IDEAS home Printed from https://ideas.repec.org/p/ecb/ecbops/2025366.html
   My bibliography  Save this paper

The intersection between climate transition policies and geoeconomic fragmentation

Author

Listed:
  • Weber, Pierre-François
  • Afota, Amandine
  • Boeckelmann, Lukas
  • De Gaye, Annabelle
  • Dieppe, Alistair
  • Faubert, Violaine
  • Grieco, Fabio
  • Le Roux, Julien
  • Meunier, Baptiste
  • Munteanu, Bogdan
  • Nobletz, Capucine
  • Norring, Anni
  • Reininger, Thomas
  • Skackauskaite, Ieva
  • Suárez-Varela, Marta
  • Svartzman, Romain
  • Valadier, Cécile
  • Vlajie, Diana
  • Wilbert, Lucia
  • Zaghini, Andrea
  • Attinasi, Maria Grazia
  • Brüggemann, Axel

Abstract

Two phenomena are increasingly reshaping the world economy. One is the growing and well-documented importance of climate transition policies that differ across countries. The other is the stark rise of geoeconomic fragmentation (GEF) concerns. While differences in climate transition policies are not new, they could amplify GEF, which is a new, growing risk. Conceptually, GEF is a policy-driven reversal of global economic integration, guided by strategic considerations such as national security, sovereignty, autonomy, or economic rivalry. It does not include reversals to global economic integration that are driven by autonomous change, such as shifts in technology, demographics or preferences, or policies motivated primarily by prudential or environmental concerns and labour or human rights. GEF propagates via all the channels through which countries engage with each other economically and politically to provide global public goods such as climate change mitigation. The steep rise in trade and investment restrictions points to coming headwinds which could be compounded by uncoordinated climate transition policies. Conversely, GEF could make transition policies more difficult as, together with their prerequisites – such as shared regulatory approaches, knowledge sharing and financial aid to less well-off countries – they hinge on effective cross-border coordination and collaboration. There is a considerable risk that GEF may hinder climate transition policies. The report is structured as follows. The first section sheds light on how climate policies may contribute to GEF. The second section analyses the extent to which GEF could hinder the green transition. The last section discusses gaps and avenues for further analytical and model-based work. JEL Classification: F52, F64, H87, Q54

