Energy and Carbon Nationalism in the Global Energy Complex

Introduction

Energy has long been intertwined with national interests, shaping geopolitics and economic strategies. From 20th-century oil embargos to 21st-century clean tech subsidies, governments have pursued “energy nationalism” – policies ensuring domestic control over energy resources and security of supply. Today, as climate change drives a shift toward low-carbon technologies, a new form of energy nationalism is emerging: carbon nationalism. This refers to nations leveraging decarbonization policies to protect or promote domestic industries, often through measures like local content rules, export controls on critical materials, and carbon-border tariffs. The phenomenon is reshaping the global energy complex, which encompasses fossil fuels, renewables, nuclear power, electricity grids, critical minerals, carbon management systems, and the diverse end-use sectors of energy.

This essay defines and contextualizes energy and carbon nationalism historically and in the current policy environment. It maps out the global energy complex with data-driven insights on trends – from energy demand and electricity generation to carbon emissions, carbon capture deployment, renewable capacity growth, subsidies, electric vehicle adoption, and critical mineral supplies. Furthermore, it examines how carbon nationalism manifests in policy tools such as border carbon adjustments, export restrictions, local content requirements, and green industrial strategies. Sector-specific implications are analyzed for transport (including electric vehicles and sustainable aviation fuels), heavy industry (steel, cement, chemicals), hydrogen, liquefied natural gas (LNG), and carbon capture utilization and storage (CCUS). Emerging patterns in investment and supply chains are identified, reflecting a world where geopolitical rivalry and the net-zero transition increasingly intersect. Finally, the essay presents forward-looking scenarios to 2035, exploring how varying degrees of international cooperation or competition could shape the energy landscape. The goal is to offer a comprehensive, forward-looking analysis of how energy and carbon nationalism are influencing – and will continue to influence – the global energy transition.

Historical Context: From Energy Nationalism to Carbon Nationalism

Energy Nationalism’s Roots: Energy nationalism in its classical sense refers to the assertion of national control over energy assets and the use of energy policy as a tool of statecraft. In the 20th century, this often meant countries nationalizing oil and gas industries or forming producer alliances. Notable examples include the formation of OPEC in 1960 and the oil embargo of 1973, when Arab states weaponized oil exports for political leverage. Many resource-rich countries established state-owned enterprises (like Saudi Aramco, Russia’s Gazprom, or Venezuela’s PDVSA) to ensure that oil and gas wealth served national development. “Resource nationalism” periodically surged – for instance, in the 2000s, countries from Russia to Bolivia reasserted greater state control over hydrocarbons. These actions were driven by a desire for economic sovereignty and higher revenue from commodity booms, but they often had geopolitical ripples, affecting global supply and prices. Energy nationalism also manifested in import-dependent nations’ pursuit of energy security: building strategic petroleum reserves, diversifying suppliers, and even intervening militarily to secure supply routes. Thus, historically, energy nationalism has been about maximizing national advantage and security in fossil fuel markets .

The Rise of Climate Concerns: As scientific consensus on climate change solidified in the late 20th and early 21st centuries, nations began to adopt policies to reduce carbon emissions. Initially, climate policy was framed as a global commons problem requiring international cooperation (e.g. the Kyoto Protocol, Paris Agreement). However, achieving these goals domestically meant significant shifts in energy systems – often with uneven economic impacts across industries and regions. Decarbonization began to introduce new dimensions to energy nationalism. Countries realized that transitioning to renewables, electric mobility, and other clean technologies could create new industrial winners and losers. Early signs of “green” industrial policy appeared as governments supported nascent renewable and nuclear industries for energy security and export potential (France’s state-led nuclear program, Germany’s feed-in tariffs spurring a homegrown solar industry, China’s support for wind and solar manufacturing). Still, until recently, international cooperation (e.g. technology transfer mechanisms, global carbon markets) was a dominant narrative.

Emergence of Carbon Nationalism: In the 2020s, the dynamic shifted as major economies introduced climate policies explicitly tied to national economic strategy. Carbon nationalism refers to climate and energy measures motivated by competitiveness and domestic gain as much as by environmental benefit . A prime example is the United States’ Inflation Reduction Act (IRA) of 2022 , which poured hundreds of billions of dollars into clean energy and electric vehicle incentives with strong “Buy American” provisions and domestic manufacturing requirements. Similarly, Europe’s policy response – from the Green Deal Industrial Plan to the proposed Net-Zero Industry Act – emphasizes cultivating EU-based supply chains for batteries, wind turbines, and solar panels. China, for its part, has long integrated clean energy into its industrial policy, gaining a dominant position in solar panel and battery manufacturing through years of state support . What distinguishes carbon nationalism is the use of trade and industrial policy tools in the service of decarbonization goals , often justified by the need to prevent “carbon leakage” (industry relocating to lax-regulation jurisdictions) or to ensure energy security in new forms (like critical minerals or clean tech components).

In the current policy environment, carbon nationalism is evident in measures such as the EU’s Carbon Border Adjustment Mechanism (imposing tariffs on carbon-intensive imports), national export curbs on critical minerals (e.g. Indonesia’s nickel ore export ban to spur domestic battery industry, China’s restrictions on rare earth exports), and local content rules for renewable energy projects. While these measures aim to accelerate climate action, they are simultaneously reshaping global trade and investment patterns in energy . To fully grasp these implications, one must first map out the global energy complex they are acting upon – from the status of fossil fuels and renewables to the critical materials underpinning the clean energy future.

Mapping the Global Energy Complex

Global Energy Demand and the Primary Energy Mix

The world’s energy demand has grown relentlessly over past decades, though the growth rate has slowed in recent years. By the early 2020s, total primary energy consumption reached all-time highs , reflecting the fact that modern economies and growing populations continue to require immense energy inputs. In fact, 2022 marked the fourth consecutive year of record fossil fuel demand and record CO2 emissions – a stark indicator of the challenge in aligning consumption with climate goals. The global energy mix remains dominated by fossil fuels , despite the rapid rise of renewables. Fossil fuels (coal, oil, and natural gas) have historically supplied roughly 80% of the world’s primary energy, a figure that had changed little for decades . Recent data suggest a minor shift: in 2024 fossil fuels accounted for about 86% of the energy mix (using a supply-based accounting) . Under current policies, the International Energy Agency (IEA) projects the fossil share will modestly decline to around 73% by 2030, as clean energy deployment accelerates . But today, oil, coal, and gas still underpin the global energy system’s base.

The remaining share is filled by renewables and nuclear . Renewables (including bioenergy, hydro, wind, solar, etc.) have grown from just ~3% of energy in 1990 to a larger share now , but they still lag far behind fossil fuels in absolute terms. Electricity’s role is rising too: global electricity demand growth (largely met by renewables and gas) is outpacing total energy demand growth , indicating accelerating electrification of end uses. The energy mix varies by region – for example, some countries (like France or Sweden) lean heavily on nuclear and hydro, whereas others (like many Middle Eastern nations) rely almost entirely on oil and gas. Yet on the whole, the world remains in an “energy addition” mode rather than a clear transition : new renewable energy is being added, but global fossil use is not yet declining in absolute terms . This simultaneous growth of all sources led to the remarkable situation in 2022 where every major energy source, fossil and non-fossil alike, hit record consumption levels .

Fossil Fuels: Coal, Oil, and Natural Gas

Coal: Coal is the most carbon-intensive major fuel and a target for early phase-out in climate strategies, yet it remains entrenched in many countries’ energy supply. Global coal demand has seen a resurgence since 2021, largely due to economic growth in Asia and a short-term substitution for expensive natural gas in power generation. In 2022, coal consumption reached an all-time high, driven by coal’s crucial role in electricity and industry in China, India, and other emerging economies . China alone, which has been the dominant player in coal markets, was responsible for a large portion of recent coal demand growth . Going forward, there are signs of plateau: the IEA now foresees global coal demand peaking before 2030 under stated policies . However, a peak does not mean rapid decline – in scenarios where climate action is modest, coal use remains at high levels through this decade . Energy nationalism around coal often involves governments protecting coal mining jobs or ensuring energy security. For example, during the 2022 global energy crisis, some European countries temporarily boosted coal-fired generation for security, while China ramped up domestic coal mining to avoid over-reliance on volatile imports. Such moves, while understandable in context, underscore how national priorities can collide with global climate objectives.

Oil: Oil is the lifeblood of the transport sector and a major input for petrochemicals. Global oil demand rebounded strongly after the 2020 pandemic shock and has continued to rise, nearing pre-pandemic highs. In recent years, growth in oil use has been driven significantly by emerging economies (notably China and India), even as some advanced economies plateau or slowly decline in consumption. The IEA’s outlook suggests that global oil demand may peak by the late 2020s as electric vehicles and efficiency improvements spread . Indeed, one positive trend is the exponential growth of EVs – from 1 in 25 new cars in 2020 being electric to about 1 in 5 in 2023 . This is expected to flatten oil’s growth curve. Yet, absent stronger policy, oil use could remain stubbornly high (over 100 million barrels per day) well into this decade, especially for sectors like aviation, shipping, and chemicals where alternatives are nascent. Energy nationalism in oil is most visible in the policies of major producers and exporters: for instance, the OPEC+ alliance (led by Saudi Arabia and Russia) actively manages output to influence prices and protect their revenues. In 2022–2023, OPEC+ production cuts amid post-pandemic demand recovery sent oil prices upward, benefiting producers but straining importers. Consumers responded with subsidies or strategic reserve releases – indicating how oil geopolitics remains a tug-of-war between producers’ and consumers’ national interests . Another facet is resource-holding countries requiring more local processing or participation (e.g. asking IOCs to partner with national oil companies on local terms). Thus, oil markets, while global, are profoundly shaped by national policies and collusion/coordination among states.

Natural Gas and LNG: Natural gas has often been touted as a “bridge fuel” – cleaner than coal and oil – and its demand has grown accordingly, especially for power generation and industry. Gas is unique in that it’s traded both via pipelines and as liquefied natural gas (LNG) by ship, creating distinct regional markets that have been increasingly interlinked. Gas demand saw a turbulent period due to Russia’s war in Ukraine in 2022: Russia historically was a major pipeline supplier to Europe, but its abrupt supply cuts forced Europe to pivot to LNG imports. The result was a historic surge in LNG trade and price volatility. Europe’s LNG imports jumped nearly 69% year-on-year, reaching about 101 million tonnes in 2022 as countries scrambled to replace Russian gas . This reordering made Europe the top LNG importing region in 2022, a title that traditionally belonged to Asia. By 2023, Asia started to lead growth in LNG imports again – notably China, whose LNG imports rose ~12%, making it the world’s largest LNG buyer for the second time (having first taken top spot in 2021) . On the supply side, the United States emerged as the world’s largest LNG exporter in 2023, after expanding export capacity by 12% . Along with Qatar and Australia, the U.S. now accounts for the lion’s share of LNG exports .

This gas upheaval illustrates energy nationalism in multiple ways. Russia weaponized pipeline gas supply for political leverage in 2022, prompting an urgent national security response in Europe (e.g. Germany fast-tracking floating LNG terminals and locking in long-term contracts with the U.S. and Qatar). Many governments intervened to shield consumers from soaring gas prices via subsidies or bill support. Some gas exporters, meanwhile, enjoyed windfall revenues and asserted their strategic importance. LNG has become an arena for strategic alignment: the U.S. and Qatar signed long-term deals with European and Asian partners, reinforcing new supply dependencies rooted as much in diplomatic alliance as in market forces.

