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

The document argues that while the energy transition is accelerating, current efforts are insufficient to limit warming to 1.5°C, and the shift in energy demand will fundamentally reshape global trade and geopolitics. It highlights a significant investment gap, noting that emerging markets and developing economies outside China account for only about 15% of global clean energy spending. The report identifies several trade-related barriers, including protectionist tariffs on electric vehicles, divergent technical standards, and the persistence of fossil fuel subsidies, which reached $7 trillion globally in 2023. It specifically warns that Border Carbon Adjustment Mechanisms (BCAs) and Investor-State Dispute Settlement (ISDS) provisions in investment treaties may disproportionately burden developing nations. To achieve an equitable transition, the authors recommend reforming WTO subsidy rules, increasing financial support for local value addition in critical minerals, and coordinating the phase-out of fossil fuel production.

• To limit global warming to 1.5°C, fossil fuels must decrease from 80% to 16% of the global energy supply by 2050, according to the IEA's Net Zero Emissions by 2050 Scenario.
• There is a stark disparity in clean energy investment; emerging market and developing economies outside China represent only approximately 15% of global clean energy spending, despite comprising around two-thirds of the world's population.
• China maintains a dominant position in the energy transition supply chain, accounting for roughly 60% of global production and 85% of global processing capacity for critical minerals such as cobalt, graphite, and lithium.
• Global fossil fuel subsidization is at record levels, totaling $7 trillion (7.1% of global GDP) when including both implicit and explicit subsidies.
• Trade policies such as the EU's Carbon Border Adjustment Mechanism (CBAM) and Investor-State Dispute Settlement (ISDS) provisions create significant risks for developing countries, with the latter protecting fossil fuel investments and leaving middle- and low-income countries vulnerable to about 60% of ISDS claims.
• The Agreement on Climate Change, Trade and Sustainability (ACCTS), signed in 2024 by Switzerland, Iceland, Costa Rica, and New Zealand, is the first legally binding trade agreement to regulate and eliminate harmful fossil fuel subsidies.

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} }