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Energizing the Future: Strategic Policies for Clean Technology and Global Trade

Maggie Johnson

As the clean energy economy expands, the role of policymakers in shaping the intersection of energy, industry, and trade policies becomes increasingly crucial. This transition presents significant opportunities for producing clean technologies and components, but also poses complex challenges. Policymakers are tasked with the delicate balance of fostering open, efficient markets and cost-effective energy transitions, while ensuring the security and resilience of supply chains. These decisions involve the strategic support of specific sectors, the formulation of trade policies, and the prioritization of areas for innovation.

The 2024 edition of Energy Technology Perspectives (ETP), a global guide to clean energy technologies, explores how manufacturing and international trade are evolving in response to the energy transition. It offers the first in-depth sectoral analysis using a unique bottom-up dataset and quantitative insights into industrial strategies. Manufacturing clean technologies has become a top economic priority, with the market for six key technologies—solar PV, wind, electric vehicles (EVs), batteries, electrolysers, and heat pumps—growing fourfold from 2015 to 2023, reaching over USD 700 billion. This growth, driven by rising demand for clean tech, is expected to drive the market to over USD 2 trillion by 2035.

Investment in clean technology production saw a 50% increase in 2023, reaching USD 235 billion, which accounts for nearly 10% of global investment growth. A significant portion of this investment went into solar PV and battery manufacturing, with EV production also receiving substantial funding. Despite some delays in project timelines, manufacturing investment is expected to remain strong, with spending levels projected to stay around USD 200 billion in 2024.

Materials like steel, aluminum, and ammonia are becoming increasingly critical in clean technology production. Steel and aluminum are essential for a variety of applications, from buildings to power plants, while ammonia, mainly used in fertilizers, is emerging as a fuel for shipping and power generation. The transition to near-zero emissions in these materials requires more than USD 80 billion in annual investment through 2050, creating a market that could reach USD 1.2 trillion by then.

Trade continues to play a central role in clean technology supply chains, accounting for nearly 30% of the global market value. Electric vehicles are the most traded product, followed by solar PV panels. By 2035, clean technology trade is projected to reach USD 575 billion. Under current policies, China’s clean technology exports are set to exceed USD 340 billion by 2035, comparable to the combined oil revenues of Saudi Arabia and the UAE. Despite this, opportunities remain for other countries to benefit from clean energy production and trade, depending on their policy choices and the pace of deployment. Stressing the potential for other countries to benefit from clean energy production and trade should make policymakers feel hopeful about their own countries' potential.

The transition from fossil fuels to clean technologies will have long-term effects. Unlike fossil fuels requiring constant replenishment, imported clean technologies create lasting energy infrastructure. For example, a single shipment of solar PV modules can produce as much electricity as 50 LNG tankers' worth of natural gas or coal transported by 100 ships.

Changes in the European Union’s trade balance illustrate this transformation. By 2035, clean technologies are expected to make up 35% of the EU’s import costs, up from less than 10% in 2023, decreasing dependence on fossil fuels and enhancing energy resilience.

While cost competitiveness is a significant factor in manufacturing investment, other elements also play a crucial role. With its economies of scale, integrated supply chains, and large domestic market, China is currently the lowest-cost producer. However, an IEA survey of over 50 major manufacturers shows that policy support, market access, skills, and infrastructure are crucial factors in investment decisions.

Emerging markets across Latin America, Africa, and Southeast Asia, currently contribute less than 5% of the global value of clean technologies. However, a just energy transition necessitates their broader participation, overcoming challenges such as political risk, skill shortages, and infrastructure gaps. Beyond mining, these regions have significant potential to expand their roles in clean technology production, as highlighted by ETP-2024’s analysis of business conditions, infrastructure, and resources.

The importance of key maritime trade routes, particularly the Strait of Malacca, is highlighted by their role in transporting clean energy technologies. Around half of all maritime trade in clean energy products passes through this route, which is more than double the share of fossil fuel trade passing through the Strait of Hormuz. As clean energy trade grows, ensuring the resilience of these supply chains will be crucial, given that clean technology cargoes are worth more than ten times the value of fossil fuel cargoes per tonne.

Well-balanced industrial and trade policies are crucial for accelerating clean energy transitions. While tariffs can increase the cost of technologies, well-designed policies can help bridge competitiveness gaps and promote innovation. Thoughtfully integrated industrial and trade measures will be essential for countries seeking to strengthen their positions in the clean energy landscape. ETP-2024 is designed to guide policymakers through these complex challenges and help drive progress in this critical policy area.

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