The Rise of Renewables

Renewable energy is at the center of decarbonization efforts and has seen explosive growth in capacity over the past decade . In the early 2000s, renewables (aside from traditional hydro) were a negligible part of the power mix; now they are mainstream and breaking installation records yearly. In 2023, global renewable power capacity additions saw a step change : nearly 510 gigawatts (GW) of new renewable capacity were added worldwide , an almost 50% jump compared to the previous year – the fastest growth on record . This marks the 22nd consecutive year of record renewable additions . Solar photovoltaics (PV) led the charge, accounting for three-quarters of the new capacity in 2023 . China alone commissioned as much solar PV in 2023 as the entire world did in 2022 – an extraordinary acceleration driven by Chinese industrial scale and policy support. Other regions also hit all-time highs in renewable build (e.g. the United States and Europe both significantly ramped up installations in 2023) .

Globally, total installed renewable power capacity (including hydro) reached roughly 3.4 terawatts (TW) at the end of 2022 , and by the end of 2023 it was on track to approach 3.9 TW . Despite this impressive progress, the share of renewables in total electricity generation was about 30% in 2022 , and in total final energy (which includes transport and heat) it is still much lower. There is a major push to further scale up: ahead of COP28, a global goal to triple renewable power capacity by 2030 (relative to 2022 levels) was endorsed, which would mean exceeding 11,000 GW of capacity by 2030 . The IEA notes that under current policies the world may reach ~7,300 GW by 2028, about 2.5 times the 2022 capacity – falling short of the tripling target . Achieving the full tripling would require tackling various barriers: grid infrastructure investment, faster permitting, enhanced financing for developing economies, and robust policy support in all regions .

Renewable energy deployment has significant geopolitical and industrial implications. Solar PV and wind manufacturing have become strategic industries , with China currently dominating both. For instance, China produces a large majority of the world’s solar panels and wind components, thanks to years of low-cost capital, large domestic demand, and supply chain control. This has prompted other nations to implement incentives to build domestic clean tech manufacturing (a hallmark of carbon nationalism, as discussed later). Additionally, control over critical materials for renewables (like rare earth magnets for wind turbines, polysilicon for solar cells, etc.) is a competitive concern. Nonetheless, the growth of renewables also promises more energy autonomy for many countries in the long run – harnessing local sun, wind, or hydro resources can reduce dependence on imported fuels. Regions like the Middle East, rich in oil, are now investing heavily in solar to diversify their energy mix, while countries like Australia see renewables as a way to convert sunshine into exportable energy (via green hydrogen or direct electricity exports).

Nuclear Power

Nuclear energy occupies a unique niche in the global energy complex: it is a low-carbon, dispatchable power source, but it faces public perception issues and high upfront costs. As of 2023, nuclear power provides about 10% of global electricity. Some 440 reactors are operational worldwide, with a total capacity around 390 GW. Historically, countries have differed greatly in their approach to nuclear. France obtains roughly 70% of its electricity from nuclear, while Germany chose to phase out nuclear entirely by 2022. In recent years, interest in nuclear has somewhat revived, driven by energy security and decarbonization needs. Notably, China has been rapidly expanding nuclear , adding multiple new reactors annually and planning a large fleet going forward. India, Russia, and some Middle Eastern countries (e.g. UAE with its new Barakah plant) are also building reactors. In established nuclear countries like the United States, U.K., and Canada, there is renewed support for life-extension of existing plants and development of advanced reactors (such as small modular reactors, SMRs). The IEA reported that prospects for nuclear have improved in markets like Japan (restarting reactors post-Fukushima), Korea, and the U.S., with support for extending plant lifetimes and constructing new units .

Nuclear power can enhance energy independence (reducing reliance on imported fossil fuels) and provide steady baseload or load-following power to complement intermittent renewables. This is why some see it as a key component of a secure, low-carbon energy mix. However, issues of nuclear waste, proliferation, and high costs remain. Energy nationalism in the nuclear realm often involves technology export and influence: for example, Russian firm Rosatom has been a major builder of nuclear plants abroad, giving Russia geopolitical leverage (though this is now under pressure due to sanctions). Similarly, France’s EDF and China’s CGN seek export opportunities. Control over the nuclear fuel cycle is another strategic matter – e.g. enrichment services are dominated by a few countries (U.S., Russia, Europe). A current flashpoint is enriched uranium: Russia is a leading supplier of enriched uranium fuel, holding about 40% of the global market for nuclear fuel in 2023 . Western countries are now trying to reduce this dependence by boosting domestic enrichment capabilities .

Overall, nuclear energy’s role by 2035 will depend on public acceptance and economics. Some scenarios see nuclear expanding moderately as a complement to renewables (especially via SMRs that could be deployed in smaller grids or industrial sites). Others foresee only a minor role, if costs remain high and public opposition persists. But given that nuclear is one of the few proven dispatchable low-carbon sources, many nations (especially those with limited renewable resources or land) are reluctant to foreclose this option.

Electricity Grids and Energy Storage

The electrical grid is the backbone of the modern energy system, and its importance is growing as more end-uses electrify (from vehicles to heating) and as variable renewable generation rises. A robust, smart, and expanded grid is essential to integrate high shares of wind and solar, which are intermittent and often located far from demand centers. Investments in transmission and distribution infrastructure are therefore critical enablers of the clean energy transition. However, grid expansion is lagging in many places, creating bottlenecks. The IEA has identified insufficient grid investment as one of the key challenges that could slow renewables growth under current trends . For instance, even if ample solar and wind capacity is built, without new transmission lines and storage, that power might be curtailed or unable to reach consumers. Policy support is increasingly targeting this issue (e.g. the U.S. IRA includes incentives for grid improvements, Europe has “Projects of Common Interest” to build interconnectors, and China invests heavily in ultra-high-voltage transmission lines connecting renewables-rich regions to cities).

Cross-border grid connectivity is a facet of energy geopolitics too: integrated grids can enhance energy security through trade (as in the European integrated grid, where France can export surplus nuclear power to Italy, or Denmark can import hydropower from Norway when wind is low). But they also create interdependence – which can be a vulnerability if political relations sour. For example, some Eastern European countries have sought to disconnect from Russian-controlled grid systems for energy security. In South and Southeast Asia, there are nascent plans for grid integration (like an ASEAN power grid) which could allow countries to share renewable resources, but national sovereignty concerns sometimes impede progress. Energy nationalism might manifest as reluctance to depend on neighbors for electricity , even if interconnection is mutually beneficial. Conversely, nations with surplus clean power potential (like Morocco or Iceland) are looking to export via subsea cables, tying into Europe’s grid – again blending geopolitics with the energy transition.

Energy storage, especially batteries, has become an integral part of the electricity system to balance renewable supply and demand. Costs for lithium-ion batteries have fallen drastically, enabling a rise in grid-scale storage projects and behind-the-meter batteries. By 2025, global installed battery storage is expected to exceed 500 GWh, up from just tens of GWh a few years ago. Pumped hydro storage remains the largest storage by volume globally (over 9 TWh capacity), but new investments are largely in chemical batteries now. Control over battery technology and supply chains is thus strategic (as discussed under critical minerals below). Also, smart grid technologies , demand response, and digitalization are improving grid resilience and flexibility – areas where countries are vying for leadership in innovation and standards.

Critical Minerals and Materials

A major aspect of energy (and carbon) nationalism today revolves around critical minerals – the raw materials essential for clean energy technologies. Lithium, cobalt, nickel, copper, rare earth elements, graphite, manganese, and others are fundamental for batteries, wind turbines, solar panels, electric motors, and power electronics. As the energy transition accelerates, demand for these minerals is skyrocketing. The IEA projects that in a scenario aiming for net-zero emissions by 2050, demand for critical minerals for energy could grow 3.5 times by 2030 , reaching over 30 million tonnes annually . Even under current policies, supply chains are straining to keep up.

The production and reserves of critical minerals are highly concentrated geographically, which has raised concerns about supply security and fueled resource nationalism. For instance:

Cobalt: About 70–75% of the world’s cobalt supply is mined in the Democratic Republic of Congo (DRC) . This single-country dominance poses risks, especially as DRC’s cobalt is largely controlled by foreign companies (including Chinese firms). Cobalt is crucial for many types of lithium-ion batteries (though some newer chemistries reduce cobalt content). Proven reserves of cobalt are also concentrated; DRC holds roughly half of global cobalt reserves (millions of tonnes worth). Lithium: Lithium is the indispensable element for lithium-ion batteries. In 2023, Australia produced around one-half of the world’s lithium , Chile about one-quarter, and China ~18% . Production has risen sharply – global lithium output increased 21% from 2021 to reach ~130,000 tonnes (Li content) in 2022 , and jumped further to ~240,000 tonnes in 2024 according to USGS estimates . Known lithium resources are vast (Bolivia alone has enormous resources in its salt flats), but economically extractable reserves are largest in Chile, which has the world’s largest share of confirmed lithium reserves . Australia, Argentina, and China also hold significant reserves . Notably, Bolivia has the greatest resources but is not yet a major producer, reflecting how resource nationalism (Bolivia has stringent state control and has been slow to develop its lithium) can impact global supply. Nickel: Nickel is used in high-energy-density batteries and in stainless steel. Indonesia is now the top nickel producer , accounting for about 50% of global nickel mine production in 2023 . Indonesia also has the largest nickel reserves – over 40% of the world’s known reserves . This dominance follows Indonesia’s deliberate policies: it banned raw nickel ore exports to force companies to build processing facilities domestically, a classic example of resource nationalism aimed at capturing more value locally. As a result, Indonesia has attracted foreign (especially Chinese) investment in nickel smelters and integrated battery material plants, becoming a key hub in the EV supply chain. Other major nickel producers include the Philippines, Russia, Australia, and Canada , but none rival Indonesia’s scale post-2020s. Rare Earth Elements (REEs): Rare earths (like neodymium, dysprosium) are vital for permanent magnets in wind turbines and electric vehicle motors, among other uses. China overwhelmingly dominates rare earth production – about two-thirds of global output in 2023 – and an even larger share of processing (separation and refining). Countries like the United States, Myanmar, and Australia produce some rare earths, but they are minor compared to China . In terms of reserves, China holds only ~34% of global rare earth reserves (significant but not exclusive), with sizable deposits also in Vietnam, Brazil, Russia, India, and Australia . However, many of those reserves are not developed due to economic or regulatory factors. China’s near-monopoly in refining (over 90% of some REE oxides are processed in China) has been a point of contention; it previously used export quotas (since removed after WTO rulings) and recently imposed export licenses on certain magnet-related REEs to tighten control. Graphite: Natural graphite is the primary anode material for EV batteries. China produces over 75% of the world’s graphite and also processes virtually all of it into battery-grade form. Reserves are more dispersed – China has ~25% of known reserves, with large reserves also in Brazil, Mozambique, etc. . Concern over this dependency recently led China to announce export permit requirements for battery-grade graphite (in late 2023), citing national interest – a move that rattled battery manufacturers globally. Copper: Copper is ubiquitous in all electrical equipment (wires, motors, grids). While not as geographically concentrated as some critical minerals, copper reserves and production are still led by a few countries. Chile is the largest copper producer (27% of 2022 production) and has the largest reserves (~23% of global) . Peru, China, the DRC, the U.S., and others also have notable copper output. Copper is sometimes on “critical” lists because high demand for electrification could strain supply.

The above examples illustrate why critical minerals have become a focal point of carbon nationalism. Countries are anxious about secure access to these materials for their clean energy industries. China’s dominance in many of them – not just extraction but especially refining – is staggering: on average, China is the leading refiner for 19 of 20 key minerals, with around 70% share of refining across these minerals . According to IEA data, China controls about 58% of lithium chemical processing, 65% of cobalt refining, 40% of copper smelting, and 35% of nickel refining globally . For rare earths, China’s share of refining is over 90% . This refining bottleneck means even if other countries mine more raw ore, they often ship it to China for processing (e.g. >80% of cobalt from DRC is exported to China for refining). This deep dependence has led Western and allied nations to pursue strategies like “friend-shoring” or diversifying supply chains – sourcing minerals from politically allied countries and investing in domestic refining capacity.