Suggested Citation

  • Weber, Pierre-François & Afota, Amandine & Boeckelmann, Lukas & De Gaye, Annabelle & Dieppe, Alistair & Faubert, Violaine & Grieco, Fabio & Le Roux, Julien & Meunier, Baptiste & Munteanu, Bogdan & Nob, 2025. "The intersection between climate transition policies and geoeconomic fragmentation," Occasional Paper Series 366, European Central Bank.
  • Handle: RePEc:ecb:ecbops:2025366
    Note: 95834
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//pub/pdf/scpops/ecb.op366~95975a2e13.en.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Moro, Alessandro & Zaghini, Andrea, 2023. "The green sin: How exchange rate volatility and financial openness affect green premia," CFS Working Paper Series 715, Center for Financial Studies (CFS).
    2. Grossman, G.M & Krueger, A.B., 1991. "Environmental Impacts of a North American Free Trade Agreement," Papers 158, Princeton, Woodrow Wilson School - Public and International Affairs.
    3. Rahel Aichele & Gabriel Felbermayr, 2015. "Kyoto and Carbon Leakage: An Empirical Analysis of the Carbon Content of Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 104-115, March.
    4. Brian R. Copeland & M. Scott Taylor, 2004. "Trade, Growth, and the Environment," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 7-71, March.
    5. John E. T. Bistline & Neil R. Mehrotra & Catherine Wolfram, 2023. "Economic Implications of the Climate Provisions of the Inflation Reduction Act," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 54(1 (Spring), pages 77-182.
    6. Suárez-Varela, Marta & Rodríguez-Crespo, Ernesto, 2022. "Is dirty trade concentrating in more polluting countries? Evidence from Africa," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 728-744.
    7. repec:clg:wpaper:2008-02 is not listed on IDEAS
    8. Góes, Carlos & Bekkers, Eddy, 2022. "The impact of geopolitical conflicts on trade, growth, and innovation," WTO Staff Working Papers ERSD-2022-9, World Trade Organization (WTO), Economic Research and Statistics Division.
    9. Cherniwchan, Jevan, 2017. "Trade liberalization and the environment: Evidence from NAFTA and U.S. manufacturing," Journal of International Economics, Elsevier, vol. 105(C), pages 130-149.
    10. Gaulier, Guillaume & Zignago, Soledad, 2004. "Notes on BACI (analytical database of international trade). 1989-2002 version," MPRA Paper 32401, University Library of Munich, Germany.
    11. Manuel Linsenmeier & Mr. Adil Mohommad & Gregor Schwerhoff, 2022. "The International Diffusion of Policies for Climate Change Mitigation," IMF Working Papers 2022/115, International Monetary Fund.
    12. Borin, Alessandro & Conteduca, Francesco Paolo & Di Stefano, Enrica & Gunnella, Vanessa & Mancini, Michele & Panon, Ludovic, 2023. "Trade decoupling from Russia," International Economics, Elsevier, vol. 175(C), pages 25-44.
    13. Bellora, Cecilia & Fontagné, Lionel, 2023. "EU in search of a Carbon Border Adjustment Mechanism," Energy Economics, Elsevier, vol. 123(C).
    14. Böhringer, Christoph & Balistreri, Edward J. & Rutherford, Thomas F., 2012. "The role of border carbon adjustment in unilateral climate policy: Overview of an Energy Modeling Forum study (EMF 29)," Energy Economics, Elsevier, vol. 34(S2), pages 97-110.
    15. Sam Pryke, 2017. "Explaining Resource Nationalism," Global Policy, London School of Economics and Political Science, vol. 8(4), pages 474-482, November.
    16. Attinasi, Maria Grazia & Boeckelmann, Lukas & Meunier, Baptiste, 2023. "The economic costs of supply chain decoupling," Working Paper Series 2839, European Central Bank.
    17. David Kleimann & Niclas Poitiers & André Sapir & Simone Tagliapietra & Nicolas Véron & Reinhilde Veugelers & Jeromin Zettelmeyer, 2023. "How Europe should answer the US Inflation Reduction Act," Bruegel Policy Brief node_8764, Bruegel.
    18. Kruse-Andersen, Peter Kjær & Sørensen, Peter Birch, 2022. "Optimal energy taxes and subsidies under a cost-effective unilateral climate policy: Addressing carbon leakage," Energy Economics, Elsevier, vol. 109(C).
    19. Attinasi, Maria Grazia & Boeckelmann, Lukas & Meunier, Baptiste, 2023. "Friend-shoring global value chains: a model-based assessment," Economic Bulletin Boxes, European Central Bank, vol. 2.
    20. Wolfgang Buchholz & Todd Sandler, 2021. "Global Public Goods: A Survey," Journal of Economic Literature, American Economic Association, vol. 59(2), pages 488-545, June.
    21. Violaine Faubert & Nathan Guess & Julien Le Roux, 2024. "Capital in the Twenty-First Century: Who Owns the Capital of Firms Producing Critical Raw Materials?," Working papers 952, Banque de France.
    22. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
    23. Mr. Balazs Csonto & Mr. Iryna V. Ivaschenko, 2013. "Determinants of Sovereign Bond Spreads in Emerging Markets: Local Fundamentals and Global Factors vs. Ever-Changing Misalignments," IMF Working Papers 2013/164, International Monetary Fund.
    24. K. Buysse & D. Essers, 2023. "Critical raw materials : from dependency to open strategic autonomy ?," Economic Review, National Bank of Belgium, pages 1-35, November.
    25. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2010. "The worldwide governance indicators : methodology and analytical issues," Policy Research Working Paper Series 5430, The World Bank.
    26. Benjamin Carton & Christopher Evans & Mr. Dirk V Muir & Simon Voigts, 2023. "Getting to Know GMMET: The Global Macroeconomic Model for the Energy Transition," IMF Working Papers 2023/269, International Monetary Fund.
    27. Peiró-Palomino, Jesús & Rodríguez-Crespo, Ernesto & Suárez-Varela, Marta, 2022. "Do countries with higher institutional quality transition to cleaner trade?," Ecological Economics, Elsevier, vol. 201(C).
