The collapse of climate cooperation between China and the United States has created a global governance vacuum. From rising trade barriers to stalled multilateral climate finance, the China-U.S. strategic rivalry now threatens not only emissions targets but also the fragile supply chains and institutional frameworks that underpin the global energy transition. As climate shifts from being a shared challenge to a zero-sum domain of technological and industrial competition, the consequences are reverberating far beyond Washington and Beijing.
The United States’ scrapping of key climate frameworks – marked most recently by a second withdrawal from the Paris Agreement, suspension of foreign aid, and uncertainty over Inflation Reduction Act (IRA) incentives – has ended a decade-long chapter of joint ambition. These moves, coupled with escalating tariffs and export restrictions, are accelerating the weaponization of green technology supply chains, disrupting global cooperation just as the climate crisis intensifies.
China-U.S. climate alignment once catalyzed historic breakthroughs. Their bilateral momentum underpinned the 2015 Paris Agreement, harmonized global climate policy benchmarks, and helped bring down the cost of renewable energy technologies through joint innovation and scaled deployment. This era of pragmatic cooperation enabled developing countries to adopt clean technologies more affordably and engage more fully in international climate forums.
That cooperation has given way to a new era of climate fragmentation. Strategic rivalry now shapes policies around critical minerals, rare earths, solar, and battery components – technologies vital to the global green transition. The results are tangible: trade barriers have driven up the cost of clean energy components, delayed deployment, and fractured the trust needed to support cross-border innovation.
The impact is especially acute in emerging markets. In Southeast Asia, U.S. tariffs on Chinese solar products routed through third countries have chilled market investment and risked derailing regional energy plans. In the Global South more broadly, the U.S. pause on foreign climate aid – including mechanisms like the Just Energy Transition Partnerships (JETPs) – undermines efforts to finance decarbonization at scale. These reversals deepen global inequity: as wealthy countries secure green technologies through subsidies and industrial policy, poorer nations are left more vulnerable to climate shocks and economic dislocation.
Companies, too, face a fractured climate operating environment. The Chinese EV giant BYD, for example, has delayed its Mexican factory plans amid political pressure and fears of technology leakage to the United States. Meanwhile, U.S. solar manufacturer First Solar is grappling with the implications of paused IRA subsidies, which had underpinned its expansion and domestic hiring plans.
In this new landscape, the erosion of trust and institutional continuity between the United States and China is affecting not only bilateral outcomes but also the credibility of global climate governance. Countries now hedge between competing climate alliances, and firms are forced to make bets on where long-term regulatory and policy stability might reside.
This is not a call to nostalgia. The cooperative model of the 2010s may no longer be viable. But the absence of coordination does not justify disengagement. Stakeholders across sectors and geographies must navigate this ambiguity with renewed clarity.
Managing competition without sacrificing climate progress will require a new set of guardrails. The following measures offer practical pathways to mitigate fragmentation while advancing the global energy transition.
Rather than pursuing bilateral breakthroughs, the United States, China, and key third parties (like the European Union, ASEAN, and African Union) should embed structured climate-related discussions into broader multilateral forums like the G-20, APEC, and COP meetings. These dialogues would not aim for binding cooperation but would focus on setting minimum standards to prevent the escalation of green trade wars and to maintain baseline commitments on emissions transparency, technology standards, and supply chain resilience. Competitive coexistence, not deep cooperation, should now be the goal.
To prevent developing economies – particularly those in Southeast Asia, where energy transition ambitions risk being trapped between competing green industrial policies – from becoming collateral damage in the China-U.S. climate rivalry, international financial institutions and G-7 efforts should expand neutral, depoliticized financing mechanisms – similar to JETPs but explicitly insulated from geopolitical conditionality. These facilities would help Southeast Asia, Africa, and Latin America access clean technologies and finance without forcing them to choose sides in the Sino-American competition.
The U.S., China, and other major economies should pilot mutually recognized “green trade corridors” or zones where critical decarbonization goods – like solar panels, batteries, and critical minerals – can move with reduced tariffs and non-tariff barriers under strict transparency and sustainability standards. Even limited carve-outs like these would stabilize key parts of the energy transition supply chain and build trust incrementally, while allowing strategic competition to continue elsewhere. Pilot initiatives could focus on strategic trade hubs such as Singapore, Hong Kong, or Dubai, where regulatory alignment and infrastructure already support cross-border supply chains.
The end of China-U.S. climate cooperation marks a turning point. Whether it becomes a moment of systemic collapse or strategic realignment depends on what comes next. Competition may yet drive innovation and renew global urgency – if managed with foresight and grounded in shared planetary interest. Emerging economies, particularly in Southeast Asia, must also exercise agency by building regional cooperation and advancing priorities for a just energy transition in an increasingly divided global landscape.
The stakes for the next decade could not be higher.