On the flip side, resource-rich countries are leveraging their critical minerals for economic gain and geopolitical influence. Indonesia’s nickel policy is one example; another is countries like Kazakhstan or Namibia looking to court investors for their uranium and rare earth reserves, respectively, but on terms beneficial to them. There is also the formation of cooperative groups like the Mineral Security Partnership (a U.S.-led initiative with EU, Japan, etc.) aimed at securing critical mineral supply through collaboration and investment in diversified sources. Some analysts even speculate about an ‘OPEC for critical minerals’, though the diversity of materials and players makes that concept tricky.

Carbon Management Systems: CCUS and Carbon Markets

As the world grapples with reducing emissions, carbon management technologies and policies have become part of the energy complex. Chief among these are Carbon Capture, Utilization, and Storage (CCUS) and carbon pricing mechanisms (emissions trading systems and carbon taxes). While these are distinct approaches – one technological, one economic – both are tools to manage carbon flows and are influenced by national strategies.

CCUS Deployment: CCUS involves capturing CO2 from large point sources (power plants, factories, or directly from air) and either reusing it (in products like synthetic fuels or in enhanced oil recovery) or permanently storing it underground. Many see CCUS as vital for decarbonizing “hard-to-abate” sectors like steel, cement, and chemicals, and for mitigating emissions from fossil fuel use where it persists. However, deployment has historically been slow due to high costs and technical challenges. As of mid-2023, there were 41 commercial-scale CCS/CCUS facilities operating worldwide , with a total capture capacity of about 49 million tonnes of CO2 per year . This is minuscule compared to global energy-related CO2 emissions of ~36.8 billion tonnes in 2022 . An additional 26 facilities were under construction and around 325 in various stages of development as of late 2023 , indicating a growing pipeline. The global CO2 capture capacity in development (including planned projects) was estimated at ~361 million tonnes per year in 2023, up 48% from the previous year’s pipeline . These numbers reflect increasing interest – spurred by net-zero pledges and incentives like the U.S. 45Q tax credit (generous subsidies for captured CO2) – but also underline how far CCUS has to scale. For example, the IEA’s sustainable scenarios often assume 1.2 Gt (1200 million tonnes) of CO2 capture capacity by 2030 in industry and power to stay on a 1.5°C path , against only ~0.3 Gt currently planned . This indicates a significant ambition gap.

Carbon nationalism affects CCUS in a few ways. Countries with large fossil fuel sectors (like oil producers in the Middle East, or coal-dependent economies) are investing in CCUS to extend the viability of those industries under carbon-constrained conditions. For instance, Saudi Arabia and the UAE are planning major carbon capture hubs to capture CO2 from gas processing or power plants, either to use for enhanced oil recovery or to store and potentially claim carbon credits. Indonesia, as described in a case study, is exploring becoming a regional CO2 storage hub by using its depleted oil and gas fields to store emissions from other countries’ industries . This could be a new kind of service industry (storing carbon waste) – but it raises regulatory and liability questions that nations will hammer out (e.g. agreements for cross-border CO2 transport and storage). In Europe, Norway’s Northern Lights project (part of Longship) is set to store captured CO2 from industrial sites in several countries under the North Sea, backed by the Norwegian government. This hints at a cooperative model, but other nations might prefer self-sufficiency in storage due to energy security mindsets extended to CO2. Moreover, governments with strong climate policies are funding domestic CCUS as an industrial strategy – for example, the UK is creating “CCUS clusters” with government grants to build local expertise and preserve jobs in industrial regions by cleaning up heavy industry rather than shutting it down.

However, CCUS also faces skepticism and opposition, often from civil society or sectors of the public who view it as prolonging fossil fuel use. If carbon nationalism by petro-states is perceived as just a way to “greenwash” continued oil & gas production using CCS, it could increase international tensions in climate negotiations. On the other hand, genuine progress in CCUS could be a shared interest area: even climate-progressive countries like those in the EU see a role for CCS in cement or chemicals. No cement plant in the world yet has large-scale CCS in operation , though that will change soon (Norway’s Heidelberg Materials Brevik plant will be the first, capturing ~0.4 MtCO2/year from 2024) .

Carbon Pricing and Markets: A different approach to carbon management is putting a price on emissions. As of 2025, dozens of countries and regions have implemented carbon pricing mechanisms – either cap-and-trade systems (like the EU Emissions Trading System, EU ETS, launched in 2005) or carbon taxes (like those in Canada, Sweden, South Africa, etc.). Together, these cover roughly 23% of global emissions, although prices range widely. The EU ETS remains the largest carbon market by value; EU carbon permit prices have risen in recent years (hovering around €80–100 per tonne CO2 in 2023) as the system tightens. China launched a national ETS for its power sector in 2021, creating the world’s largest system by volume of emissions, though prices there are currently very low (under €10). Carbon markets create economic signals for decarbonization and also feed into the logic of border adjustments (e.g. the EU’s CBAM will apply the domestic carbon price to imports).

From a nationalism perspective, carbon pricing can raise concerns about competitiveness – industries in one country paying high carbon costs fear competition from countries with no carbon price. This is precisely the issue CBAM is designed to address for the EU (discussed in detail in the next section). Some countries have also used carbon pricing revenues to support domestic industries’ low-carbon transition, effectively recycling the funds into industrial policy. Additionally, a concept of an international “carbon club” has been floated – where countries with strong carbon prices or standards ally and impose joint pressure on others (e.g. the G7 discussed a climate club). If such clubs form, it could deepen divisions: imagine an EU-U.S.-Japan club with CBAM-like measures pressuring China or India. Alternatively, it might encourage convergence of policies.

There’s also a growing voluntary carbon market for credits (offsets) from projects like reforestation or renewable energy. This is global in scope but faces quality and credibility challenges. Some nations (particularly forest-rich ones) are nationalistic about offsets too – for example, asserting that they should get compensation for preserving forests (as a carbon sink) and resisting rules that they see as impinging on their sovereignty over natural resources.

In summary, carbon management systems – whether technical like CCUS or policy-based like carbon pricing – are increasingly part of national strategies. They introduce a new domain of competition and cooperation: competition in who can develop technology and set standards, but also potential cooperation in linking markets or jointly funding large storage hubs. The next section will delve into how explicitly nationalist tools are being applied in the carbon and clean energy policy arena.

Tools of Energy and Carbon Nationalism

Nation-states are deploying a variety of policy tools that reflect carbon nationalism. These tools seek to bolster domestic advantages or shield local industries as the energy transition unfolds. Key mechanisms include border carbon measures to penalize high-carbon imports, export restrictions on critical materials, local content and domestic subsidy rules to favor home industries, and broad green industrial policies that channel investment into national clean energy sectors. Below we examine each in turn, with examples.

Border Carbon Adjustments

A prominent new tool is the Border Carbon Adjustment (BCA) or Carbon Border Adjustment Mechanism (CBAM). This is essentially a tariff or fee on imported goods based on their carbon emissions, aiming to equalize the carbon costs between domestic and foreign producers. The European Union is spearheading this approach with its CBAM , which entered a transitional phase in 2023. Under the EU CBAM, importers of certain carbon-intensive products must report the embedded emissions of those imports; from 2026 onward, they will be required to purchase certificates (effectively paying for those emissions at a price linked to the EU carbon market) . CBAM will initially cover iron and steel, cement, fertilizers, aluminum, electricity, and hydrogen imports , with the possibility to expand to other products over time. The mechanism is aligned with the phase-out of free allowances in the EU ETS – as EU industries lose their free carbon credits and must pay the full EU carbon price, the CBAM ensures foreign producers don’t gain an unfair advantage in the EU market by emitting CO2 for free. The goal, as stated by the EU, is to “put a fair price on carbon” for imports and prevent carbon leakage while encouraging cleaner production abroad .

CBAM is a clear case of carbon nationalism because it uses trade policy to extend the reach of domestic climate policy globally – effectively saying: if you want access to our market, you must meet our carbon standards or pay . This can incentivize trading partners to implement carbon-reduction measures (to avoid paying the fee), but it also can be seen as protectionist. Countries like Russia, China, and India – major exporters of steel, aluminum, fertilizers, etc. – have voiced opposition, seeing CBAM as a trade barrier that could hurt their industries. There are concerns it could spark disputes at the WTO, although the EU has tried to design CBAM in a WTO-compatible way (non-discriminatory, based on actual emissions data, etc.). Other countries are now considering similar measures: Canada has floated the idea of a carbon tariff, and in the U.S., legislators have proposed CBAM-like bills (though none have passed yet). The U.K. and Japan are studying it too. We may see a patchwork of carbon border adjustments by 2030, or possibly a convergence if carbon clubs form to harmonize approaches.

For developing nations with less capacity to decarbonize heavy industry, border adjustments by rich countries pose a challenge. Some fear it will impede their industrialization or export-led growth. To address equity concerns, ideas like recycling CBAM revenues to help poorer countries’ decarbonization have been suggested. Nonetheless, BCAs represent a major evolution in climate policy – merging trade and climate in unprecedented ways. Geopolitically, they place climate measures in the realm of trade wars and diplomacy. If designed cooperatively, they could push more countries toward pricing carbon; if done unilaterally and punitively, they could cause rifts.

Export Restrictions and Resource Nationalism

Export controls are a classic tool of resource nationalism, now reappearing in the context of critical minerals and even technologies. Several examples illustrate this trend:

Critical Minerals Export Bans/Quotas: In the 2010s, China imposed export quotas on rare earth elements, citing environmental protection and resource conservation, though widely seen as a strategic move to favor its downstream industries. After legal challenges, China dropped formal quotas but has maintained other measures. In 2023, China went further by requiring export licenses for certain rare earth magnet alloy technologies and, later in the year, for graphite products (critical for EV batteries), effectively tightening exports of these battery-grade materials. This came shortly after Western nations restricted exports of advanced semiconductors to China – highlighting tit-for-tat strategic trade measures. Meanwhile, Indonesia’s nickel ore ban , first enacted in 2014, then reintroduced and made indefinite from 2020, has been one of the most consequential export restrictions. It essentially forced companies to build nickel smelters in Indonesia (often with Chinese partnership) if they wanted access to Indonesia’s rich nickel laterite resources. Despite a WTO dispute (which Indonesia lost on appeal in 2023), Indonesia signaled it will maintain the ban, given how it spurred a domestic nickel processing boom and investment inflow. Indonesia has hinted at similar tactics for other minerals (like bauxite, copper concentrate) to foster domestic refining. These moves align with President Jokowi’s vision of moving the nation up the value chain and not selling raw materials cheaply. Other countries with critical minerals are considering or implementing their own restrictions: for instance, Zimbabwe banned raw lithium ore exports in 2022 to push for local battery mineral processing; Namibia is banning unprocessed lithium and cobalt exports. These policies reflect a desire to capture more economic benefit domestically (more jobs, higher export value) – a valid development goal, though they can create short-term supply crunches internationally. Energy Export Controls: Energy exporters occasionally use export curbs for domestic economic reasons. For example, during the 2022 energy crisis, some coal-exporting countries (like Indonesia, again) temporarily banned coal exports to ensure domestic power plants had enough supply when inventories ran low. Malaysia in 2021 halted exports of piped natural gas to meet local demand. Such actions typically occur during extreme conditions (shortages or price spikes) – they underscore that even “global” commodity markets can fracture when countries prioritize home needs. Russia’s abrupt gas supply cuts to Europe in 2022 can be viewed through a geopolitical lens (punitive action), but Russia also temporarily banned gasoline and diesel exports in 2023 to curb domestic fuel prices – a more classic economic nationalism move to shield citizens from inflation. Technology Export Limits: Beyond raw materials, nations are also guarding technologies. The U.S. has long had export controls on nuclear technology (for non-proliferation) and, more recently, on certain renewable energy tech transfers to rivals (for instance, restricting Chinese involvement in its grid for cybersecurity). China’s new export law (2023) included controls on advanced solar PV technology to maintain its competitive edge. Moreover, as mentioned, China’s curbs on gallium and germanium exports in 2023 (critical for semiconductor and solar industries) were seen as retaliation to Western chip export controls, but they also remind that China holds leverage in materials that are byproducts of base metal refining.

