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Whatever good Donald Trump’s victory may be, the atmosphere on Earth is not. Admittedly, his economic team is still being chosen, and something more or less may emerge from the swirl of individuals and ideologies. Joe Biden’s Inflation Control Act was designed to be politically sacrosanct by funneling spending to Republican states. Still, the president-elect said he would at least eliminate subsidies for electric vehicles, if not more than Biden’s green spending.
Howard Lutnick, who was announced Tuesday as a candidate for secretary of commerce to take more control of the U.S. trade representative’s office, has described climate change as a concern for elitist wealthy people, but not for Wall Street CEOs. One man, oddly enough, doesn’t seem to include himself in that category.
If the United States turned its back on technology, it would have dealt a severe blow to its once global adoption and prominence in world trade. Not this time. Thanks to a persistent strain of climate change denial in American politics and the myopia of some industries, the United States has fallen far behind China as the world’s largest producer (and consumer) of green technology.
Instead, the Trump administration’s biggest blow to green investment outside the United States may be collateral damage from the high interest rate environment.
For example, the disappearance of the United States as a purchasing and producing country for EVs does not mean that the global market will disappear. The US has been slow to adopt EVs, with EVs accounting for only 10% of the US car market in 2023, while in China they accounted for nearly 40%. Under Biden’s policy of ramping up domestic production behind a high tariff wall while eliminating Chinese software, America was already on its way to becoming an isolated, high-cost, low-tech island.
China’s dominance was built on early generations of green technologies such as solar, wind, and batteries, often in production as well as consumption, supported by massive state support. According to the International Energy Agency, China has a share of more than 80% in all stages of the solar power supply chain. Even developed countries that want to compete with China are often forced to choose between mass importing cheap Chinese kit and protecting (or heavily subsidizing) more expensive local producers. You can
For example, in the case of solar panels, China won the battle for supremacy in the European market about a decade ago when the EU soft-pedaled anti-dumping duties to protect its industry. In contrast, the United States made a determined effort to drive Chinese solar panels from the market. This was successful, mainly because it benefited producers in Vietnam and other Southeast Asian countries, but adoption rates were low. Think tank Bruegel and consultancy Rhodium Group say the US is currently investing more than 10 times as much in domestic solar manufacturing as the EU ($2.1 billion versus $141 million in Q2 2024). However, we estimate that the investment amount is still small. Approximately half of the installed capacity.
Indeed, for countries hoping to retain some of their manufacturing capacity, the possibility that Chinese and other low-cost exports will be diverted from the U.S. market to other countries will further exacerbate competitiveness issues. Dew. Certainly, the global trading system will be flooded with cheap kit. The slowdown in China’s domestic demand means that the country is returning to an export-oriented model more generally.
Climate change denialism is on the rise in some parts of Europe’s political right. But nevertheless, imagine, for example, cheaper Chinese EVs blocking the green transition rather than encouraging EU governments to capture more value added for their own economies. is difficult. Hungarian Prime Minister Viktor Orbán, a climate change skeptic, welcomed BYD’s construction of an EV factory in Hungary. In an unusual move, some would say humiliating and a reversal of traditional practice, the EU has forced Chinese battery companies to transfer their technology to their European peers in return for EU subsidies. I am planning to request to be relocated.
Perhaps more worrying is the impact on already disappointing green investment in low- and middle-income countries. Private capital has been slow to fund what appears to be a clear business opportunity.
In response to criticism that the World Bank has traditionally been too optimistic about private investor financing of green infrastructure in developing countries, the bank’s president, Ajay Banga, recently said in an interview with the FT that it has He said he fully acknowledged that his spending forecasts were not realistic. It was too exaggerated.
But he said there were some countries and sectors where the lack of investment was puzzling. “The question is, if solar and wind are now cheaper per unit of electricity than fossil fuels, why aren’t the billions of dollars sitting outside middle-income countries’ doors pouring in?” Banga said. Said. The bank is working on various ways to attract private capital inflows.
Meanwhile, high global bond yields over the past two years have deterred renewable energy companies that had previously experienced a favorable low interest rate environment from investing. This, like all of President Trump’s policies, is speculative, but if President Trump imposes broad import tariffs, cuts deep taxes, and the Federal Reserve responds by raising borrowing costs. , green investment will be hit even harder.
For most governments and businesses around the world, the main issues of green transition will remain the same: technology availability, calculating costs and benefits, and trade-offs between import adoption and domestic production. The financing conditions for that investment may not have been met. The U.S. government may not be driving the adoption of carbon-saving technologies, but its dominance of the dollar market will make its influence felt more powerful.
alan.beattie@ft.com
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