    28. repec:hal:cesptp:halshs-04331408 is not listed on IDEAS
    29. Thomas Allen & Mathieu Boullot & St phane D es & Annabelle de Gaye & No mie Lisack & Camille Thubin & Oriane Wegner, 2023. "Using Short-Term Scenarios to Assess the Macroeconomic Impacts of Climate Transition," Working papers 922, Banque de France.
    30. John Hassler & Per Krusell & Conny Olovsson, 2021. "Presidential Address 2020: Suboptimal Climate Policy [“Climate Change Uncertainty Spillover in the Macroeconomy.”]," Journal of the European Economic Association, European Economic Association, vol. 19(6), pages 2895-2928.
    31. Di Tommaso, Caterina & Perdichizzi, Salvatore & Vigne, Samuel & Zaghini, Andrea, 2024. "Is the government always greener?," CFS Working Paper Series 718, Center for Financial Studies (CFS).
    32. William Nordhaus, 2015. "Climate Clubs: Overcoming Free-Riding in International Climate Policy," American Economic Review, American Economic Association, vol. 105(4), pages 1339-1370, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Suárez-Varela, Marta & Rodríguez-Crespo, Ernesto, 2022. "Is dirty trade concentrating in more polluting countries? Evidence from Africa," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 728-744.
    2. Peiró-Palomino, Jesús & Rodríguez-Crespo, Ernesto & Suárez-Varela, Marta, 2022. "Do countries with higher institutional quality transition to cleaner trade?," Ecological Economics, Elsevier, vol. 201(C).
    3. Eskander, Shaikh & Fankhauser, Samuel, 2021. "The impact of climate legislation on trade-related carbon emissions, 1997–2017," LSE Research Online Documents on Economics 111509, London School of Economics and Political Science, LSE Library.
    4. Wang, Junbo & Ma, Zhenyu & Fan, Xiayang, 2023. "We are all in the same boat: The welfare and carbon abatement effects of the EU carbon border adjustment mechanism," MPRA Paper 118978, University Library of Munich, Germany.
    5. Barrows, Geoffrey & Ollivier, Hélène, 2021. "Foreign demand, developing country exports, and CO2 emissions: Firm-level evidence from India," Journal of Development Economics, Elsevier, vol. 149(C).
    6. Naegele, Helene & Zaklan, Aleksandar, 2019. "Does the EU ETS cause carbon leakage in European manufacturing?," Journal of Environmental Economics and Management, Elsevier, vol. 93(C), pages 125-147.
    7. Banie Naser Outchiri, 2020. "Contributing to better energy and environmental analyses: how accurate are decomposition analysis results?," Cahiers de recherche 20-11, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    8. Thais NUNEZ-ROCHA & Inmaculada MARTíNEZ-ZARZOSO & Chahir ZAKI, 2022. "What type of trade is promoted by environmental regulations?," LEO Working Papers / DR LEO 2988, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    9. Koch, Nicolas & Basse Mama, Houdou, 2019. "Does the EU Emissions Trading System induce investment leakage? Evidence from German multinational firms," Energy Economics, Elsevier, vol. 81(C), pages 479-492.
    10. Kwon, Ohyun & Zhao, Hao & Zhao, Min Qiang, 2023. "Global firms and emissions: Investigating the dual channels of emissions abatement," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).
    11. Thais Nuñez-Rocha & Chahir Zaki & Inmaculada Martínez-Zarzoso, 2024. "What Type Of Trade Is Promoted By Environmental Provisions In Trade Agreements?," Post-Print hal-04926976, HAL.
    12. Jia, Zhijie & Wu, Rongxin & Liu, Yu & Wen, Shiyan & Lin, Boqiang, 2024. "Can carbon tariffs based on domestic embedded carbon emissions reduce more carbon leakages?," Ecological Economics, Elsevier, vol. 220(C).
    13. Qirjo, Dhimitri & Pascalau, Razvan & Krichevskiy, Dmitriy, 2019. "CETA and Air Pollution," MPRA Paper 95608, University Library of Munich, Germany.
    14. Inmaculada Martínez-Zarzoso & Walid Oueslati, 2018. "Do deep and comprehensive regional trade agreements help in reducing air pollution?," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 18(6), pages 743-777, December.
    15. Jevan M. Cherniwchan & M. Scott Taylor, 2022. "International Trade and the Environment: Three Remaining Empirical Challenges," NBER Working Papers 30020, National Bureau of Economic Research, Inc.
    16. He, Ling-Yun & Huang, Geng, 2021. "How can export improve firms’ energy efficiency? The role of innovation investment," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 90-97.
    17. Banie Naser Outchiri & Jie He, 2020. "Technical gap, trade partners and product mix evolution: how trading with China affects global CO2 emissions," Cahiers de recherche 20-07, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    18. Carattini, Stefano & Kim, Giseong & Melkadze, Givi & Pommeret, Aude, 2024. "Carbon taxes and tariffs, financial frictions, and international spillovers," European Economic Review, Elsevier, vol. 170(C).
    19. Shaikh M. S. U. Eskander & Sam Fankhauser, 2023. "The Impact of Climate Legislation on Trade-Related Carbon Emissions 1996–2018," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(1), pages 167-194, May.
    20. Liu, Li-Jing & Creutzig, Felix & Yao, Yun-Fei & Wei, Yi-Ming & Liang, Qiao-Mei, 2020. "Environmental and economic impacts of trade barriers: The example of China–US trade friction," Resource and Energy Economics, Elsevier, vol. 59(C).

    More about this item

    Keywords

    climate change; geoeconomic fragmentation; international cooperation; international public goods;
    All these keywords.

    JEL classification:

    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbops:2025366. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.