These export restrictions, while aimed at domestic or strategic benefit, have global consequences: they can raise prices, spur other countries to find alternative sources or invest in their own production, and even provoke trade disputes. They are a form of economic statecraft. For instance, Europe responded to China’s graphite curbs by accelerating efforts to source graphite from elsewhere (Africa, India) and to develop synthetic graphite or alternative battery chemistries. Japan, after China’s rare earth embargo in 2010 (a diplomatic spat fallout), diversified its rare earth supply chain by investing in Australian mines and recycling – a successful example of a nation mitigating another’s resource weaponization.

Local Content Rules and Green Industrial Policy

To ensure that clean energy investments translate into domestic jobs and industrial growth, many countries employ local content requirements (LCRs) or subsidies tied to domestic production . This is a core feature of carbon nationalism: using the decarbonization push to also bolster national industries. Several instances include:

United States (IRA): The legacy Inflation Reduction Act has explicit domestic content incentives. For example, the EV tax credit (up to $7,500 per vehicle) is only fully available if a certain percentage of the vehicle’s battery minerals and components come from the U.S. or countries with a U.S. free trade agreement – and none from “foreign entities of concern” (i.e. China or Russia) by mid-decade. This has led automakers to scramble to onshore battery supply chains or partner with allied countries (we’ve seen a flurry of announcements for battery gigafactories in the U.S., and mineral sourcing deals with countries like Australia and Canada). The IRA also provides bonus tax credits for renewable energy projects that use American-made steel, iron, and manufactured components. Effectively, it’s a huge carrot for clean tech firms to “Make in the USA”. The act’s generous subsidies (estimated $370+ billion over 10 years) for things like solar panel manufacturing, wind turbine components, electrolyzers, and more are green industrial policy on a massive scale . Emerging Economies: India has implemented local content requirements in its solar industry for years (for instance, certain government solar procurement schemes mandate using domestically made cells and modules). It also launched Production-Linked Incentives (PLI) schemes that give direct financial rewards to companies for manufacturing solar PV, advanced batteries, and even EV components in India. These aim to reduce import dependence (India currently relies heavily on Chinese solar imports) and create domestic champions. Similarly, countries like Brazil and South Africa have had local content rules in renewable energy auctions to stimulate local manufacturing and job creation. Such policies can succeed if the market scale is large enough to sustain local industry (e.g. India’s enormous solar demand is starting to nurture domestic module companies), but they can also raise costs if local suppliers are not competitive yet. Content Requirements in Fossil Sector Transition: Some energy nationalism in a carbon context also appears as conditions on foreign investment in oil/gas or mining that technology or equipment be sourced locally. For example, oil producers often have rules that a percentage of services or goods for a project come from domestic firms. As we move to new sectors, this extends to, say, requiring a foreign company building a large renewable project to use local contractors or materials. Saudi Arabia’s Vision 2030 localization drive (the IKTVA program) essentially does this – even as they invest in solar and wind, they want those projects to spawn local supply chains.

Green Industrial Policy more broadly refers to government interventions (subsidies, financing, procurement, R&D support) to build up domestic clean tech industries. Aside from the U.S. and EU, China has arguably been the most successful at this historically: its support (through low-interest loans, export credits, setting high domestic deployment targets, etc.) allowed it to dominate solar PV manufacturing (over 70% of global output), wind turbine manufacturing (leading global supplier), and increasingly EVs (China now makes over 50% of the world’s electric cars and controls 70% of global battery production capacity). This wasn’t labeled “green” policy per se – it was industrial policy applied to green sectors – but it was very much about national strength in future industries. Now other countries are emulating aspects of this model to avoid being left behind in the new energy economy.

However, when everyone tries to maximize their own take, there’s a risk of fragmentation and inefficiency. Duplication of supply chains could raise costs in the short term (losing economies of scale that global trade provided). There is also the specter of a subsidy race or even trade wars (the EU considered a complaint at the WTO about IRA; also, Western nations criticize China’s subsidies, but now do similar). An alternative could be more cooperative approaches, like coordinating on standards or co-investing in diversified supply. One example is the US-EU discussions on a critical minerals agreement so that EU-origin minerals would count for IRA credits (a way to not penalize allies). Japan and the US already signed such a deal in 2023.

In summary, local content and green industrial policies are double-edged: they can build resilience and political support for climate action by creating local jobs, but they can also strain international relations and potentially slow down global deployment if they impede trade. This balance will be an ongoing debate.

Fossil Fuel Protectionism and Legacy Nationalism

While much of the focus is on new energy sectors, it’s worth noting that traditional energy nationalism hasn’t vanished. Many countries continue to protect their fossil fuel industries even as they talk up climate initiatives. This includes direct subsidies, tax breaks, and public financing for oil, gas, and coal. In 2022, governments worldwide spent an unprecedented $1+ trillion on fossil fuel consumption subsidies – doubling the prior year – largely to shield consumers from high energy prices after Russia’s invasion of Ukraine . These subsidies keep domestic fuel prices artificially low, often for political reasons, but they also blunt the incentive to conserve energy or switch to cleaner sources. Major subsidizers include some oil-rich nations (e.g. Iran, Saudi Arabia, Russia) and developing economies where energy inflation is politically sensitive . In 2023, as prices fell, consumption subsidies globally receded to around $620 billion , but that’s still substantial. On top of that, if one counts implicit subsidies (like not pricing pollution and climate damage), the IMF estimates total fossil subsidies at a staggering $7 trillion in 2022 . Phasing out these subsidies is a climate priority, yet politically challenging – as attempts to remove them often trigger public backlash (e.g. fuel price riots in countries from Nigeria to France’s “gilets jaunes”).

Why mention this in nationalism? Because subsidizing domestic energy has an intuitive national-interest rationale: keeping energy affordable for citizens and industries. However, it runs counter to global climate interests. Many G20 countries have repeatedly pledged to eliminate “inefficient fossil fuel subsidies,” but progress is slow. In the context of carbon nationalism, one might see a future where countries face pressure or even penalties for such subsidies (imagine, hypothetically, if a carbon border adjustment also adjusted for subsidies – though that’s not on the table yet).

Finally, some nations with significant fossil resources are adopting a dual strategy: invest in clean energy but also safeguard the future of their oil/gas by exploring CCUS or diversification. The Gulf states (Saudi, UAE) are doing this – expanding renewables and EV infrastructure at home, even as they invest in CCS and nature-based offsets to label their oil “net-zero barrels” eventually. They also emphasize a narrative of “producer nation climate leadership” (hosting climate summits, etc.) to maintain a voice. This can be seen as a form of carbon nationalism where they attempt to shape the global climate agenda in a way that doesn’t eliminate their core economic engine overnight.

In summary, the toolkit of energy and carbon nationalism is broad: tariffs, quotas, subsidies, mandates, and strategic investments – all configured to navigate the tension between cooperating on a global climate imperative and competing for national benefit. The next sections turn to how these dynamics play out in specific sectors and what patterns are emerging in investment and supply chains.

Sectoral Implications of Carbon Nationalism

The interplay of energy transition and nationalist policy manifests differently across various sectors of the economy. Here we analyze key sectors – transportation (particularly electric vehicles and aviation fuels), heavy industry (steel, cement, chemicals), hydrogen, LNG, and CCUS – to see how carbon nationalism is influencing their development.

Transportation: Electric Vehicles and Sustainable Fuels

The transport sector, responsible for roughly one-quarter of global CO2 emissions, is undergoing a profound shift towards electrification and alternative fuels. Policies promoting this shift often have strong national economic motives.

Electric Vehicles (EVs): The EV revolution is well underway. Globally, electric car sales exceeded 10 million in 2022 and surged to about 14 million in 2023 , comprising 18% of all cars sold (up from 14% in 2022) . The total electric car stock on the road hit 40 million in 2023 . This rapid growth has been propelled by supportive policies (purchase incentives, fuel economy/CO2 standards, charging infrastructure deployment) and by declining battery costs. However, it is also intertwined with national industrial strategies. China is the clear leader in EVs – in 2023, nearly 60% of new EVs were sold in China , and China accounts for roughly half of global EV stock and battery production capacity. Chinese brands (BYD, Nio, Xpeng, etc.) now dominate their huge domestic market and are expanding abroad, often undercutting Western competitors on price. This is the result of years of state support: China’s subsidies for EV purchases (which ran for over a decade until 2022) and its mandates on automakers (the EV credit system) created the world’s largest EV industry, supporting battery manufacturers like CATL (now a world leader). Now, China’s EV sector is strong enough that the government phased out direct subsidies, though indirect support (like R&D funding and tax exemptions) remains . Chinese EV makers benefit from domestic supply chain integration – China refined ~55–70% of key battery materials and produced ~75% of the world’s battery cells in 2023 . This dominance has raised alarm in other nations, spurring them to respond.

Europe has used regulation as a driver: tight EU CO2 emissions standards for cars (effectively requiring ~EVs to reach targets) and a de facto phase-out of new combustion car sales by 2035 have forced European automakers to invest heavily in EVs. Germany’s Volkswagen, for example, pivoted strategy to EVs in the late 2010s. Yet Europe faces competitive pressure; it currently hosts many assembly plants for EVs but heavily relies on imported batteries (largely from Asia). The EU is trying to build battery gigafactories across the continent (Sweden’s Northvolt, projects in Germany, France, etc.), aided by subsidies and by the expected market demand. Still, concerns led the European Commission in 2023 to launch an anti-subsidy investigation into Chinese EV imports, worried that China’s state support allows its EVs to be dumped in Europe to the detriment of EU industry. This shows carbon nationalism turning into trade tension: both Europe and China want their domestic EV industries to thrive, setting up potential conflict in global markets. The resolution may involve Europe imposing tariffs or quotas on Chinese EVs, or conversely European brands upping their game (for instance, by cutting costs with cheaper materials or moving some production to lower-cost allied countries).

The United States , historically lagging in EV adoption, has turbocharged its effort with the IRA and related infrastructure laws. As mentioned, the U.S. approach is openly nationalist – using subsidies to ensure EV and battery manufacturing happens onshore or in allied nations. The result has been at least $100 billion in announced investment in new U.S. battery plants, EV factories, and supply chains since 2022. Companies from Korea, Japan, and Europe (like LG, SK, Panasonic, Volkswagen, Honda) are building battery plants in states like Georgia, Tennessee, and Ohio, often in joint ventures with U.S. automakers. This investment wave is partly a direct response to the incentives that reward local production. U.S. EV sales are rising (about 8% of new cars in 2023 were electric, up from ~5% in 2022), and the goal is to reach 50% by 2030. If successful, the U.S. could reduce its dependence on oil imports (still significant for transportation) and challenge China’s grip on the EV supply chain. But short-term, the U.S. still imports most of its EV battery materials – which is why it’s seeking those critical mineral partnerships globally.

Sustainable Aviation Fuel (SAF) and Alternative Fuels: While road transport goes electric, aviation and shipping are harder to electrify due to energy density needs. Here, nations are vying to develop and secure supplies of low-carbon fuels such as SAF (made from biofuels or synthetic processes) and green ammonia or methanol for ships. The EU has mandated that airlines uplift a rising share of SAF – at least 2% by 2025, 6% by 2030, scaling up thereafter – which means a huge new market for SAF in Europe. The U.S. IRA provides a hefty tax credit for SAF (up to $1.00 per gallon for life-cycle GHG reductions ≥50%), aiming to jump-start a domestic SAF industry. Competition arises in feedstock and technology: Who will produce the sustainable feedstocks (like waste oils, agricultural residues, or dedicated energy crops)? Countries with abundant biomass (Brazil, for one, with its biofuel expertise) see opportunity. Also, new technologies like Power-to-Liquid (synthetic jet fuel made from green hydrogen and captured CO2) could allow countries with cheap renewables to create e-fuels for export (for example, a project in Chile’s Patagonia aims to produce synthetic gasoline for export to Europe). Germany, in particular, championed an allowance for e-fuels in cars beyond 2035 as a niche – a nod to its auto industry’s interests. This shows industrial lobbying shaping policy under a nationalist lens (preserving a role for combustion engine technology where German firms excel, albeit using carbon-neutral fuel).

