From climate to geopolitics: What role does the energy transition play today?

Today, the energy transition extends far beyond environmental policy. It is increasingly intertwined with goals of economic security, industrial leadership and strategic autonomy. Governments are not only seeking to reduce emissions; they are striving to secure jobs, safeguard supply chains, protect productive capacity and maintain political leverage vis-vis competitors.

What a decade ago was framed primarily as climate policy is now embedded in global positioning strategies. “Climate clubs,” tariffs, and export controls are part of the new vocabulary of climate governance.

This is the picture that emerges from the EsadeGeo report “The Effects of the Energy Transition on the Geopolitics of Energy”. The analysis outlines a scenario in which China consolidates its position of power, while Europe and the United States expand the use of tariffs, conditional subsidies, export controls and investment screening mechanisms.

Understanding the intersection between energy transition and power is essential: decarbonization does not reduce competition — it reorganizes it.

Energy transition as real-time geopolitics

Since the 2008 financial crisis and the supply chain disruptions during COVID-19, the global economy has shifted from hyperglobalization toward a more fragmented system organized around blocs and economic security.

Energy transition is also a competition for industrial power

The energy transition has created new value chains, particularly in renewable technologies. But it has also generated new dependencies — especially in critical minerals and advanced manufacturing — intensifying geopolitical tensions.

The concentration of supply chains in China, for instance, has pushed both the United States and the European Union to diversify sourcing, reindustrialize strategic sectors and strengthen industrial policy.

In this context, regulatory, industrial and trade decisions — including tariffs — have a dual effect. They reshape trade flows immediately and serve as direct instruments of power. The energy transition is no longer merely a climate tool; it is a strategic response within a more fragmented world order, transforming global economic and geopolitical relations.

China at the center of the new power structure

According to the report, China occupies a central position in this evolving landscape. As early as 2024, its dominance in critical minerals — supported by investments in overseas assets — and in key segments of clean technology manufacturing was already evident. Since then, this advantage has acquired an additional dimension: the ability to modulate access.

The ecosystem fostered by the “Made in China 2025” program — grounded in strong public investment and the scaling of green technologies — accelerated innovation, reduced costs and was reinforced by structural infrastructure investments. It also generated industrial overcapacity, allowing Chinese products to enter global markets at price levels that put pressure on European and American industries.

At the same time, export restrictions on certain materials, licensing systems and administrative requirements introduced by Beijing have transformed industrial strength into geopolitical leverage.

The debate is no longer simply about “who manufactures more cheaply,” but increasingly about “who can manufacture at all.”

For businesses, this shift means risk management must extend beyond efficiency to encompass availability, dependency and political alignment. For countries, economic interdependence can evolve into strategic vulnerability.

The United States: clean tech as strategic priority

The United States illustrates how green industry and clean technologies have become embedded within a broader geopolitical strategy.

Measures introduced under the Biden administration — including the Inflation Reduction Act, the CHIPS and Science Act and infrastructure programs — acted as catalysts for investment and industrial relocation. They also generated friction with allies and revealed how indirect trade could quickly reroute through third countries.

With the return of a Trump administration, the strategic emphasis intensifies. Support for clean technologies remains, but it is increasingly coupled with a renewed focus on traditional energy security, liquefied natural gas (LNG) exports and stricter conditions aimed at limiting exposure to China.

This is not a 180-degree policy reversal, but a recalibration of priorities. The transition continues — yet subordinated to objectives of power, industrial resilience and domestic stability.

Trade tools are becoming negotiation instruments, and economic policy is increasingly a form of diplomacy. For companies, the implication is clear: regulatory frameworks can shift rapidly, reshaping entire value chains.

The European Union: protecting without closing

Europe operates within a more delicate geometry. It maintains ambitious climate leadership goals while seeking to preserve competitiveness, avoid industrial relocation and reduce dependence on near-monopoly external suppliers.

The Green Deal Industrial Plan, the Critical Raw Materials Act and the Net-Zero Industry Act are already in motion. The debate is no longer about whether to act, but how to accelerate implementation — with less bureaucracy, fewer administrative burdens and greater investment appeal.

Tariffs on Chinese electric vehicles illustrate this balancing act. The EU seeks to protect its industry without fracturing markets or escalating conflict. Meanwhile, Chinese investment in Europe through joint ventures and local production facilities adds further complexity.

European strategic autonomy does not mean decoupling

Achieving less external dependence does not imply disengagement. Rather, it implies managing interdependence under less vulnerable conditions — combining openness and partnership review with trade defense instruments and industrial incentives.

Carbon border adjustment: climate as market condition

The Carbon Border Adjustment Mechanism (CBAM) is one of the most visible symbols of this new phase. Designed to prevent carbon leakage, it aligns the cost of carbon emissions between European producers and imports from countries with weaker climate regulations, incentivizing higher environmental standards.

Its impact extends beyond climate policy. CBAM projects the so-called “Brussels effect” into global climate governance, encouraging exporting countries to establish their own emissions trading systems.

Carbon thus becomes a condition of market access. Climate policy turns into industrial policy — with direct diplomatic implications.

Yet CBAM also raises questions regarding bureaucracy, competitiveness, the gradual phase-out of free allowances within the EU Emissions Trading System and potential industrial leakage. Recent simplifications underscore how sensitive this instrument is as a trade policy tool.

The rise of energy diplomacy

In an era of growing rivalry, the question remains whether spaces for cooperation can endure.

Climate clubs among aligned countries, friendshoring strategies and sectoral agreements seek to coordinate standards and reduce excessive dependencies. The aim is to avoid replicating the vulnerabilities of the fossil fuel era.

However, industrial overcapacity, domestic employment pressures and technological competition often push governments toward defensive measures. Coordination persists — but it is fragile.

Energy diplomacy remains active, albeit in a different form than a decade ago. Following Russia’s invasion of Ukraine, the EU signed more than 180 agreements related to renewables, raw materials and gas supply to strengthen energy security. Yet many of these arrangements are perceived as emergency responses rather than components of a stable long-term architecture.

The new green geopolitics

If in 2024 the debate revolved around the risk of fragmentation, by 2026 fragmentation is an operational reality.

The world now functions through flexible energy blocks, shifting alliances and managed competition. Understanding the energy transition today requires reading industrial policy, international trade and national security strategies simultaneously.

Decarbonization does not eliminate rivalry; it redistributes it.

The emerging map may be less fossil-based, but it is more geostrategic. Rules will continue to evolve, dependencies will change shape and access to resources and markets will increasingly be mediated by power politics.

The energy transition now plays a more prominent role because of its intersections with other policy domains, even if it originated as an environmental project.

The question is no longer only how to move toward lower emissions, but how to do so within an international system undergoing constant transformation.