America’s current approach to international climate policy is worth interrogating in light of President-elect Donald Trump’s victory. President Joe Biden put unprecedented resources behind this multilateral diplomacy approach, beginning with the appointment of former secretary of state John Kerry as the inaugural special presidential envoy for climate.
Before stepping down in March 2024, Kerry led a robust team (on which one of the authors served as a special advisor) that supercharged U.S. leadership at the past several UN climate summits. His stature and shuttle diplomacy achieved much, especially given the first Trump administration’s damage to America’s credibility by deciding to withdraw from the Paris Agreement. Under Kerry, the United States shepherded multilateral efforts like the Global Methane Pledge and bilateral agreements with major emitters like China—notable wins given the rough geopolitical environment.
The imminent return of Trump to the White House provides a pragmatic milestone to assess these accomplishments given that the next administration will likely seek to reverse them.
Taking Stock
Taking stock of emissions reveals a dim picture. The 2021 UN climate conference, COP26, in Glasgow saw the world commit to phasing down coal, marking the first mention of a fossil fuel in a UN climate agreement. The historic loss and damage fund meant to compensate vulnerable countries already affected by the climate crisis headlined COP27 in Sharm El Sheikh in 2022. The fund was formally established the next year at COP28 in Dubai, where countries also agreed to “transition away from fossil fuels,” a deal hailed as historic by many observers.
Where does progress on these pledges stand months before Trump reenters the White House? Early results suggest marginal returns. The world has never consumed as much coal as it is burning this year. Coal consumption has continued to increase since COP26 to reach an all-time high in 2023 and is expected to remain at the same level through 2025. Current policies are expected to only diminish coal consumption by roughly 40 percent through mid-century, a level closer to today’s demand than what is required in a net-zero emissions scenario. Similar projections for oil and natural gas see peak demand this decade but with long-lived plateaus well into mid-century.
The result is not particularly surprising. The Paris Agreement, which has now underpinned global climate negotiations for nearly a decade, hinges upon a voluntary framework. Countries are merely encouraged to periodically update their climate targets with no penalties for failing to do so, setting weak goals, or falling short of previous goals. To be fair, that design is a feature rather than a flaw, drawing in the participation of nearly every country and tying—if not binding—them to aspirational goals as an organizational principle and call to action.
The disconnect is not that multilateral diplomacy and successive COPs do not accelerate the energy transition and climate action—they do. Rather, it is that this approach is not adequately complemented by other foreign policy tools. Taking advantage of the full complement is the norm when it comes to any other issue of foreign policy significance.
While the multilateral framework has yielded some progress, alone it is insufficient to address the scale and urgency of the climate crisis. The United States should pivot to a more assertive, geostrategic form of climate diplomacy that leverages commercial diplomacy and trade as complementary tools.
To some extent, the Biden administration acknowledged this mismatch in international climate policy. In his April 2024 speech at Columbia University, John Podesta, Kerry’s successor, advocated trade tools to spur climate action and highlighted the constraints of consensus-based frameworks, in which spoilers play a dominant role. He said, “There is no penalty for what I like to call carbon dumping—when high emissions in production are exported back into countries with stronger climate policies.”
Vice President–elect JD Vance similarly argued that the second Trump administration would seek to bring more energy production and manufacturing to the United States because it is the “cleanest economy in the world,” compared to “more energy production in China, more manufacturing overseas, more doing business in some of the dirtiest parts of the entire world.”
Trump likely will again withdraw the United States from the Paris Agreement and possibly from the UN climate change framework governing it. Such a move would prevent the U.S. government from formally participating in the COP process, possibly making it difficult for future administrations to rejoin. The U.S. influence in international climate affairs may inevitably diminish as a result, but the profound upheaval could give way to other approaches.
Climate Shift
The current U.S. approach to international climate action is not well optimized to meet a transformed world defined by industrial policy, intensified great power competition, and shifting views on globalization and supply chains. This global landscape has shifted in four defining ways.
First, increasingly complex, fragmented geopolitics underpin Podesta’s assessment of the difficulty of building consensus. The fraught bilateral relationship between the United States and China has somewhat stabilized in recent years but remains a far cry from the dynamic that led to the Paris Agreement. Further, the steep rise of economic statecraft following Russia’s full-scale invasion of Ukraine in 2022 has upended global energy flows and accelerated fracturing of the decades-old consensus on global trade that made clean energy technologies cheap. Geopolitical tensions—rather than climate talks—are shaping national approaches to the energy transition. These trends will likely continue under Trump’s second term.