Infrastructure and Standards: Another aspect in transport is charging infrastructure for EVs and standards (like charging plugs, communication protocols). Countries that move first can set standards that their companies then export. China, for example, has its own EV charging standard (GB/T) and is pushing it in Belt and Road countries, whereas Europe and North America coalesced around CCS (Combined Charging System) standard. Tesla’s proprietary plug was a separate standard but was recently opened and is being adopted by Ford/GM in the U.S., indicating a standard war outcome where Tesla’s design might prevail in North America. Standard dominance can confer advantage to companies from the originating country, although it’s more technical.

In sum, the transport sector showcases a race to dominate the next era of mobility. The combination of large domestic markets, supportive policy, and industrial strength has given China an edge in EVs; now others are responding with their own nationalist strategies to catch up or protect their turf. The result could be faster EV adoption (a positive for climate) but also a balkanized supply chain and potential trade frictions (e.g. tariffs on cars, debates about mineral sourcing ethics, etc.). Over the next decade, one scenario is that a few major blocs each have robust EV industries: China (and its Asian sphere), North America (U.S.-centric, including Canada/Mexico for manufacturing), and Europe – with some degree of interdependence but also redundancy to secure supply chains.

Heavy Industry: Steel, Cement, and Chemicals

Heavy industries like steel, cement, aluminum, and chemicals (including fertilizers, petrochemicals) are the backbone of industrial economies, but they are also major greenhouse gas emitters. Decarbonizing these sectors is technically challenging and capital-intensive. Carbon nationalism comes into play as countries strive to protect their industrial base while also pushing for lower emissions through innovation and regulation.

Steel: Steel production (over 1.8 billion tons globally in 2022) accounts for ~7% of CO2 emissions. It’s heavily dependent on coal today (in blast furnaces). There are two main low-carbon pathways: using hydrogen to produce direct reduced iron (DRI) that is then melted in electric furnaces (often called “green steel” if hydrogen is green), or using CCUS on blast furnaces, or increasing recycling in electric arc furnaces (which need scrap steel). Europe has been a leader in setting targets for green steel because its industry faces high carbon costs under the EU ETS. Several European steel companies (SSAB in Sweden, ArcelorMittal in Germany, Salzgitter, ThyssenKrupp, etc.) have pilot projects to use green hydrogen for steelmaking . Sweden’s HYBRIT project delivered the world’s first batch of virtually fossil-free steel in 2021 (using H₂-DRI and renewable electricity), and plans full commercialization by 2026. The Swedish government supported this with grants and by creating a market (Volvo agreed to buy some green steel). Germany has earmarked billions in subsidies to help its steel mills decarbonize (the “Carbon Contracts for Difference” scheme would pay the cost difference for low-carbon steel). These are defensive moves to keep European steel competitive under carbon pricing and CBAM – otherwise cleaner but costlier steel might be undercut by cheap high-carbon imports if not for CBAM. Thus, CBAM for steel (starting transitional phase in 2023) is crucial so that EU steelmakers investing in green processes aren’t disadvantaged. It’s carbon nationalism in that it simultaneously forces foreign producers to pay (or clean up) and pressures EU producers to innovate, ideally turning them into tech leaders in green steel which can be exported globally.

China, which produces over 50% of the world’s steel, has a different situation: its steel industry is relatively young and very coal-based. China has started some pilot low-carbon projects (including some CCUS on steel plants and research into hydrogen DRI), but broadly it hasn’t shifted yet – partly due to cost and energy security (hydrogen at scale would require massive renewables and water). However, China is focusing on efficiency and closing some older inefficient mills, and it has a target for peak CO2 by 2030, which implies steel emissions peaking this decade. Chinese steel might face CBAM tariffs in Europe, but China might also find alternative markets. In a carbon-nationalist framing, China could view green steel tech as something to master to maintain export markets, or it might double down on supplying emerging economies with cheaper conventional steel while it can.

Cement: Cement is about 8% of global CO2 emissions (due to both energy use and the CO2 released in the limestone calcination process). It’s hard to decarbonize – options include more efficient kilns, alternative binders, and CCUS (since ~50% of emissions are inherent from chemistry). As noted in a cement industry roadmap, CCUS may need to mitigate around one-third of cement emissions by 2050 . So far, no cement plant has a commercial carbon capture operating (though Norway’s Brevik will soon, capturing ~0.4 MtCO₂/yr) . The first movers are in Europe (driven by high carbon prices and government support). The Canadian government is also supporting a major CCUS project at a Lafarge cement plant. The question is, will these new costs render domestic cement uncompetitive? Cement is heavy but does get traded regionally; CBAM will cover cement into the EU, which helps EU plants plan for CCUS without being killed by imports. Countries like India and China, top cement producers, have so far not made concrete (no pun intended) plans for CCUS in cement by 2030 – their strategies lean more on efficiency and maybe alternative fuels (biomass or waste) in kilns. If CBAM-like measures spread, they might have to adapt if they export (though cement trade is limited; more likely the issue is for related products like concrete or clinker or even building materials embedded emissions). Some national strategies could also involve requiring the use of low-carbon cement domestically in public construction (favoring local producers who invest in cleaner tech).

Chemicals (including Fertilizers): The chemical sector (which produces plastics, fertilizers, etc.) is diverse. Fertilizer (ammonia) production is emissions-intensive due to natural gas use; “green ammonia” from green hydrogen is a key alternative. Countries like Australia, Chile, and some Middle Eastern nations plan to make green ammonia for export (for fertilizer or as a fuel). If green ammonia costs drop, countries with cheap renewables and space (like Australia) could undercut traditional producers – a potential shift in comparative advantage that nations are eyeing. That’s why fossil-fuel-based ammonia producers (like in the Middle East or Russia) are looking at CCS or at their own green hydrogen to maintain market share.

For plastics and petrochemicals: many oil-producing countries, seeing a long-term decline in oil as fuel, want to pivot to petrochemicals (Saudi Arabia, for instance, is investing in large petrochemical complexes). They argue demand for petrochemicals (plastics, etc.) will grow even in an energy transition. However, there is climate pressure on plastics too (due to both emissions and pollution). Nations might clash here: one pushing a global treaty to curb plastics (Europe supports this) vs. others wanting to maximize this outlet for oil. So far it’s early days, but it’s a subtle realm of energy nationalism – shaping the narrative of future oil use.

Aluminum: Often called “congealed electricity,” aluminum production is very electricity-intensive (and also emits from carbon anodes). Countries with cheap power (especially hydropower) have competitive smelters (e.g. Canada, Norway, Iceland, Russia with hydro/nuclear). Now, access to cheap clean power is becoming crucial as buyers seek “low-carbon aluminum”. This could reorder things: China produces ~60% of aluminum, but much on coal power, making its carbon footprint high. China itself is trying to move smelters to Yunnan province where hydropower is abundant, to green its aluminum. The EU’s CBAM also initially covers aluminum , which could benefit cleaner producers (like hydro-based smelters in Norway or Canada) over coal-based ones. The UAE and Bahrain market their gas-powered smelters as relatively lower-carbon (often using CCUS for emissions). We see here a pattern: countries with the ability to produce a commodity with lower emissions intensity will want to set standards favoring that.

Trade and Alliances: A noteworthy initiative is the U.S.-EU proposal for a “green steel and aluminum club” (negotiated as part of resolving a Trump-era trade tariff dispute). The idea is to have a trade arrangement where both sides only trade tariff-free in steel/aluminum that meets low-carbon benchmarks, and impose tariffs on dirty steel from elsewhere (like China). This is an explicit merging of climate and trade policy to reward cleaner production and pressure others. It hasn’t been finalized, but it signals the kind of alliances that might form – essentially a climate cartel for certain products. If it happens, it’s carbon nationalism at the bloc level instead of nation-state: the West versus others.

In summary, heavy industries are where the rubber meets the road for combining climate policy with safeguarding economic interests. Countries that proactively invest in greening these industries aim to give their companies an edge in a decarbonizing global market (being the first to offer green steel, etc.). Those that don’t could face trade barriers or loss of market if consumers prefer greener products. At the same time, governments are wary of pushing too hard and just driving industries offshore (hence instruments like CBAM and subsidies). Over the next decade, expect significant churn: some old plants will shutter, new low-carbon facilities will emerge (like hydrogen-based steel mills in Europe or perhaps China if it decides to leapfrog). The competitive landscape of commodities might reorder around carbon intensity, creating winners and losers among countries. National policies today are trying to secure a “winner” spot for their domestic sectors in this new low-carbon industrial economy.

Hydrogen and the New Energy Carriers

Hydrogen has gained prominence as a versatile energy carrier critical for decarbonizing sectors that are hard to electrify, such as heavy industry, long-haul transport, and seasonal energy storage. The color spectrum of hydrogen (green from renewables, blue from natural gas with CCS, etc.) also has geopolitical implications, as nations place bets on production methods that align with their resource endowments and strategic interests.

Global Hydrogen Strategies: Over 30 countries have released hydrogen strategies or roadmaps in the past few years, signaling its perceived importance. The EU, for instance, in its 2020 hydrogen strategy set a target for 40 GW of electrolyzers by 2030 within Europe (and potentially importing another 40 GW-equivalent from neighboring regions). Germany and Japan were early advocates for hydrogen as part of their energy transition. Japan sees hydrogen (and its carrier, ammonia) as vital to decarbonize its energy since it has limited renewables; it aims to use ammonia in coal power plants and fuel cells for transport. Japan has been forging partnerships (like with Australia for a supply chain to ship liquefied hydrogen or hydrogen-carriers from Australian renewable projects). South Korea also has ambitious fuel cell vehicle and hydrogen plans, again with an eye on technology leadership (Korean firms are leaders in fuel cells).

The Middle East and Export Hubs: Countries like Saudi Arabia, UAE, and Oman are positioning to be major exporters of hydrogen (likely in the form of ammonia, which is easier to ship). They have cheap land and capital to build massive solar and wind farms to power electrolysis for green hydrogen. Neom (Saudi’s futuristic city) is building a $5 billion green hydrogen/ammonia plant slated to be one of the world’s largest. These nations see this as a way to leverage their natural resources (sun, space, existing energy infrastructure) to remain energy exporters in a post-oil world. If they can produce green ammonia cheaply, they can export carbon-free fuel to Europe or Asia. This is partly why the UAE and Saudi Arabia advocate for including all solutions (they emphasize they can do hydrogen and CCS and renewables, not just phase out oil).

Hydrogen Alliances: We are seeing bilateral deals: e.g., Germany has signed cooperation agreements with countries like Morocco and Chile to eventually import green hydrogen or synthetic fuels from them (Germany doesn’t have enough domestic renewable capacity to meet all its future hydrogen needs, so it’s scouting abroad). Similarly, the EU launched an “EU–Africa Hydrogen Partnership” of sorts, eyeing North Africa’s solar potential to supply Europe via pipelines or ships. This could be mutually beneficial but also introduces neo-colonial concerns if not done equitably (Africa wants to use its renewables for its own development too, not only export).

