Greening Transatlantic Relations

A climate of threat?

The trade relationship seemed to head toward calmer seas in November 2021 when the Biden administration agreed to lift the tariffs that Donald Trump had placed on European steel and aluminum. In return, the EU stopped penalizing iconic US products like Harley Davison motorcycles and Levi’s jeans. 

But then the Biden team created new problems by including targeted tax breaks for electric vehicles (EV) in its big climate and economic stimulus bill, the Inflation Reduction Act. Americans only get the EV tax credit, for instance, if vehicles are assembled in the United States. The EU argues that the United States is effectively building up its own EV industry with subsidies and protectionist trade barriers. 

In response, the EU has launched its own effort to win the race to be the leader of new clean-energy technologies. At the core of the program is a Green Deal Industrial Plan to mobilize EU funds to transform the region’s manufacturing and energy base. The architects of the plan note similar efforts by the United States, Japan, and India, but they also sound a warning about China, whose “pipeline of announced investments in clean technologies exceeds $280 billion…Europe and its partners must do more to combat the effect of such unfair subsidies and prolonged market distortion.”

As part of the Net-Zero Industry Act and other measures, the EU is, in effect, implementing its own version of “unfair subsidies and prolonged market distortion” by using tax breaks and subsidies to scale up the production of solar panels, batteries, and wind turbines. It also aims to increase the domestic sourcing of critical minerals and processing of these key ingredients in clean technologies. Through the Horizon Europe Program, meanwhile, the EU is allocating nearly $100 billion euros to support, among other things, “innovations with potential breakthrough and disruptive nature with scale-up potential that may be too risky for private investors.”

With its Carbon Border Adjustment Mechanism, the EU will also penalize carbon-heavy production, whether by domestic or foreign producers. The United States has taken a different route by slapping tariffs only on “dirty” overseas production. These two approaches can be reconciled, but the two sides are more likely to clash both bilaterally and in their trade policies with other parts of the world.

These disagreements have huge consequences. Together, the United States and the EU represent about one-third of the global economy. In terms of carbon footprint, the combined emissions are now less than China’s but represent the lion’s share of historic emissions since the dawn of the Industrial Revolution. By virtue of size, economic power, and shared responsibility for the climate crisis, the United States and European Union have an obligation to sit down and figure out a joint approach to saving the planet—and they should do so with China, not against it. 

For collaboration not competition

The press releases issued by Washington and Brussels paint a positive—and very Green—picture of transatlantic cooperation. 

For instance, when President Biden and European Commission President Ursula von der Leyen met in Washington in early March, they identified ways to “deepen our cooperation on diversifying critical mineral and battery supply chains” and strive for greater transparency in the way the two sides subsidize new technologies. The two have also pledged close cooperation on preserving biodiversity, promoting sustainable fisheries, reforestation, and so on. A proliferation of institutions—the Clean Energy Incentives Dialogue in the EU-US Trade and Technology Council, the US-EU Task Force on Energy Security, the Partnership for Transatlantic Energy and Climate Cooperation—attempt to harmonize the policies of the two partners. 

But for all these pledges, declarations, and confabs, the United States and European Union have not really linked arms to fight climate change. At one point during the Obama years, the United States and China formed a joint partnership, the US-China Clean Energy Research Center, that brought together state actors, businesses, universities, and banks to explore new clean-energy technologies. So intent on competing with one another to become the world’s leader in clean technologies, the United States and EU haven’t come up with anything comparable. Indeed, there was more active cooperation across the Atlantic during the Trump era, albeit at a sub-national level and in response to Trump’s withdrawal from the Paris climate agreement. California and the EU, for instance, collaborated on carbon markets and zero-carbon transportation alternatives. That level of concrete cooperation is still lacking at the federal level.

Money, politics & ideology

The reason why competition, rather than cooperation, shapes US-EU relations boils down to three factors: money, politics, and ideology. 

At the political level, the United States can’t agree with the EU on major climate initiatives because it can’t even agree with itself. California and Brussels see eye to eye because liberal Democrats are firmly in control in Sacramento. At the federal level, Republicans have joined a few conservative Democrats to block the Biden administration from breaking firmly with fossil fuels. The European Union has its own internal divisions to navigate as well, particularly between members in the east that are more dependent on dirty energy and manufacturing than members in the west. 