Second, non-state actors, such as corporations, financial institutions, city governments, and activists, are increasingly driving climate action. This dynamic will accelerate under a second Trump administration, with civil society increasingly looking to and pressuring U.S. businesses to fill the leadership gap. The UN process will go on, and U.S. nongovernmental organizations will support it. Private capital is also reshaping the dynamics in ways national policies may not fully anticipate or control, while the rise of climate litigation is creating new pressures on governments and corporations alike. For instance, a landmark climate lawsuit brought by young activists in 2021 led Germany’s Federal Constitutional Court to rule that the government’s climate targets were insufficient, pressuring Germany to revise its climate law. Corporations are playing an important role in bringing to market new technologies needed to accelerate climate action, including carbon removal, advanced nuclear reactors, and enhanced geothermal, by making advanced market commitments for such technologies. These factors underscore the need for a more multifaceted approach to international climate diplomacy that can engage with and adapt to new actors and pressures.
Third, political dynamics severely limit the current U.S. approach to international climate diplomacy. Climate change has long been politically polarized in the United States. Foreign assistance, while central to climate negotiations, has fallen out of favor in the United States in part because of the rise of inward-looking foreign and economic policies. Future administrations cannot afford to rely on Congress to mobilize concessional finance and development assistance at levels that the climate crisis demands. To be fair, no single government can mobilize the capital at the scale required for a successful and timely decarbonization of a developing country. Developed countries only recently fulfilled their long overdue climate finance pledge made in 2009 to mobilize $100 billion annually. In contrast, emerging markets and developing economies (EMDEs), excluding China, collectively require roughly $1.7 trillion per year by 2030 to be on track for a net-zero emissions future. Trump will likely seek to eliminate U.S. international climate finance contributions and most, if not all, U.S. international climate programs explicitly labeled as such. The Biden administration pledged to provide $11.4 billion annually for international climate finance by 2024 and is on track to meet this target.
Last, and most importantly, industrial policy is in vogue. However, the current approach is not yet calibrated to its popularity. Recent global progress on climate arguably owes more to the U.S. Inflation Reduction Act (IRA) and the EU Carbon Border Adjustment Mechanism (CBAM) than the past few UN climate conferences. In the United States, the IRA, which could facilitate over a trillion dollars in government spending to fight climate change and trillions more in private investment domestically, has prompted many countries to increase clean energy spending as they vie for industries of the future. Even though Republicans control both chambers of Congress, it is unlikely they will pursue a full IRA repeal in part because it has been generating economic and jobs benefits in their congressional districts. Though their fiscal resources are more constrained, Australia and Canada have announced similar subsidy regimes to stay competitive. And diverse economies are seeking to cooperate with the United States on clean energy supply chains. Most IRA spending will serve the U.S. energy transition, but it is already proving useful as a nascent foreign policy tool. The EU CBAM, which so far only compels data collection, is likewise spurring other governments to strengthen carbon pricing measures or consider them for the first time.
New approaches are necessary to match the enduring realities of volatile geopolitics and domestic constraints that limit multilateralism, as well as the new opportunities that industrial policies present.
Trade Arts and Crafts
A rush among global governments to adopt industrial policies is not without risk. Without effective cooperation and coordination on industrial policies, governments risk undermining the effectiveness of the new tools and straining long-standing areas of climate cooperation. The IRA exemplifies this inherent tension. It will drive down global emissions in the long term by accelerating the spread of clean energy technologies. In the short term, however, many countries see it as diverting investment from their energy transitions to the United States.
The United States must acknowledge a painful reality: the IRA’s content requirements and massive investment signal concern for a wide swath of countries, which might have every incentive to erect trade barriers. Such an outcome seems likely, given the fact that it would play into the tendencies of developing countries. For example, India’s production-linked incentives predate the IRA, and Indonesia’s move to ban raw critical mineral exports has successfully attracted higher value-chain investment. Follow-on policies must address how the IRA has already reshaped the international landscape by identifying meaningful opportunities for green supply chain and investment coordination.
The Next Clean Energy Frontier
Expanding the international climate tool kit to include other policy tools is a sensible starting point. The United States should not abandon the United Nations’ COP process or lay down its current international climate tool kit, though Trump may do exactly that. But Trump or a future administration could better realize global goals with a complementary global clean energy industrial strategy that is geopolitically resilient and politically durable. The complexity of the climate crisis makes clear the need for a strong, defensible, explainable approach resilient to domestic political swings, the scrutiny of other countries, and geopolitical shocks. The guiding principle could center on subsidies, tariffs, and assistance.
Domestic subsidies would position the United States as a global competitor in commercializing the technologies necessary for global decarbonization. They should be designed to allow for the rapid diffusion of these technologies to the rest of the world and encourage joint supply chains with like-minded partners and allies. The United States should also explore new ways of leveraging free trade agreements to make subsidies more accessible to other countries, creating incentives for cooperation, as with critical mineral agreements under the IRA. Such efforts could include administrative measures and legislation that allow U.S. partners and allies to more readily qualify for tax credit adders and meet domestic content requirements. For example, the United States could allow security pacts to qualify as free trade agreements under the IRA, urge more foreign companies in partner countries to invest in the U.S. market so they can take advantage of domestic tax credits that subsidize overall operations and facilitate technological know-how, and consider a select number of countries as domestic sources that count toward local content, as Congress allowed under the Defense Production Act for Australia.