Blue vs Green Hydrogen: A rift in hydrogen is between those pushing green hydrogen (from water electrolysis using renewables, zero emissions in production) and blue hydrogen (from natural gas with CCS, which still has some residual emissions and relies on fossil). Countries with big gas reserves (like the U.S., Canada, Russia, Middle East) often support blue hydrogen at least as a transition (it utilizes their gas and they can claim it’s low-carbon if CCS is applied). For example, Russia (pre-war, at least) had hydrogen plans focusing on blue hydrogen to supply Europe via existing pipelines. The U.S. IRA has a hydrogen production tax credit that is color-agnostic – it rewards low carbon intensity H₂, so blue projects in gas-rich states (with CCS) could qualify, as well as green projects. This somewhat upset EU green purists who worry cheap subsidized blue hydrogen from the U.S. could compete with European green hydrogen. So here, carbon nationalism can appear in debates over standards – e.g., what counts as low-carbon hydrogen, how to certify it, whether to prefer domestic green hydrogen over imported blue, etc. The EU is inclined to favor green (renewable) hydrogen in its regulations, partly to ensure the hydrogen doesn’t just prolong fossil fuel use. But it may import blue if needed due to volume shortfall.

Scale and Technology Race: Currently, global low-carbon hydrogen production is tiny (only a few million tons, mostly “blue” pilot projects and a bit of green). But pipelines of projects are large – at least 250 projects announced worldwide. Electrolyzer manufacturing is scaling up massively, especially in Europe, China, and the U.S. China recently claimed to have a 70% share in current electrolyzer manufacturing capacity, although Western firms lead in some advanced technology types. The cost of electrolysis is expected to drop, and capacities of single projects are rising (100 MW-scale projects in operation, GW-scale under construction). There is a race to improve electrolyzers (efficiency, using cheaper materials) and to develop hydrogen storage and transport solutions (like better liquefaction or carrier fuels).

From a national perspective, being a leader in hydrogen technology (electrolyzers, fuel cells) is desirable. Europe has companies like Nel, ITM Power, Siemens Energy (electrolyzers), and the U.S. has some newcomers too; China is entering strongly. Japan’s bets on fuel cells (Toyota’s Mirai fuel cell car, etc.) are a way to ensure they have a stake if fuel cell vehicles catch on for certain segments (e.g. long-haul trucking or buses).

Hydrogen as Geopolitical Tool: It’s conceivable that by 2035, we’ll see significant international hydrogen trade (via pipelines or ammonia ships). Countries like Australia and Chile could become significant exporters of green hydrogen-derived fuels thanks to vast renewable resources. Australia already included hydrogen in its trade plans (supplying Asian markets). Energy security calculations will start to include hydrogen import dependence. Japan, for example, plans to import large volumes of ammonia/hydrogen, making it as dependent on foreign hydrogen as it is on foreign oil/gas today, just hopefully from a more diversified or stable set of partners (maybe Australia, Middle East, rather than just Middle East). European countries might diversify hydrogen import sources (maybe pipeline from North Africa and Norway, ammonia from the Middle East, etc., to avoid reliance on any single supplier – lessons learned from Russian gas).

In essence, hydrogen is opening a new theater of both collaboration and competition. It won’t replace oil/gas geopolitics overnight, but it could reconfigure energy alliances. Countries acting now with vision (like investing in large projects, securing partnerships, setting up regulatory frameworks for a hydrogen market) aim to position themselves as future hydrogen powers – whether as producers or as high-tech equipment suppliers.

Liquefied Natural Gas (LNG) and Gas Markets in Transition

Natural gas, particularly LNG, deserves a spotlight because of how the 2022 crisis redefined its geopolitical importance. LNG trade has grown steadily for decades, but the Ukraine war’s impact on European gas flows made LNG a strategic commodity in a way not seen before.

Europe’s Pivot and Global LNG Flows: Europe historically relied on cheap pipeline gas from Russia for ~40% of its gas supply. In 2022, Russia cut most deliveries to Europe. Europe responded by massively importing LNG. The EU’s LNG imports jumped to ~101 million tonnes in 2022 (a 69% increase from 2021) , turning it overnight into the top destination for LNG. This drastically shifted flows: U.S. LNG cargoes that once mainly went to Asia were rerouted to Europe. By 2023, Europe’s imports leveled off (its gas demand shrank due to high prices and a warm winter), but it still remains a huge LNG buyer. China in 2022 had actually decreased LNG imports due to lockdowns and high prices, allowing cargoes to go to Europe, but in 2023 China’s demand rebounded ~12% and it reclaimed the title of largest LNG importer. These swings show LNG’s market flexibility, but also its vulnerability to geopolitical and economic events.

For producing nations, this was an opportunity: Qatar moved from long-term Asia-focused contracts to also sign deals with Europe (like 15-20 year contracts with Germany, Italy). The U.S. benefited hugely – its LNG exports surged, and by 2023 the U.S. was the world’s largest LNG exporter . This had an element of U.S. energy nationalism paying off: years of building LNG export capacity (driven by private sector with some govt encouragement) yielded geopolitical influence, as U.S. LNG became Europe’s safety valve. The U.S.-EU collaboration in 2022 (the U.S. promising extra LNG to help Europe) strengthened transatlantic ties. However, it also introduced tension – Europeans complained about paying high prices to “friendly” U.S. suppliers (some called it war profiteering), and the U.S. responded that those were market prices set by traders (many cargoes were sold by intermediaries, not necessarily by U.S. gov or companies directly).

Contracting and Alliances: LNG deals increasingly reflect strategic alliances. European companies/governments signing long-term contracts with Qatar, U.S., or even African producers (e.g. Italy’s ENI with Algeria, Congo for more gas) are not just commercial, but to ensure gas security free from Russian influence. At the same time, Russia has tried to pivot eastward: its pipeline gas to China (Power of Siberia) is ramping up, and it’s negotiating another pipeline (Power of Siberia 2 via Mongolia). That would make China the primary buyer of Russian gas by the 2030s, entrenching a Russia-China energy axis. China wins with cheaper piped gas, Russia gets a new market, both reduce reliance on Western customers. India too is expanding LNG imports and signing term deals (it inked a big 10-year deal with Qatar in 2023, for example). India’s government seeks favorable terms as a growing major buyer – a sign of using its market size in negotiation (energy diplomacy).

LNG Investments: The shock of 2022, with Europe proving to be a willing buyer at high prices, has spurred new investments. Qatar undertook a huge expansion (North Field East and South projects) to increase capacity by ~60% by late 2020s. The U.S. has a slew of new LNG terminals approved or under construction (Venture Global, Cheniere expansions, etc.), which could make the U.S. the dominant LNG exporter by late 2020s with potentially 130+ million tonnes/year. Resource nationalism could still play a role: the U.S. might consider (though hasn’t yet used) restricting LNG exports if domestic prices spike (there were calls in 2022 by some in Congress to do so, but it didn’t happen). Likewise, some Asian governments (Pakistan, Bangladesh) who couldn’t afford LNG at peak prices suffered power outages – leading them to reconsider over-reliance on global LNG which can be out of reach financially when market is tight.

Decarbonization Angle: LNG is a fossil fuel, so how does it fit in a carbon-constrained world? Many argue it’s a “bridge” – notably, replacing coal with gas cuts emissions about half in power generation. Some countries plan to expand gas use as a lower-carbon option (e.g. in South and Southeast Asia). But the bridge narrative is contested, because gas still emits and locks in infrastructure for decades. Europe’s longer-term plan is to reduce gas drastically (the EU’s REPowerEU plan, beyond replacing Russian gas, also pushes efficiency and electrification to cut overall gas demand ~30% by 2030). If Europe succeeds, by 2035 its LNG imports may decline, freeing supply for elsewhere but also raising questions for exporters – could they face stranded LNG assets later? This makes exporters hedge: Qatar and others are also looking at carbon capture for LNG facilities and marketing “carbon-neutral LNG” (often via offsets). Also, a few projects are exploring hydrogen-ready LNG terminals or blending hydrogen in gas networks as a future-proofing measure.

Competition vs Collaboration: We might see formation of an “LNG buyers’ club” among Asian importers to bargain collectively for better prices (Japan, Korea, India hinted at this). OPEC-style collusion among gas exporters is unlikely (there is a Gas Exporting Countries Forum, but gas contracts and investments are different from oil). Instead, long-term bilateral deals will set the stage. U.S. LNG is mostly flexible and market-priced, while Qatar favors long fixed contracts. Some European players, burned by spot market volatility, are now more willing to sign long contracts (which they hesitated before due to climate goals). This shows pragmatism and national interest trumping earlier market ideology under stress.

In terms of carbon nationalism, countries will carefully choose reliable partners (ex: Europe prefers U.S., Qatar, Norway now; China spreads between Russia, Middle East, U.S. to some extent). As global gas demand might still rise (especially in Asia) even if it falls in others, ensuring supply is an energy security matter. If climate policies tighten, there could be carbon tariffs on LNG too (less likely because energy commodities haven’t been targeted yet, but conceivably in future). More likely, suppliers will try to lower the carbon intensity of their LNG (by reducing methane leaks, etc.) to keep it acceptable. U.S. and EU are pushing methane reduction initiatives globally – that’s another aspect: if say the EU decides to only import gas from countries that meet methane leakage standards, that’s a form of carbon-informed trade policy which could disadvantage, for instance, gas from places with high flaring or leaks.

Overall, LNG’s near-term geopolitical role has risen (energy weaponization by Russia boosted it), but its long-term role depends on climate action. Nations are thus making decisions: invest big in LNG for short/medium term gains, but also plan to pivot for net-zero alignment. For instance, a scenario could be by 2035, some LNG infrastructure is repurposed for hydrogen/ammonia. Countries like Japan are explicitly planning their LNG import terminals to potentially handle ammonia in the future – a hedge strategy.

Carbon Capture, Utilization, and Storage (CCUS)

We touched on CCUS in mapping the energy complex; here, we consider its sectoral and strategic implications further. CCUS is not a sector per se, but it underpins strategies in power, industry, and even carbon removal.

Power Generation with CCS: Coal and gas power with CCS is technically feasible but not widely deployed (only a handful of small projects, e.g. the Boundary Dam coal CCS in Canada capturing ~1 MtCO₂/yr). Given the cost and the falling cost of renewables plus storage, many regions opt to skip CCS in power and just transition to renewables. However, some fossil-fuel-rich countries view CCS as a lifeline for their power plants. For example, Japan and Australia have discussed it to keep coal (with ammonia co-firing or CCS). The U.S. has some gas CCS projects planned, boosted by the IRA’s increase of 45Q credit to $85/ton CO2 stored, which could make gas-CCS plants more viable economically (especially if gas is cheap). If nations invest heavily in power CCS, it might be in context of maintaining energy sovereignty (not wanting to rely solely on imported solar panels or wind turbines). But generally, CCS in power is likely to remain secondary to CCS in industry and carbon removal.

Industry CCS Hubs: Many countries are pursuing “clusters” or hubs where multiple factories share CO2 transport and storage infrastructure (e.g. pipelines to a common storage site). The UK’s government selected a few industrial clusters (like Hynet in northwest England, Teesside) to receive funding and start CCS by mid-2020s, with the aim of preserving those industrial jobs by decarbonizing them. The Gulf states (e.g. UAE’s ADNOC) are creating CO2 hubs where they can collect CO2 and inject it into oil fields (both for EOR and long-term storage). Norway ’s Longship project is an interesting collaborative model: it offers storage as a service for European emitters, partially paid by Norwegian government. If this model succeeds, we might see a few countries become CO2 importers for storage as a business (some have legal barriers though, like EU law initially forbade exporting CO2 for disposal, but they made exemptions for Norway).

Race for Technological Leadership: There’s an innovation aspect. Companies and countries leading in CCUS technology (capture tech, drilling for storage, monitoring) could export those services. The U.S. has dozens of startup companies working on various capture technologies, spurred by policy support. The EU funds pilot projects (like LEILAC for cement capture). Global CCS Institute data shows huge growth in planned capacity (361 Mtpa in pipeline) , meaning a lot of projects need engineering. If places like the U.S., Canada, or Norway refine expertise now, they could become exporters of CCUS know-how or even storage capacity.

