk economic instability as global demand declines. In Mozambique, gas discovery did not lead to promised growth; instead, external debt as a proportion of GDP trebled to 93% by 2021, and actual economic growth was around 2.5% compared to IMF projections of 34%.

APA

Walker, B., & Belton, E. (2025). Energy Transition Trade, Climate, and Net Zero Pathways: Scenarios and Implications for Developing Countries and Climate-Resilient Development. Forum on Trade, Environment, & the SDGs. https://lyrical-cormorant.files.svdcdn.com/production/assets/images/Publications/TESS-Briefing-Note-Energy-Transition-Net-Zero.pdf?dm=1740658627

Chicago

Walker, Beth, and Ellie Belton. Energy Transition Trade, Climate, and Net Zero Pathways: Scenarios and Implications for Developing Countries and Climate-Resilient Development. Forum on Trade, Environment, & the SDGs, 2025. https://lyrical-cormorant.files.svdcdn.com/production/assets/images/Publications/TESS-Briefing-Note-Energy-Transition-Net-Zero.pdf?dm=1740658627.

Wikipedia

{{cite report |last1=Walker |first1=Beth |last2=Belton |first2=Ellie |title=Energy Transition Trade, Climate, and Net Zero Pathways: Scenarios and Implications for Developing Countries and Climate-Resilient Development |publisher=Forum on Trade, Environment, & the SDGs |date=February 2025 |url=https://lyrical-cormorant.files.svdcdn.com/production/assets/images/Publications/TESS-Briefing-Note-Energy-Transition-Net-Zero.pdf?dm=1740658627 |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{walker2025energy, author = {Walker, Beth and Belton, Ellie}, title = {{Energy Transition Trade, Climate, and Net Zero Pathways: Scenarios and Implications for Developing Countries and Climate-Resilient Development}}, institution = {Forum on Trade, Environment, \& the SDGs}, year = {2025}, month = feb, url = {https://lyrical-cormorant.files.svdcdn.com/production/assets/images/Publications/TESS-Briefing-Note-Energy-Transition-Net-Zero.pdf?dm=1740658627}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }