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Trump dealmaking could shift the cold war over the climate

A worker is cleaning solar panels that provide partial electrical power to Istiqlal Mosque in Jakarta, Indonesia, on May 3, 2024.
A worker is cleaning solar panels that provide partial electrical power to Istiqlal Mosque in Jakarta, Indonesia, on May 3, 2024. (Garry Lotulung via Reuters Connect)
Editor's note:

This piece is part of a series titled “The future of U.S.-China policy: Recommendations for the incoming administration” from Brookings’s John L. Thornton China Center.

Donald Trump, an incoming U.S. president who pledges to make America great again, could score a win in one of today’s defining global battles: the competition with China to sell low-carbon technologies throughout the Global South. It matters little that the president-elect derides climate change as a hoax. He could notch the economic and geopolitical victory—and, as an aside, win points for helping the planet—by following his favorite playbook: the art of the deal.

It could be quite the power play: The bane of climate campaigners becomes the master of climate realpolitik. It also could happen. Trump is returning to the White House at a time when raw dealmaking is showing signs of succeeding as a climate strategy after years in which grand diplomacy has faltered. This is particularly the case in emerging markets and developing economies, the parts of the world that matter most to the planet’s future.

A tweet and a turn

Trump presents himself as a proud opponent of what he calls wasteful efforts to stanch global warming. He has pledged to loosen carbon curbs on power plants and to revoke unspent billions of federal dollars that outgoing President Joe Biden’s 2022 Inflation Reduction Act promised in subsidies for U.S. factories cranking out clean-energy wares. Trump particularly opposes climate efforts he sees as benefitting other countries; he has promised to withdraw the United States from the 2015 Paris climate deal and to raise Biden-era tariffs on imports of Chinese-made low-carbon products such as batteries and certain materials used to make them. These moves reflect a worldview on climate change that Trump famously articulated in a tweet in 2012, about four years before he first entered the White House: “The concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non-competitive.”

That line has aged poorly. In the dozen years since Trump posted it, climate change’s effects have dramatically intensified—environmentally, economically, and geopolitically—scrambling political alliances in the process. From wildfire-ravaged California to storm-battered Louisiana to flood-prone Florida, increasing numbers of Americans have come to experience global warming as a personally devastating force. The wildfires raging at the time of this writing across the Los Angeles region, all but destroying entire towns, are the latest apocalyptic example. Around the globe, corporate executives, elected politicians, and financial-market regulators have watched in horror as climate risks have threatened balance sheets—which explains why most of them view global warming no longer as a public-relations issue but now as one that’s strategically core. Policymakers eyeing increasing migration flows in Europe and elsewhere are debating to what extent that’s due to a changing climate and how to respond. Meanwhile, low-carbon technologies, from solar panels to batteries to electric cars, are cratering in cost, surging in scale, and threatening the market dominance of century-old industrial giants. For all these reasons, in the years since Trump’s first presidential term, the quest for climate solutions has grown from an academic and activist pursuit into an epic economic and geopolitical fight.

The cold war over the climate

The fight today amounts to a cold war over the climate. Nations are battling for supremacy in innovating, manufacturing, and deploying low-carbon products. They are fighting, too, to corner global supplies of the raw materials—notably copper, lithium, and nickel—needed to make those wares. China, which dominates these industries, heads one bloc in the fight. The United States, European nations, Japan, and other Western-aligned powers coexist, though competitively, in the other bloc.

The weapons in this cold war are policy tools: trade policies, such as tariffs and other fees on imports; tax policies, notably, increasingly large subsidies for domestic production; lawsuits, typically filed against foreign rivals; and diplomacy, including sweeping schemes that aspire to build commercial allies in parts of the world that the partisans regard as economically and strategically vital.

This isn’t purely a governmental battle. If the world musters the trillions of dollars in annual spending widely estimated as necessary to meaningfully decarbonize the economy, private capital will dwarf public spending because government coffers aren’t big enough. Nevertheless, governments are key players in this cold war over the climate because of their role as catalysts: providing concessionary money to prime the pump of market-rate private investment, and promulgating policies that create markets that cause private investors to swarm in.

The cold war over the climate began in earnest two decades ago, in China. Sensing the growing stakes, China started systematically assembling an industrial policy to exploit them. Since then, while Washington equivocated, oscillating between viewing climate change as economically core and economically fringe, Beijing aggressively leveraged a manufacturing base it already had made the world’s factory floor to produce not just t-shirts and toys but also low-carbon technologies.

Today, in essentially every green sector of scale, China dominates the supply chain and, increasingly, the innovation economy. Its firms are racking up records in solar-cell efficiency, and its scientists are doing frontier work on batteries. China’s system of state support for green technologies has often been colossally inefficient, creating some corporate high-flyers that crashed stupendously, and in the process wasting vast sums of renminbi. However, China’s spending has scaled up these technologies for countries around the globe. It has also helped buy China dominance over these global industries at a time when the world is realizing they will be crucial for generations to come.

Borrowing Beijing’s playbook

Trump’s famous 2012 tweet misconstrued key points: China didn’t create global warming, global warming didn’t kill U.S. manufacturing, and global warming is no mere “concept.” But Trump, as he often does, correctly tapped into U.S. angst over a bottom-line reality: in this case, that China was defeating the United States at making money from the climate fight, or, more fundamentally, that Chinese-style capitalism was besting U.S.-style capitalism on one of global capitalism’s great new frontiers.

Trump in his first term, and Biden after him, sought to beat back China’s low-carbon leadership with broad tariffs—a blunt policy cudgel. First on solar panels and then on a raft of goods including batteries and electric cars, Washington, under both a populist Republican and a progressive Democrat, sought to counter what it argued were Beijing’s unfair subsidies for Chinese green-technology firms by forcing those firms to pay rising penalties when they shipped their goods to sell in the United States.

Biden, two years into his term, augmented the stick of tariffs with a juicy carrot: subsidies in the 2022 Inflation Reduction Act that slashed the cost to corporations of manufacturing low-carbon products on U.S. soil. Washington’s subsidies did in the United States what Beijing’s subsidies had done in China: They proved wildly popular domestically, pumping up clean-energy development via companies that were all too happy to pocket and deploy the state’s largesse. It was a rich plot twist, given Washington’s long-standing criticism of Beijing. Washington sought to beat Beijing basically by borrowing Beijing’s industrial-policy playbook.

Bipolar to multipolar

That plot has thickened since Trump lost the 2020 election and left the White House. In the interim, the bipolar green policy fight between China and the United States had gone multipolar; now, it’s global. Today, the leading partisans also include India, Indonesia, Saudi Arabia, and essentially every other fast-growing nation of economic consequence and geopolitical ambition.

Like the United States and China, each of these Global South powers built its economy by exploiting its domestic deposits of fossil fuels—generally coal, oil, or both. Now, each sees decarbonization as a megatrend that, depending on how adroitly it responds, could render it an economic winner or loser. So, each wants its slice of the green pie—the bigger, the better. To that end, each is upping its green game, in essence adapting China’s and America’s low-carbon industrial policies to its own natural-resource mix, industrial profile, fiscal wherewithal, and governance structure. Moreover, in this new global green chess game, each is trying, for its own advantage, to play China and the United States against each other.

In short, the cold war over the climate is heating up.

That presents Trump, as he reoccupies the White House, with the opportunity to leverage, on the climate front, the art of the deal. That opportunity is especially ripe because a decade-old diplomatic competition between the United States and China for green influence in the Global South has failed to achieve the decarbonization its boosters intended.

Greening the Global South

The competition dates at least to 2013, when Xi Jinping, then new on the scene as China’s president, rolled out a multibillion-dollar effort of state spending and state-orchestrated industrial networking called the Belt and Road Initiative (BRI). It aimed to help Chinese companies—often ones with close ties to the government—ink deals to sell their products abroad, deals typically greased by Chinese state finance.

At first, the BRI’s investment book was heavy with dirty infrastructure, notably coal-fired power plants from Southeast Asia to Latin America to Africa. But that drew increasingly loud international criticism of China, which was trying to position itself on the world stage as a low-carbon leader. Bowing to the pressure, Xi pledged in 2021 that China would stop financing coal-fired power abroad. Since then, the Chinese-made infrastructure financed through the BRI has had an increasingly, though not an entirely, green hue.

China’s push to green the BRI, however, sparked a new line of criticism: that the once-too-dirty BRI now was essentially too aggressively clean, helping China further dominate low-carbon industries around the globe. In November 2021, at a United Nations climate conference in Glasgow, the United States and several European governments jointly announced an ambitious green-diplomatic parry, the Just Energy Transition Partnership (JETP) initiative, which amounted to an anti-China retort.

The JETP initiative sought to help key Global South countries meet their climate goals with assistance from the Global North. Its goal was to improve on a generation of largely failed pledges by rich nations to write checks to poor nations to help them shift their economic development onto a lower-carbon path.

Those earlier efforts, often trumpeted and administered by the United Nations, frequently were perceived within the Global South as attempts by the Global North to shift responsibility for fighting climate change to the countries that were least to blame for the problem and least equipped to respond to it. In some cases, the rich countries failed to come up with the cash they had promised. In other cases, they provided the money but did so in forms—typically loans rather than grants—that recipient countries complained reduced the money’s utility. The promised climate aid bought less climate progress than either side hoped.

The idea behind the JETP effort was that donor and recipient countries would work more closely together to fashion plans for global aid and domestic carbon cuts. The plans would be crafted to be politically and economically realistic in the nations whose carbon emissions are growing fastest today—nations whose growth must occur on a lower-carbon path if the world is to meet its climate goals.

The JETP initiative initially targeted decarbonization in South Africa. Since then, it has rolled out programs in Indonesia, Vietnam, and Senegal. In each of these countries, the mix of Global North governments joining the United States as donors has varied. But the basic structure has remained consistent: the donor governments bring along major investment banks based in their countries, just as, in the BRI, China’s Foreign Ministry brings along leading, and often state-owned, Chinese banks. As with the BRI, one of the JETP’s subtexts has been that the money will lead Global South countries to buy their low-carbon technology from firms based in the countries providing the ostensible largesse.

In the three years since the JETP started, the Global North government officials and bankers have been burning carbon flying to and from meetings in Johannesburg, Jakarta, Hanoi, and Dakar. Yet the experience of the JETP in the most populous country where it has been tried, Indonesia, illustrates the difficulty of grand climate diplomacy even in its updated version—and the opportunity for a more transactional U.S. approach.

The Indonesian influence

Indonesia, a nation of 281 million people and more than 17,000 islands, is a natural resource trove. That’s why it has long been a target of invading nations and of acquisitive multinationals. The Dutch sailed up in the 1600s, and, over the next three centuries, they plied what they called the Dutch East Indies for everything from spices to coal to oil. Throughout the 20th century, the archipelago was a target of global mining companies, which came to dig up and ship out buried treasure including copper and gold. Modern Indonesia declared independence in 1945, won it from the Dutch in 1949, and is the world’s largest coal exporter today.

Indonesia exports coal to China and other Asian nations and churns through prodigious quantities of the black rock at home. It burns coal to power a growing population and an expanding, export-focused industrial base, one that includes a vast network of mineral mines. The country is, therefore, a keystone of the global coal trade—a position that made Indonesia an obvious choice for Global North governments seeking to use the JETP to jumpstart decarbonization in the Global South.

Indonesian officials initially were hopeful about the JETP. They are eager to diversify their economy from one that exports raw resources to one full of auto factories, solar-panel plants, and data centers. They are pushing particularly hard to adapt their old-school mining industry to the new low-carbon economy: Indonesia is the world’s largest producer of nickel, whose strategic and economic value is surging because it’s a key material for batteries for electric cars.

In November 2022, Indonesian leaders joined U.S., U.K., and Japanese officials in announcing the launch of the Indonesian JETP program. It was supposed to bring $20 billion to Indonesia to finance a decarbonization push that would include the premature shutdown of several coal-fired power plants and the construction of new renewable-energy generation, including solar and wind farms. The money was to come in both grants and low-interest loans—half of it from the governments of those three countries and half from banks and other private sources. The donors and Indonesian officials were to work closely together to determine which projects across the archipelago would get the preferential funding. It was, supporters said, a new model for how a partnership between public and private players and between the Global North and the Global South could be structured to accelerate the shift to low-carbon growth in a way that was both politically and economically sustainable—and in a country in which that shift was crucial to the planet.

The partnership has, at least so far, failed to bankroll the intended extent of decarbonization. Despite myriad meetings—in Jakarta, Washington, and capitals around the world—the Global North benefactors and the Indonesian beneficiaries have been unable to implement a significant number of decarbonization deals. Amid a debate about who’s to blame, the upshot is that the concessionary capital from the foreigners isn’t flowing nearly as quickly, or as significantly, as Indonesian officials expected.

But that doesn’t mean Indonesia isn’t scrambling to capitalize on the world’s decarbonization drive. It means merely that Indonesian officials are looking elsewhere for green money. Over the past year, they have been inking deal after deal for low-carbon projects across the archipelago. Many have been with China.