The money side of the equation exerts an even more powerful influence. The clean technology market is large — over $300 billion globally in 2020 — and growing at a rapid clip of over 5 percent annually. Only by expanding the domestic production of solar panels, wind turbines, electric cars, and the like can advanced economies manage this transition without dooming workers in sunset industries like coal mining to a future of joblessness. No wonder the United States and EU are jockeying to grab a larger slice of the pie.

But perhaps the most important obstacle to greater transatlantic cooperation on climate change is an ideological faith in markets. True, the EU is beefing up its industrial policy, and the Inflation Reduction Act similarly marshals federal money to pick winners and losers in the clean energy field. But Brussels has largely relied on its cap-and-trade system—the EU Emissions Trading System—to reduce carbon emissions, which means that reductions within Europe can be offset by “carbon leakage” as dirty manufacturing relocates overseas or outsources key components. The Carbon Border Adjustment Mechanism is one effort to plug these leaks. 

The United States doesn’t have a federal cap-and-trade system (though some states like California do). Moreover, the U.S. government has generally relied on market mechanisms to reduce carbon, such as Green bank financing or a proposed carbon tax. Meanwhile, markets continue to favor fossil fuel companies, which have reaped record profits and still take advantage of state subsidies that keep prices low for consumers. 

But whatever policies the transatlantic partners prioritize at home, they clearly are competing with each other at the global level. By the time markets have “decided” that dirty energy is no longer profitable, it will be too late for the planet. 

There is one important asterisk to this competition between Washington and Brussels. Both agree that China is a threat, whether because of its enormous carbon emissions—which have yet to peak—or because of its dominant position in the global market for clean energy technologies. China reportedly controls 80 percent of the manufacturing of solar panels, generates 46 percent more wind power than second-place Europe, and is leading the patent race by a large margin to develop a replacement for lithium-ion batteries. 

Despite their faith in markets, the United States and EU are losing out to a putatively communist country in the battle to become the world’s leading clean tech giant. A shared fear of China may in the end push the United States and EU toward closer cooperation despite their free-market instincts.

Grassroots resistance

Civil society organizations—Greenpeace, Friends of the Earth, #FridaysforFuture, Extinction Rebellion—have coordinated activities and campaigns across the Atlantic. They have joined arms to derail the Transatlantic Trade and Investment Partnership, protest the Energy Charter Treaty, and block new fossil fuel projects. The Climate Emergency Fund and the Equation Campaign have funded a new wave of transatlantic activism. 

Looking ahead, the most promising collaborations are in the realm of climate justice that connect transatlantic actors with the Global South. To begin with, the world faces a resurgent debt crisis, with twice the number of low-income countries at high risk of default today compared to 2015. Many middle-income countries in the Global South, too, are dangerously burdened with debt. Much of this debt is held in Europe and North America, either by governments or private banks. A strong transatlantic push from below for debt restructuring along climate-friendly lines is a promising front for civil society campaigning. 

At the last COP in Egypt, richer countries agreed to a loss-and-damage fund that would go toward compensating poorer countries for the costs already associated with climate change. A Transitional Committee has been established to work out the details, meeting for the first time in March. As with other financing mechanisms—like the Green Climate Fund—richer countries are angling to shirk their loss-and-damage obligations by providing money through new loans, rather than outright grants, and thereby contributing to the debt crisis. Here again is an opportunity for civil society organizations in Europe and the United States to hold their leaders to account and demand sustainable solutions.

Finally, the issue of trade looms over all of these discussions. Even as the United States and the EU squabble over bilateral trade, they are both negotiating agreements with countries of the Global South to access raw materials and gain preferential terms for their own exports. Activists in the Global North have successfully challenged investor-state dispute settlement (ISDS) provisions in these agreements that allow corporations to sue governments for regulations that affect their profitability. This kind of activism can be expanded to address a wide variety of trade stipulations that are both climate-unfriendly and disadvantageous for Global South countries.
The United States and EU have managed to reduce their carbon footprints over the last 20 years. By 2020, EU-27 emissions were 31 percent lower and U.S. emissions 7 percent lower than 1990 levels. But these reductions are largely meaningless in the face of the 53 percent increase in global emissions over the same period. If Brussels and Washington don’t see that they must up their game through mutual coordination and climate justice policies toward the Global South, civic movements will just have to work harder to correct their vision.