Direct Air Capture (DAC): This subset of CCUS – pulling CO2 from ambient air – is extremely energy intensive but is considered for achieving net-zero (to offset sectors that can’t fully eliminate emissions). The U.S. and Canada are particularly investing in DAC hubs (the U.S. just funded two DAC hub projects in Texas and Louisiana for large-scale demonstration). Whoever cracks cost-effective DAC might hold keys to a major carbon removal service industry. Oil companies like Occidental view DAC as a new business (Occidental is building what could be the world’s largest DAC plant in Texas, aiming to sell carbon removal credits). There is a bit of nationalism in that climate-motivated tech race: the U.S. clearly wants to lead in DAC (and has put the most money on it, including a $180/ton credit for DAC under IRA), which aligns with its fossil sector interests (they can reuse skills and potentially claim carbon-negative oil using DAC + EOR). Europe is more focused on nature-based removals but is also researching DAC (Climeworks, a Swiss company, is a DAC leader). If DAC scales, countries with ample storage geology (like U.S., Canada, Middle East, Russia) could actually import CO2 from others or operate removal for others as service. That raises governance issues: how to account for removals, who gets credit – likely something that will be negotiated in climate agreements (Article 6 of Paris allows international trading of credits, etc.).

Public Acceptance and Liability: A challenge for CCS is local opposition (concerns about CO2 leaks, etc.) and long-term liability for stored CO2. Countries differ: Norway and U.S. have generally favorable attitudes or legal frameworks (in the U.S., some states allow transfer of liability to the state post-closure of a storage site). In Europe, Germany has been very hesitant to allow onshore CO2 storage due to public opposition; it may export CO2 to Norway instead. This is interesting nationally: countries with suitable geology but less population density (like under North Sea, or perhaps parts of the U.S. Gulf Coast) might take advantage while others avoid it. It could lead to a sort of carbon storage diplomacy (e.g., “we’ll store your CO2 if you pay us or if we get some concession”).

OPEC and CCS: Saudi Arabia and others are promoting a narrative that the world can keep using oil and gas if CCS is implemented. They formed the “Net Zero Producers Forum” with some other oil nations to collaborate on CCS and other measures. This can be seen as a delaying tactic by critics, or a genuine effort to align with climate goals by leveraging wealth (depending on perspective). If CCS tech becomes cheaper, it could indeed prolong fossil fuel use but mitigate emissions – something fossil-exporting countries would welcome and import-dependent ones might cautiously accept if it meets climate targets. There’s a lot of skepticism, so trust and verification will be key. For instance, the environmental integrity of CCS projects (ensuring CO2 is actually stored, not leaked) will need international oversight or standards, to avoid greenwashing.

In summary, CCUS’s role is still emerging. Its development is heavily policy-driven (because carbon prices or incentives determine viability). Nations with strong climate commitments but also heavy industries are the early movers (Europe, Canada, Australia’s plans, etc.). The U.S. through its incentives aims to create a CCUS industry that can be cost-competitive, essentially subsidizing learning-by-doing. If that succeeds, U.S. firms might corner the market on capture equipment or CO2 management services. Conversely, if it flops or if other regions (like China) scale it later at lower cost (China is building some pilot CCS on coal plants, though behind the West in deployment), then the advantage could shift.

The interplay of CCUS and nationalism boils down to: countries will use CCS to safeguard domestic industries and jobs while meeting climate pledges (so as not to simply shut factories); and some may try to monetize geological assets as CO2 dumps. International frameworks will evolve to manage cross-border CO2 flows if that trade grows.

Investment and Supply Chain Shifts Under Energy Nationalism

One of the clearest outcomes of energy and carbon nationalism is the reconfiguration of global investment and supply chains in the energy sector . As countries prioritize security, resilience, and domestic benefit, we observe new patterns in where money is flowing and how supply networks are being redrawn:

Friend-Shoring and Alliances: Instead of lowest-cost global sourcing, there is a tilt towards sourcing from politically allied or geographically close nations – often termed “friend-shoring” or “ally-shoring”. For example, Europe and the U.S. have both realized overreliance on China for critical clean tech and minerals is a vulnerability. Hence, they are looking to each other and to allies like Australia, Canada, Japan, South Korea, and India to develop alternative supply chains. The U.S.-EU task force on IRA, and mineral agreements, aim to allow EU components to count in U.S. EV tax credits and vice versa, fostering an integrated allied supply chain rather than competition between them. Likewise, the Minerals Security Partnership (MSP) (including US, EU, Japan, Canada, Australia, etc.) coordinates efforts to invest in mines in Africa, Latin America, and Asia in a transparent, sustainable way to offer an alternative to Chinese investment. One result: more Western-backed mining projects are starting, e.g. nickel in Brazil, rare earth separation facilities in Europe and North America (some with help from Australian companies, since Australia has rare earths but used to send all to China; now Lynas Corp is building a facility in the U.S. and Malaysia to diversify processing). Another example: India and Australia have deepened ties on critical minerals, with Australia set to supply lithium and others to India’s nascent battery industry. These relationships are partly motivated by shared strategic concerns (balancing China) and partly by economic complementarity (raw materials in one, market in other).

Localized Manufacturing: The big shift in manufacturing is that regions are now trying to localize production of solar panels, wind turbines, batteries, and even semiconductors for energy (since chips are crucial for EVs, smart grids, etc.). The global solar PV supply chain is currently >80% China-centric (from polysilicon to modules). In 2023, both the U.S. and India have multiple new polysilicon and module plants under construction due to incentives. The EU has a target to scale up solar manufacturing (though competition from cheaper Chinese panels is tough, so they discuss possible tariffs or local content rules as well). Wind energy supply chains are a bit more regionally diversified (with major firms in Europe – Vestas, Siemens Gamesa – and China – Goldwind, etc., and the U.S. having GE). But even in wind, Europe’s industry is under strain from cost competition; the EU is trying to support it (e.g. by ensuring auctions reflect inflation costs, etc.). So we see investment flowing into factories in the U.S. South for solar components (often by European or Asian firms wanting to sell in the U.S.), into battery plants as mentioned, and possibly into EV assembly (like Hyundai and Kia are building EV plants in the U.S. to avoid losing subsidies). Similarly, European automakers might produce more in U.S. or vice versa to navigate rules.

A consequence might be excess capacity or inefficiencies in the short term – e.g., building battery plants in every continent may not yield the lowest unit costs compared to a single massive production base, but it insures against disruptions and aligns with political goals. Over time, each major market could have a relatively self-sufficient supply ecosystem for key technologies, trading more with friendly countries and less with strategic competitors.

Emerging Market Producers and South-South Links: The new nationalism is not only in rich countries. Emerging economies like India, Indonesia, Brazil, Turkey, South Africa are also leveraging the energy transition to build domestic industries. India, for example, doesn’t want to be dependent on Chinese solar, so its tariffs and PLIs have brought some module and cell production home (expected to exceed 100 GW manufacturing capacity by 2025, up from ~20 GW a couple years ago). Indonesia, beyond minerals, also wants to develop EV manufacturing (it negotiated with Tesla and Chinese battery makers to establish plants locally to utilize its nickel). Vietnam and Thailand are also becoming EV/battery assembly hubs (benefiting from some China plus one diversification by companies). This means a more multipolar production landscape could emerge, rather than everything in East Asia as in 2010s.

Notably, South-South cooperation is also on the rise. China invests heavily in other developing countries’ energy (both fossil and renewable – though it pledged to stop building coal plants abroad, it still invests in many gas, hydro, solar projects via the Belt and Road). Chinese firms are building EV plants in Thailand, battery plants in Hungary, solar farms in Latin America. Some of this is pure commerce, but it’s also a strategic influence tool – making those countries reliant on Chinese tech and standards. Meanwhile, the West’s absence or new engagement in some regions (like the U.S. trying to come back with PGII – Partnership for Global Infrastructure and Investment – as a counter to BRI) will determine who shapes the energy infrastructure in the Global South. For instance, will African countries buy mostly Chinese-made solar panels and batteries under Chinese-financed deals, or will alternatives be offered? This is an open contest. It has major implications for global decarbonization because developing countries will account for most future energy demand growth – whoever provides their solutions will gain economically and politically.

Finance Patterns: Global investment in clean energy reached an estimated $1.7 trillion in 2023 , outpacing fossil investments (~$1 trillion) . But much of this is concentrated in China, U.S., EU. A worrying pattern is that investment in developing countries (ex-China) is lagging. If risk-averse Western investors withdraw or prioritize domestic projects due to new subsidies, emerging economies might lean more on domestic funds or Chinese capital to fund renewables. Multilateral development banks are being urged to step up lending for climate projects to fill this gap. At the same time, oil and gas investment has rebounded post-2020 shock (with national oil companies in Middle East spending big as well). Also, sovereign wealth funds of oil-rich states (like Saudi’s PIF, UAE’s Mubadala) are investing in both fossil expansion and diversifying into clean tech abroad (like Saudi’s fund invested in EV maker Lucid, UAE’s Masdar invests in renewables globally). This is strategic diversification – hedging bets in the energy transition while also maintaining core business.

Supply Chain Risks and Resilience: The Covid pandemic and the war also highlighted supply chain vulnerabilities. So businesses and governments are now putting more emphasis on resilience – meaning dual sourcing, inventory stockpiling (some countries considering strategic reserves of critical minerals analogous to oil reserves), and vertical integration. For example, some automakers (Tesla, BYD, etc.) are integrating backwards into mining or refining or making deals directly with mines to secure lithium/cobalt. Governments are supporting that: Canada, for instance, has used foreign investment screening to block Chinese stakes in Canadian lithium companies (national security justification) so that those resources remain available to Western supply chains. In the EU, a proposed Critical Raw Materials Act sets targets to mine 10% and refine 40% of its own needs of critical materials in EU by 2030 – ambitious given current near-total import reliance, but it means new mines or recycling plants might open in Europe (with fast-tracked permits).

Labor and Skills: Nationalism also surfaces in ensuring domestic workforce benefits. Many clean energy manufacturing jobs will be created in these new factories; policies like the IRA also have labor provisions (bonus credits if projects use union labor or pay prevailing wages). This is in part to build a political coalition for climate action – if workers see good jobs in clean energy, support for decarbonization broadens. However, there’s a shortage of skilled labor in some places for these new industries, which could hamper progress unless training programs ramp up (which many plans include – e.g. IRENA emphasizes the skill gap as an enabler to triple renewables ).

To synthesize, the investment and supply chain realignment under energy nationalism suggests that by 2030 we may have: (1) more regionalized supply hubs (North America, Europe, East Asia, possibly South Asia) for clean tech; (2) stronger ties within political blocs for energy trade (e.g. U.S.-Europe, China-Russia, Gulf-Asia); (3) less singular dependence on any one country (like China) for critical inputs, though China will remain a giant player given its head start; and (4) possibly a slightly slower or costlier transition in the short run due to these redundancies, but arguably a more secure one against shocks.

