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As the global community confronts the urgency of climate change, “environmental” objectives are increasingly shaping trade policies. The rise of “green protectionism” — using environmental regulations as barriers to trade — has become a point of contention.
While these measures ostensibly aim to promote sustainability, they often worsen trade imbalances and fuel tensions in international trade. With the right policies and support, developing countries could benefit from the global shift towards sustainability. However, the current trajectory risks reinforcing economic disparities.
The 2015 Paris Agreement acknowledges the historical responsibility of developed nations for greenhouse gas emissions, however green protectionism tends to undermine this. At COP28 in Dubai developing nations tabled concerns that stringent regulations from developed nations could hinder their economic growth. Discussions also centred on climate financing and industrial decarbonisation for developing economies.
Last year, at COP29, African leaders emphasised the urgent need for climate finance to address the continent’s mounting climate challenges. They called for equitable global solutions and fair valuation of Africa’s green assets. The AU highlighted the financing gap, estimated at $1.3-trillion a year, which poses a threat to climate resilience and adaptation efforts. They also pushed for the operationalisation of the global “loss and damage fund” established at COP28.
Green protectionism refers to the use of environmental standards, taxes, or regulations on imports to foster global sustainability. Though these measures promote greener practices, they can also act as disguised trade barriers. Under the General Agreement on Tariffs and Trade, countries can impose trade measures to protect life, health or exhaustible natural resources, provided these do not result in unjust and arbitrary discrimination or serve as disguised restrictions on international trade.
Developed nations often use green protectionism to shield domestic industries and reduce competition from developing countries, which may lack the technical, industrial or financial resources to meet stringent standards. This worsens trade imbalances, limiting market access for goods from countries contributing far less to global emissions. In some cases environmental regulations mask economic objectives, allowing developed countries to maintain protectionist policies under the guise of sustainability.
These tensions have already led to trade disputes, such as between Canada Renewable Energy and India Solar Cells, at the World Trade Organisation (WTO). These cases underscore the difficulty in distinguishing genuine environmental protection from unjustified trade barriers and highlight the challenge the WTO faces in regulating green protectionism.
The carbon border adjustment mechanism
The EU’s carbon border adjustment mechanism (CBAM), a key component of its green deal, imposes a carbon price on imports from countries with weaker climate policies. While the CBAM seeks to address carbon leakage by discouraging companies from relocating production to countries with weaker climate regulations, it has been criticised for disproportionately affecting developing countries. The EU has estimated that carbon leakage would increase emissions outside the bloc by 2%-5% if such policies were not in place. The CBAM applies to high-emission goods such as cement, steel, aluminium, fertilisers and electricity, with expansion plans. Together, these sectors account for about 94% of the emissions covered by the EU’s emissions trading system.
While the EU has committed to using CBAM revenue to support climate finance in developing nations, the details remain vague. African nations such as Zambia and the Democratic Republic of Congo (DRC), which are vital sources of critical minerals such as cobalt and copper for renewable energy technologies, stand to lose out if they cannot align with the EU’s stringent environmental standards.
US inflation reduction Act
Signed in 2022, the Inflation Reduction Act (IRA) allocates $369bn to clean energy and climate initiatives, offering subsidies for producing renewable technologies domestically or within free-trade partner countries. This has prompted concerns from allies and trade partners about the act’s protectionist implications. The IRA is not just an environmental policy; it is also a strategic industrial policy that seeks to bolster US manufacturing and reduce dependency on Chinese supply chains for critical technologies.
While this might make economic sense from a US perspective, it puts significant pressure on developing nations that supply raw materials but lack the capacity to develop green technology industries. Moreover, it leaves nonfree-trade partner countries vulnerable. For example, SA’s automotive industry is deeply integrated into global value chains, contributing 4.3% to the country’s GDP in 2021, with vehicle and component exports accounting for 12.5% of total exports. However, the absence of a free-trade agreement with the US could limit SA’s access to the US market, limiting the potential benefits for its automotive sector.
The IRA’s focus on “reshoring” green technologies has sparked criticism from EU leaders who have warned that its subsidies could lead to deindustrialisation in Europe by incentivising companies to shift production to the US. Germany, a leader in automotive manufacturing, has been particularly vocal in expressing concerns about the IRA’s impact on its electric vehicle (EV) industry. German automakers such as Volkswagen and BMW could face competitive disadvantages if US subsidies make American-made EVs cheaper and more accessible than those produced in Europe.
Developing countries such as Namibia, the DRC and Zambia in Africa, major producers of lithium, cobalt and copper respectively, and Bolivia and Argentina in Latin America, major lithium producers, are further marginalised in this framework. Though their resources are critical to the global green transition, they lack the technology and infrastructure to compete with the US and China in the production of advanced green technologies. The IRA’s preference for domestic or regional supply chains could limit local beneficiation of their resources.
China’s dominance in the renewable energy sector, especially in solar panels and EV batteries, gives it a strong position in global green industries. China controls 80% of the world’s solar panel supply chain and holds a significant share in battery production, as a result of a combination of state subsidies, industrial policies, labour standards and strategic investments. China has solidified its dominance in Africa’s clean tech and automotive sectors, controlling 60% of global cobalt refining capacity, much of it sourced from Africa. Chinese firms have secured long-term agreements in mineral extraction in countries such as Zambia (copper) and Guinea (bauxite).
This dominance poses challenges for developing nations. For instance, the DRC, which supplies more than 70% of the world’s cobalt, often exports raw materials without value addition, leaving much of the economic value — estimated at billions of dollars annually — on the table, yielding great returns for foreign investors while the local economy reaps minimal benefits. Likewise, countries such as Indonesia and the Philippines have sought to develop domestic value-added industries by imposing export bans on raw materials, though their success has been limited due to a lack of technological capacity and financial resources.
Similarly, Zimbabwe and Namibia have implemented policies to restrict the export of unprocessed minerals, particularly lithium, which is essential for EV batteries. Namibia’s lithium industry alone is projected to be worth $1bn annually by 2025. However, the effectiveness of these measures depends on attracting foreign investment and facilitating technology transfers. These shifts reflect a broader push by African nations to capture more value from their resources and take a more proactive role in global supply chains.
China’s Belt & Road Initiative (BRI) further complicates matters. While it has funded renewable energy projects in many developing nations, these projects often rely on Chinese technology and expertise, creating dependencies and limiting local industrial growth. For example, BRI-funded solar projects in Pakistan and Kenya have been criticised for insufficient technology transfer, raising concerns about long-term sustainable development.
Towards a just and inclusive green transition
Green protectionism is unjust and should be stopped. It imposes unfair barriers on developing nations under the guise of environmental goals, deepening global inequalities. The EU’s CBAM, the US’s IRA and China’s industrial dominance exemplify how wealthier nations use their technological and financial leverage to dominate green industries, sidelining less-developed economies.
To prevent this new form of eco-imperialism, developed nations must adopt an inclusive approach. Policies should focus on technology transfer, capacity-building and financial support, ensuring that developing nations can actively participate in green industries rather than just supply raw materials. Trade policies must encourage equitable global value chains, enabling industrial growth in emerging economies and fostering a fairer green economy.
• Sithole, a legal practitioner and consultant in international business, trade and investment law, is managing partner at Amila Africa.
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