By Rafael Leal-Arcas

International trade is often portrayed as part of the climate problem. Goods travel across borders, production generates emissions, and global supply chains depend heavily on fossil fuels. Trade agreements are also frequently criticized for constraining governments’ ability to adopt environmental regulations or support domestic green industries. From this perspective, trade liberalization and climate protection appear to be competing priorities. But is this necessarily the case?

What if international trade were understood not simply as a source of environmental pressure, but as one of the most important instruments available to accelerate the global energy transition?

This question matters because climate change cannot be addressed by individual countries acting in clinical isolation. The technologies, materials, capital, and expertise needed to decarbonize economies are distributed unevenly across the world. Some countries possess abundant renewable-energy resources; others have advanced manufacturing capabilities, technological expertise, or the financial capacity to invest in new energy systems. International trade connects these different strengths. Properly governed, it can help transform them into a collective response to climate change.

The energy transition is a global undertaking

Consider the technologies required to reduce greenhouse gas emissions: solar panels, wind turbines, batteries, electricity-grid equipment, hydrogen technologies, and carbon-capture systems. Their development and deployment depend on complex international supply chains. No country can efficiently produce every component, secure every necessary raw material, or develop every relevant technology independently. Trade can facilitate the diffusion of clean-energy technologies, reduce the costs of deploying renewable energy, and enable countries to benefit from innovations developed elsewhere. For developing economies in particular, access to affordable technology can make the difference between ambitious climate commitments and their practical implementation.

The relationship between trade and energy security is equally important. Diversifying energy sources and suppliers can reduce exposure to supply disruptions and geopolitical tensions. At the same time, the transition to low-carbon energy creates new dependencies, including on critical minerals, battery components, semiconductors, and specialized manufacturing. The challenge is not to eliminate international interdependence, which would be economically costly and often impractical, but to make it more resilient, diversified, and sustainable. This is where trade policy becomes central to energy policy. Decisions about tariffs, export restrictions, technical standards, subsidies, investment, and technology transfer can influence the speed, cost, and geographical distribution of the energy transition.

When trade rules become part of climate governance

International trade law is sometimes treated as an obstacle to environmental action. Concerns arise when governments introduce subsidies for renewable energy, impose carbon-related measures on imported products, or seek to develop domestic clean-technology industries. Such measures can raise questions under World Trade Organization (WTO) rules and international trade agreements. Yet the relationship between trade law and climate policy is more nuanced than a simple conflict between liberalization and environmental protection.

Trade rules do not prohibit every measure that affects international commerce in pursuit of environmental objectives. WTO law contains provisions and exceptions that may be relevant to legitimate public-policy measures, although their application depends on the specific measure and its design. The central challenge is to ensure that climate policies are effective, transparent, and consistent with applicable international obligations, while avoiding unjustified discrimination or unnecessary restrictions on trade. This distinction matters. If trade rules are designed and interpreted without sufficient attention to the climate transition, they may create uncertainty for governments and investors. Conversely, if climate policies disregard trade obligations, they may generate disputes, retaliation, and fragmentation. Neither outcome serves the long-term interests of sustainable development. The more productive question is how international trade governance can support climate objectives while preserving a predictable framework for international economic cooperation.

The fairness question cannot be ignored

There is, however, a fundamental difficulty: the benefits and costs of the energy transition are not distributed equally. Countries differ considerably in their technological capabilities, financial resources, energy systems, and historical contributions to greenhouse gas emissions. A wealthy economy may be able to subsidize domestic renewable-energy industries and invest heavily in decarbonization. A lower-income country may struggle to finance electricity infrastructure or obtain affordable clean technologies.

Climate-related trade measures can intensify these disparities if they impose additional costs on exporters that lack the resources to adapt. Carbon-related requirements, for example, may create incentives for cleaner production, but they can also raise questions about competitiveness, administrative capacity, and the treatment of developing-country producers. A credible approach to sustainable trade governance must therefore consider not only whether a measure reduces emissions, but also who bears its costs, who benefits from it, and whether countries have a realistic opportunity to participate in the transition.

This is not an argument against environmental standards. It is an argument for combining them with international cooperation, capacity-building, technology access, and appropriate financial support. A global energy transition that is environmentally ambitious but economically exclusionary will struggle to achieve the broad international participation it requires.

‘Rethinking the Global Trade Order provides a fresh view on why international trade matters — and how it can be reconfigured in the wake of recent chaos to deliver for people and the planet. Bravo Professor Leal-Arcas for giving us a picture of what a WTO oriented to sustainable development might look like.’

– Dan Esty, Yale University and the Remaking Trade Project, USA

From competing objectives to complementary policies

The relationship between trade, climate, and energy should consequently be understood as a governance challenge, rather than an unavoidable conflict. Governments need to coordinate policies that are too often developed separately: trade negotiations, energy strategies, climate commitments, industrial policies, and sustainable-development objectives. Such coordination can take several forms. Trade agreements can facilitate commerce in environmental goods and services. International cooperation can help reduce unnecessary barriers to clean-energy technologies. Governments can improve transparency around green subsidies and technical standards. Regional partnerships can support cross-border electricity networks and more diversified energy supply chains. Financial and technical cooperation can help developing economies participate in low-carbon production.

These approaches do not require every country to adopt identical policies. Different national circumstances demand different pathways. What matters is that international rules and institutions create sufficient space for legitimate climate action while encouraging cooperation rather than economic fragmentation. The challenge is particularly relevant to regions such as the Arabian Gulf, where hydrocarbon production remains economically significant even as governments pursue diversification and investment in renewable energy. International trade can help connect established energy producers with emerging clean-energy markets, technologies, and investment opportunities. It can also support the development of new forms of energy cooperation between regions with complementary capabilities and strategic interests.

Rethinking the purpose of trade

The global energy transition forces us to reconsider what international trade governance is ultimately intended to achieve. Economic efficiency and market access remain important, but they cannot be separated entirely from the environmental and security conditions on which long-term prosperity depends. Trade alone will not solve climate change. Nor should trade agreements be expected to replace climate treaties, domestic regulation, or public investment. But trade governance can either reinforce these efforts or make them more difficult. Its contribution depends on the choices governments make and the institutions through which they cooperate.

The essential task is to move beyond the assumption that economic openness and environmental protection must necessarily compete. International trade can help spread clean technologies, diversify energy supplies, support sustainable development, and connect national climate strategies. Realizing that potential requires rules that recognize both the value of open markets and the legitimacy of climate action. The question is no longer simply whether trade and climate policy can coexist. It is whether we can design international economic governance so that trade actively contributes to a more secure, sustainable, and equitable energy future. That is a challenge for international law, but also an opportunity to rethink the role of trade in addressing one of the defining problems of our time.

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Rafael Leal-Arcas is a Chair of the Department of Governance and Public Policy & Professor of EU International Economic Law and Jean Monnet Chair (awarded by the European Commission) & Professor of Law, Governance, and Public Policy, College of Law and International Relations, Alfaisal University, Riyadh, Saudi Arabia.