In November 2024, three weeks after winning election, Indonesia’s new president, Prabowo Subianto, made his first official trip abroad, to Beijing. During the trip, as part of a forum that also involved Xi, Indonesia and China inked business deals totaling $10 billion. One was an agreement between GEM Co., a Chinese battery maker, and PT Vale, the Indonesian unit of mining company Vale SA, to build a $1.42 billion plant on the Indonesian island of Sulawesi to process nickel laterite ore, mined in the area by Vale, into mixed hydroxide precipitate, a material used to make batteries for electric cars. As part of their Beijing meeting, Prabowo and Xi issued a statement pledging long-term cooperation in various areas of low-carbon dealmaking, including electric vehicles, lithium batteries, and solar technology. They also agreed to formalize an effort to shore up strategic supply chains for those products by establishing a Green Mineral Resources Partnership. “China supports Indonesia’s efforts to accelerate its energy transition,” their statement noted, “and will engage in more high-quality cooperation with Indonesia in clean energy industry and energy infrastructure.”

Trump’s card

Decarbonization, it turns out, is all about the deal. Today’s cold climate war offers an approach for U.S. action that, if Trump chose to pursue it, would play to his instincts as dealmaker-in-chief. A winning strategy for U.S. gamesmanship in the global clean-technology fight will require the Trump administration to do three things.

The first thing the administration will have to do is to care. It will need to publicly recognize low-carbon technology for the economic and geopolitical juggernaut it has become rather than continuing to disparage it as child’s play compared with the adult game of fossil fuels. Words matter, and the American public is unlikely to support a long-term and expensive strategy to claw back a sizable share of a market that a populist president contends is a waste of effort and money. Either climate change is a force that the United States is committed to building world-leading industries to conquer, or it isn’t. The president must decide, and then he must say so.

The second thing the Trump administration will have to do to grab a strategic slice of the global market for low-carbon goods is to shift its policy stance from fear to confidence. Cowering in a defensive strategy of building protectionist barriers to try to keep out Chinese low-carbon wares is, at best, a short-term play. Chinese solar manufacturers, to take just one example, have proved skillful and sensible in skirting U.S. tariffs by shifting their production to parts of the world—first Southeast Asia, then Mexico—not blocked by those policy walls.

A confident strategy for the United States is one that goes on a carefully planned offensive. That means designing and executing an industrial policy calibrated to support international sales of those low-carbon products and services that U.S. firms are poised to produce competitively. Context is crucial: The United States can’t own all, or even most, of the global low-carbon market. The market is too big. And other countries, including but not limited to China, are too entrenched, at least in the technologies that have achieved scale so far. But if it plays to its strengths, the United States can carve out profitable parts of the market. It is a financial powerhouse—not just because of the quantity of capital U.S. firms can invest in the Global South, but also because of the U.S. finance industry’s innovativeness in structuring that money in ways that can prove useful. It also retains key advantages in developing leading-edge technologies—albeit with an important caveat. As technologies scale, their manufacturing is likely to diversify around the globe. Rather than resorting to protectionist tariffs to try to concentrate that mass manufacturing in the United States, Washington should focus on a strategy that, over time, surfs strategically from one new technology wave to another, riding each wave to maximum domestic economic effect.

The third thing the Trump administration will need to do to become an effective low-carbon mercantilist is to set its sights on the most important prize: private deals in the places around the globe where markets are growing fastest. The financial goal shouldn’t be government aid; it should be commercial capital, the kind of money that has the potential to seriously scale. That distinction argues for a new and targeted set of deals in the Global South, particularly in a handful of fast-growing economies in Southeast Asia, the Middle East, and Africa. It’s there that two colossal contests will be won or lost: not just the one against rising temperatures, which is long-term and politically unpredictable, but the one for sustainable-technology dominance, which, experience has shown, can win jobs and elections.

The Trump administration, in short, has the opportunity to wage a sophisticated strategy of U.S. low-carbon salesmanship that the Biden administration, despite prodigious effort, only started. Seizing that opportunity will give Trump a particularly durable bragging right—not just against China, but also against the increasing number of other countries piling into the global green game. Low-carbon deals can be just as valuable as high-carbon ones—and they have a brighter future, particularly in the Global South.

A deal is a deal. Money is money. There’s green for the getting around the globe. That’s a vision of American greatness that ought to play well not just in blue states, but also in red states, and even in the Trump White House.

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