Competitiveness and climate are not opposites
Global climate policies have come under increasing pressure in recent years. In the US, climate policy under President Trump is not only being scaled back, it is often actively counteracted. The EU is sticking to its net zero target for the time being, but various climate programmes have been postponed or watered down in recent years. The negative impact of climate policy on competitiveness is often cited as the motivation for these changes. It is certainly useful to evaluate and adjust climate policy, but we must be careful not to go too far. Short-term gains must be weighed against long-term risks. Even more so because there is an important strategic aspect to renewable energy. The call for energy independence has become louder of late, with Russia's invasion of Ukraine and the war in the Middle East as important drivers. Without a clear and consistent climate policy, China's technological lead in climate sectors will only increase. Climate change is undeniable, and the future belongs to those who can combine competitiveness and climate action.
Climate agenda under pressure
Just a few weeks ago in the US, President Trump formally withdrew the 'endangerment finding', the most important scientific basis for American measures to regulate greenhouse gases and combat climate change. As such, the US no longer recognises that carbon dioxide and other greenhouse gases pose a threat to public health and well-being. In addition, funding for various climate programmes and agencies has been cut, while subsidies and tax breaks for fossil fuel production have increased. The Trump administration is also actively working against climate action progress at the international level, including by withdrawing the US from the Paris Climate Agreement.
The US may be an extreme example, but it is by no means the only country where the climate agenda is under pressure. Cracks are also becoming increasingly visible in the EU. The net zero target for 2050 has (not yet) been changed, but the timing and modalities of all kinds of climate initiatives and regulations are being tinkered with. For example, the introduction of EU ETS II (the new emissions trading system for buildings and road transport) and the EU Deforestation Regulation have been postponed by one year. The scope of the Carbon Border Adjustment Mechanism (CBAM) has also been limited and there are plans to weaken the ban on the sale of new fossil fuel cars by 2035. In July 2026, the EU will also consider the future of the EU ETS programme. Lobby groups are already working hard to turn this evaluation to their advantage.
Competitiveness is gaining interest
Many of the changes to European climate policy are motivated by fears that the measures imposed will undermine the competitiveness of businesses and the purchasing power of citizens. These concerns are certainly justified. Global warming is a global problem that the EU cannot solve on its own. If other major players continue to emit greenhouse gases unchecked, climate change will still affect the EU, while only the EU bears the transition costs. If other major players withdraw, it also becomes more difficult for the EU to ask its citizens and businesses to make efforts, as they will feel disadvantaged compared to their counterparts in other countries. The EU has long tried to be a pioneer, but is now encountering increasing resistance within its own borders. It is worth emphasising here that the EU's pioneering role has not been without consequences. Partly under the influence of the EU ETS, other countries, including China, have set up similar carbon pricing systems in order to be able to collect (part of) the tax that would otherwise have to be paid to the EU.
The EU has listened to concerns about competitiveness and launched the Competitiveness Compass in January 2025, a plan based on the recommendations of the Draghi report. The plan still includes a decarbonisation component, but also focuses on closing the innovation gap with the EU's main competitors and reducing dependence on other countries. Competitiveness and the strengthening of the internal market were also central topics at the informal summit of EU leaders in Alden-Biesen in early 2026. On 19 March, the European Commission will present a concrete plan to translate the ideas exchanged during the meeting into action.
Climate change as a revenue model
There are several good reasons to approach the climate problem in a positive way and to start greening the economy now. After all, denying global warming does not make the problem go away. Scientist agree that the world will have to take action sooner or later. It is therefore worthwhile to prepare industry and households for this future now and to develop a competitive advantage in the technologies of the coming decades.
A good example of the danger of sectors falling behind is the automotive industry in the EU. While many European car manufacturers dragged their feet, the Chinese automotive sector committed wholeheartedly to the development of electric vehicles, forcing car manufacturers in the EU to now play catch-up. Postponing the ban on the sale of new fossil fuel cars may temporarily support the industry, but in the longer term, there is a risk of being left with an outdated industrial apparatus. Moreover, backtracking penalises companies in the EU that have made timely efforts to focus on greening their products and processes. Electric vehicles are just one example of the many renewable technologies in which China excels. China's market dominance is even more pronounced in photovoltaic panels, heat pumps, wind turbines and batteries. The country produces more than 80% of the world's solar panels, 60% of its wind turbines and 75% of its electric vehicles and their batteries.
There are certainly questions to be asked about the way in which China manufactures these products. For example, many production processes in the country are highly polluting, not least because of the continued use of coal as an energy source. In addition, there are also reports of human rights violations in the renewable energy sector, including forced labour, wage theft and illegal overtime. Furthermore, in recent years, the renewable sectors have been heavily subsidised by the government, which has led to overproduction and artificially low prices, resulting in unfair competition with foreign producers. These are valid observations that warrant investigation and possibly action, but they do not detract from the need to continue to focus on greening industry in the EU.
Evaluations and adjustments desirable
All of this does not mean that climate decisions are sacrosanct and must be adhered to at all costs. Interim evaluations of measures taken are not only desirable, they are absolutely necessary in order to correct distortions and identify ineffective measures. This is certainly the case when small interventions have major positive consequences. A good example of this is the adjustment of the CBAM, whereby around 90% of importers of CBAM products could be exempted while 99% of CBAM emissions remain covered. It is particularly important that adjustments are based on data and are well thought out. After all, an ever-changing climate policy clouds investment signals and encourages procrastination. Moreover, it penalises companies and households that have made the efforts that were asked of them. It is important that vulnerable parties are supported, such as sectors that are highly exposed to foreign competition, countries that are disproportionately affected and households with more limited resources. The EU partly provides for this through its Just Transition Mechanism, which, among other things, offers support and funding to those parties that are significantly disadvantaged by the green transition.
Other strategic considerations
Being prepared for the economy of the future is just one reason to continue focussing on climate policy. There are also strategic considerations, in particular reducing dependence on fossil fuel imports. The wars in Ukraine and the Middle East have highlighted how vulnerable the EU is to disruptions in the supply and price of fossil fuels. This not only affects inflation but also the EU's autonomy on the international stage. Renewable energy can help to reduce this dependence, provided that the heavy reliance on a few countries (including China and Turkey) for the supply of critical materials is also adequately addressed.
Conclusion
It is an illusion to think that we can escape the consequences of global warming. We have to prepare ourselves for the future by greening our economy, with considerable attention for those that are negatively affected. It is important to realise that climate action and competitiveness can indeed go hand in hand and both should be considered when setting out a strategy for the future. In recent years, China has built up a strong lead by resolutely focusing on renewable energy and the number of competitors will only grow going forward. By waiting, we risk making our own industry redundant and remaining stuck in a relationship of dependency on fossil fuel producers, followed by one based on Chinese technology.