Tariffs would protect these investments and impose penalties on countries with lax standards or inaction. The United States should consider pairing clean energy subsidies with tariffs on carbon-intensive goods from countries lacking robust decarbonization strategies. This would minimize the risk of carbon leakage, in which stringent domestic emissions standards result in the relocation of carbon-intensive production to a country with laxer regulations. To this end, the White House could engage with Congress to design and pass a carbon border adjustment that channels revenues toward and allows waivers for EMDEs, balancing the need for fair trade against the need for a just, equitable transition. Multiple bills like the Foreign Pollution Fee Act, Clean Competition Act, and bipartisan PROVE IT Act seek to establish a U.S. carbon tariff. Insofar as U.S. climate action hinges upon political consensus, climate-aligned trade policy could provide another avenue for progress.
Stronger assistance, in the form of affordable exports, and some concessional finance would enable other countries to accelerate their energy transitions and benefit from the United States’ hard-won progress on climate. It is crucial that the United States provide both technical and financial assistance to EMDEs to bolster their decarbonization efforts. Strategic use of tariff waivers combined with targeted finance could create export opportunities and deepen supply chain cooperation with these countries. Additionally, coordinating investments with countries that have large sovereign wealth funds could further facilitate technology transfer, making innovative climate solutions more accessible and affordable.
Furthermore, commercial diplomacy may help complement limited amounts of U.S. concessional finance. The United States should engage in promoting nascent technologies with high export potential, such as advanced battery storage, carbon capture and storage, advanced nuclear reactors, and enhanced geothermal. This requires regular updates to competitiveness analyses and market priorities, proactively broadcasting resources to the same U.S. clean tech innovators that benefit from domestic subsidies and formulating a strategy to promote technology transfer and upstream investment in EMDEs with private sector participation. These moves would help the United States stay ahead in a rapidly evolving global landscape.
The urgency of the climate crisis and size of the opportunity align incentives. As clean tech rapidly evolves into a multitrillion dollar industry, the United States, even at its most ambitious, will still rely on inputs from abroad. Coherence and cooperation lie in the growing pie: U.S. climate diplomacy can focus on driving global ambition, thereby creating demand. U.S. industry can meet a portion of this demand, supported by global supply chains and bolstered by American technical expertise and foreign assistance, which in turn can stimulate local manufacturing and economic growth. Meanwhile, China’s dominance in global clean tech manufacturing today encompasses entire supply chains for many commercial technologies. This excess manufacturing capacity may structurally drive hunger for export markets rather than supply-chain partners.
This dynamic suggests two lessons learned. First, the United States should not overly invest in low margin, commodity-like technologies that do not substantially drive job creation and economic growth given low chances for and the high cost of achieving success. Second, where U.S. innovation and know-how can drive market creation for clean energy technologies abroad, exports and commercial diplomacy must be married with benefits for partner countries, especially developing ones, that harbor their own ambitions to join the global clean energy economy. Simply put, U.S. policy in this arena must be additive rather than extractive.
Such overtures could be the foundation for a so-called carbon club that could serve as a platform to reconcile national policies at the intersection of climate and trade and establish rules of the road for subsidies, tariffs, and related investment policies. A carefully designed club could reduce the risk of a race to the bottom, in which countries close off and fragment their clean energy markets. Instead, it would incentivize data sharing and gathering, enhance policy dialogue and coordination, and promote innovation and clean trade, fostering a more collaborative and progressive international climate policy landscape. At best, members could ambitiously establish preferential trade terms internal to the club, including access to subsidies and markets, thus creating incentives to align with standards on emissions and other sustainable practices beyond what UN negotiations can drive.
Sticks-based approaches to driving climate action do entail some risks but certainly fewer than if applied multilaterally rather than unilaterally. A club could balance enforcement mechanisms with coordination and consultation, mitigating trade tension and discouraging rather than incentivizing the unilateral imposition of trade tools and standards. In the long term, minilateral groups can serve as proving grounds for new modes of cooperation that long-standing international institutions like the World Trade Organization and World Bank can take up.
A new approach to international climate policy is by no means uncomplicated, but the path of least resistance may entail riding the tide of industrial policy while mitigating the risks of trade fragmentation. The United States is in strong need of a more diversified approach to its international climate policy. Few, if any, areas of U.S. foreign policy rely on consensus-based multilateralism alone. By embracing commercial diplomacy and trade and employing a mix of strategic incentives and penalties, the United States can lead the world toward a more effective climate policy.
.jpg)