Scenarios to 2035: Geopolitical and Economic Outlook

Looking ahead to 2035, we can envisage a few distinct scenarios for how energy and carbon nationalism might shape the global energy order. These scenarios are not predictions but plausible narratives exploring different degrees of international cooperation versus competition in the energy transition:

Scenario 1: Green Cold War – Fragmentation and Rival Blocs

In this scenario, the world divides into two or three major blocs that compete intensely over clean energy supply chains and standards, reminiscent of a Cold War dynamic. The U.S., EU, and allied democracies form a tight-knit “Climate Tech Alliance” aiming for self-sufficiency in critical minerals, batteries, and renewables. They maintain tariffs or strict controls on imports of clean tech from rival states (especially China/Russia), citing security and human rights concerns. China leads an opposing bloc with Russia, Iran, and several Belt and Road partner countries, continuing to dominate mass production of low-cost clean tech and exporting to much of the developing world. Geopolitical tensions remain high, with trade disputes at the WTO over subsidies and CBAM measures proliferating. Both blocs heavily subsidize their industries, resulting in redundant manufacturing capacity (e.g. parallel EV supply chains that barely interlink). Supply chains bifurcate: for example, two separate EV battery ecosystems emerge with different technical standards (one China-centric, one West-centric). Nations in the Non-Aligned movement try to avoid taking sides, but many in Africa, Latin America, and Southeast Asia find themselves courted by both – one offering affordable technology (China), the other offering financing and market access (West).

Energy security concerns remain paramount. Countries hold larger strategic stockpiles of critical minerals. There are sporadic export curbs – e.g., China at one point halts rare earth exports to certain Western countries amid a Taiwan crisis, and the West accelerates opening rare earth mines in Australia and Canada to compensate. OPEC+ continues to manage oil supply, but oil’s importance gradually wanes after 2030 as EVs take a big chunk of transport. In this scenario, decarbonization progress is uneven: within each bloc, technology advances (like cheaper solar, better batteries) still happen due to competition, and by 2035 both major blocs have achieved significant emissions cuts and have robust clean energy industries domestically. But global coordination on climate suffers – the 2030 global climate targets are missed because trust issues prevent ambitious joint action. Some developing countries without support stick with fossil fuels longer, since the fractured geopolitics limit global climate finance flows. Essentially, the energy transition does move forward, but in a fractured way with inefficiencies and slower help for poorer nations. This scenario is characterized by high geopolitical risk, with energy used as a tool of influence – for instance, green tech exports come with political strings attached. The world eventually decarbonizes in silos, possibly averting worst climate outcomes but at higher economic cost and with persistent global tensions.

Scenario 2: Cooperative Climate Tech Globalization – A New Bretton Woods

In this optimistic scenario, by the late 2020s the major powers realize that climate change is a common existential threat that necessitates collaboration, not confrontation. A series of climate disasters combined with diplomatic breakthroughs (perhaps a change in leadership in some key country that pivots policy) leads to a new era of climate cooperation. The G20 agrees on a framework to harmonize carbon pricing or at least floors for carbon costs. The EU’s CBAM becomes obsolete as major trading nations all implement comparable carbon prices or standards; instead of tariffs, there’s mutual recognition of efforts. The U.S., China, EU, India, and others establish a Global Clean Technology Accord : they coordinate R&D, jointly fund deployment in developing countries, and remove trade barriers for climate goods. Intellectual property for critical climate technologies is sometimes shared under patent pools to speed up diffusion (with compensation mechanisms to firms). Supply chains remain globally interdependent but are managed for resilience through international agreements – e.g. an OECD-like agreement on critical minerals ensures transparent markets and investment in diversified mining with environmental safeguards, reducing the risk of cut-offs. Countries specialize based on comparative advantage (maybe Australia and Chile supply most lithium but under multilateral governance, China continues making cheapest solar cells but factories also open in Africa where solar demand grows, etc.).

Investments surge in the developing world because advanced economies channel significant climate finance – fulfilling the long-promised $100+ billion per year and more. This allows emerging economies to leapfrog to clean energy without debt distress. By 2035, global renewable capacity has more than tripled (on track for 1.5°C), EVs dominate new sales everywhere, and coal power is in steep decline globally, with last plants in sight of retirement thanks to a coordinated effort (like the Climate Club paying for coal phase-out in Indonesia, South Africa, etc., which actually happened as planned). Fossil fuel geopolitics also stabilizes: as oil demand peaked and declines, petrostates diversify their economies with international help (e.g. a green hydrogen industry in Saudi financed by global investors, using revenue to transition workforce). Russia, in this scenario, might have resolved conflicts and joined cooperative frameworks to pivot its economy (or it becomes a smaller player as others circumvent its exports).

This scenario sees relatively lower energy prices in the long run (because cooperation and standardization drive down costs of new tech quickly). There is still competition, but it’s friendly – like who can produce the most efficient solar panel – often resolved by joint ventures rather than zero-sum outcomes. The world could reach near net-zero by mid-century under this cooperation, since everyone is rowing in the same direction, albeit at different speeds. Geopolitically, climate action becomes a source of soft power: countries gain influence by contributing to global solutions (e.g. whoever provides the best cheap storage or a fusion breakthrough shares it). While this might sound idealistic, elements could be realistic if climate impacts worsen to the point of shaking up politics (some liken it to an external threat uniting humanity).

Scenario 3: Technology Race and Climate Pragmatism – Competitive Acceleration

This scenario lies in between, where rivalry persists but is channeled into a race to the top in clean tech rather than overt economic warfare. Here, the competition itself drives innovation and deployment at scale – akin to the space race dynamic. The U.S., China, EU, and others each push their industries to outdo the others in EVs, batteries, renewables, etc., because being the leader is seen as key to economic prosperity and international prestige. We see partial decoupling : some supply chain diversification happens (reducing extreme dependencies), but global trade in clean tech remains high as demand is enormous and no one can meet it alone. For example, China’s BYD might set up EV factories in Europe despite geopolitical qualms, because it makes business sense and Europe allows it in exchange for China cooperating on some climate front. Or the U.S. might still import some critical minerals from China but uses leverage to get better terms, while ramping domestic mines modestly. Essentially it’s a managed competition.

International climate cooperation exists in parallel (the Paris Agreement frame continues, countries increase pledges gradually) but is always underpinned by the reality of national interest. The climate goals are somewhat met because each big emitter finds it in its interest to deploy clean tech (for pollution, energy security, or industrial policy reasons), even if they don’t coordinate carbon prices. The outcome by 2035: emissions have peaked globally and are declining, though not as fast as ideal. Global warming trajectories improve (maybe aiming towards 2°C), but not yet safe – requiring further efforts.

Geopolitically, there are tensions – perhaps trade spats over subsidies flare, but they don’t spiral out of control. One year a country might ban an export of a key mineral, but then a compromise is reached or others fill the gap. Energy trade is reconfigured: by 2035, oil and gas trade volumes are down; new trades like green hydrogen and minerals are up. Countries might engage in resource diplomacy akin to old oil diplomacy – e.g. forming partnerships to secure lithium supply, or using state-owned companies to acquire mines abroad. There may be “green OPECs” – not formal cartels, but groups of countries influencing terms (like the Lithium Triangle of Argentina, Bolivia, Chile coordinating on lithium pricing). But the world avoids splitting into hostile camps; rather, it’s a frenemies situation: interdependent but vying for advantage.

In this scenario, we could see interesting mixes like Russia and OPEC states aligning on some things (like lobbying for CCS acceptance and slower phase-out of oil, which partially succeed with support from oil-importers who still need some oil), while China and U.S. might tacitly cooperate on specific tech (like aligning standards for hydrogen shipping to grow that market, because both see benefit). Essentially, pragmatism leads to enough collaboration to not derail the transition, while competition ensures high momentum. Businesses navigate the complexity via multi-local operations (siting factories in all major markets to avoid trade barriers). Consumers see rapid innovation – EVs become cheaper than gasoline cars universally, solar plus storage becomes the default power supply in many places, etc., thanks to scale from the race. But some regions that lack either domestic capabilities or strong allies might be left behind (like parts of Africa could be underserviced still).

These scenarios help illustrate the range of outcomes: from division (scenario 1) to unity (scenario 2) to a competitive but constructive middle path (scenario 3). The reality will likely have elements of all. For instance, current trends hint at scenario 3: U.S.-China competition is pushing both to invest in clean tech faster (which is good for climate), yet there’s a risk of scenario 1 if it escalates unchecked. Scenario 2 would require a big geopolitical thaw and collective realization which, while difficult, isn’t impossible especially as climate impacts worsen.

Policymakers today have some agency in steering toward the more cooperative end – through diplomacy like climate clubs that are inclusive and by balancing nationalist impulses with global solidarity (e.g. ensuring developing nations are helped, so they don’t become the fault line of rich vs poor). Economic players will also influence it – companies often prefer larger integrated markets and may lobby against too much fragmentation. Civil society and voters might demand more cooperation if they see nationalism hindering climate progress.

In any case, by 2035 we can confidently say the global energy complex will look quite different: fossil fuels likely in decline or plateau, clean technologies dominating new investment, and new patterns of winners and losers emerging. Nations will continue to tussle for position in this new paradigm, but ideally in ways that still preserve the overarching goal of a livable planet.

Conclusion

The era of energy and carbon nationalism is redefining how countries pursue security and prosperity amid the urgent need to decarbonize. Historically, energy security meant oil barrels and gas pipelines; today it also means lithium supplies, solar panel factories, and secure grids. Nations are balancing cooperation and competition, using policy tools to ensure they are not left behind in the energy transition and that their economies reap the benefits of new industries. This tug-of-war between global climate goals and national interests is evident in border carbon measures to protect low-carbon industries, in subsidies and local content rules aimed at spawning domestic clean tech champions, and in the jockeying for control of critical resources and technologies.

The global energy complex that emerges will likely be more diverse and distributed. Fossil fuels, while still significant now, are slated to peak in demand before 2030 ; their geopolitical weight may diminish over time, even as short-term volatility remains. Renewables, electrification, and energy efficiency are taking center stage, with record growth in solar, wind, and EVs showing the momentum is on the side of low-carbon solutions . Yet, as this essay has highlighted, how that transition unfolds—smoothly or contentiously—will depend on governance and international relations. A cooperative approach could lower costs, accelerate deployment, and spread benefits widely. A nationalist, beggar-thy-neighbor approach risks delays, higher costs, and leaving some countries behind.

Policy-makers thus face a dual challenge: advancing decarbonization at the needed pace, while also addressing legitimate national concerns about jobs, equity, and security that drive energy nationalism. Smart policy can align these objectives—for instance, investing in workforce retraining so fossil fuel communities can shift to clean energy jobs, or forming partnerships that make supply chains both secure and efficient rather than purely domestic. Transparency and communication can also help: if citizens see that international climate cooperation brings local benefits (like cheaper clean technology or new markets for exports), support for such cooperation will grow.

As we look to 2035, we can be cautiously optimistic that the intense focus on clean energy investment will bear fruit in bending the emissions curve downward. Electric mobility, renewables, and possibly hydrogen and CCS should all be scaling up massively by then. The key uncertainty is geopolitical: whether the world will converge in tackling climate change or fracture into rival camps. The scenarios sketched offer signposts. In any outcome, nations will continue to assert their interests—energy and carbon policies will be used to gain advantage or security. But unlike in the 20th century, when such maneuvers often hindered global progress (think of oil crises or resource wars), in the 21st century there is an opportunity for competition to become a race to the top in innovation and deployment.

Ultimately, carbon nationalism need not derail climate action if managed wisely. Rivalry can spur faster innovation, and protecting industries during transition can uphold social consent for climate policies. The risk is if nationalism turns into zero-sum thinking that undermines the collective effort required. Avoiding that will require enlightened leadership, both domestically (framing climate action as in the national interest, which it is) and internationally (forging coalitions that accommodate different needs). Initiatives like climate clubs, critical mineral alliances, or joint R&D programs can fuse national and global aims.

In conclusion, the global energy complex is in the early stages of a historic transformation. Energy and carbon nationalism are powerful forces shaping this journey, with both positive and negative potentials. We stand at a crossroads where policy decisions in the next few years—on trade, investment, and collaboration—will set the trajectory for decades. A future of clean, affordable, and secure energy for all is within reach, but achieving it will require navigating the currents of nationalism and globalization deftly. The hope is that common sense and common cause prevail, so that by 2035 we look back and see that the competition for a greener world brought out the best in us, not the worst.

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