Green protectionism is on the rise

Trade interventions have increased in recent years, peaking at the height of the US-China trade war in 2020. This has led some commentators to talk about an end to, or even reversal of, globalisation. At the same time, ‘green’ technologies – i.e. technologies important for decarbonisation – have become an increasingly important part of the economy. Some governments have sought to link these two trends, using tariff and subsidy policies to try and boost their green technology sectors. In recent weeks, the US has announced higher tariffs on Chinese electric vehicles, batteries and solar components, as well as on products such as steel, aluminium and semiconductors; and this month the EU announced tariffs on Chinese electric vehicles.

This blog attempts to quantify this increase in ‘green’ protectionism – is it a natural consequence of the increasing importance of green tech in global trade, or a trend in policy in its own right?

In this blog, trade interventions are defined as those likely to discriminate against foreign trade interests. This includes tariffs, quotas and other forms of ‘at-the-border’ trade intervention, but importantly, they also include ‘behind-the-border’ interventions such as requirements to meet domestic standards or procurement preferences for domestic goods. Any intervention that affects at least one environmental good was considered as an intervention targeting green technologies. To quantify the extent of ‘green protectionism’, we use a list of environmental goods defined by the IMF which consist of 223 goods that serve to promote the green transition.

Protectionism is becoming more focused on green tech

The total number of trade-restrictive interventions increased sharply in 2020, and it has remained high (see Figure 1). Furthermore, the share of interventions which include green technologies has been trending upwards over time. However, the share of environmental goods in total goods trade has also risen steadily over the last 30 years. This suggests that environmental goods have not necessarily been targeted specifically, but have been increasingly caught up in protectionist measures as they have become more important in the global trading system.

China leads in green trade interventions…

The US, China and Brazil impose the most trade restrictions in total (see map on the left). The most common targets of trade interventions are EU countries, with China in sixth place and the US in seventh. However, a different picture emerges when looking at interventions related to green technologies. Here, China imposed by far the largest number of restrictions. Between 2008–2023, China has carried out 1708 green trade restrictions, followed by the USA with 1017, Germany with 422 and India with 309. The countries most commonly targeted by green trade restrictions were Japan, Germany and France, with the US in fifth place and China in eighth.

…but the West is joining in

However, Western trade policy has been moving in a Chinese-like direction in recent years. The share of green interventions in China has been high for some time (see Figure 3) – if anything it has fallen from its peak in 2019–20. In contrast, it has risen sharply in the US since 2020. There, the proportion appeared to be particularly low during the Trump administration. While the total number of measures sent by the US during this period was high, there were relatively fewer measures targeting green technologies as policies focused on traditional industries such as steel or aluminium. In Germany, there also seems to be a slightly positive trend in the share of interventions targeting green technologies.

The importance of green trade interventions is likely to increase further in coming years, as green tech products become a larger share of global trade flows. However, any increase in interventions targeting green technologies will further hinder the green transition in the trade-restricting countries as well as globally. This may put countries off from pursuing a green protectionist agenda, or at least limit it to focusing on the sectors where they have the most comparative advantage and potential for building a domestic industry.

About The Author

Leon Bost, European Economist

Prior to joining CRU, Leon worked at the Institute for Applied Economic Research in Germany and in the Office of the Chief Economist of the European Bank for Reconstruction and Development in London.

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