Energy & Environment European Union Geopolitics & Energy Security Renewables & Advanced Energy United States and Canada
Report October 7, 2024

Treating the green transition like the geopolitical imperative it is

By Carol Schaeffer

This essay is part of the report “Transatlantic horizons: A collaborative US-EU policy agenda for 2025 and beyond,” which outlines an agenda for common action for the next US administration and European Commission.

The bottom line

The urgency of the green transition is not going away, and it is a question of security as much as it is a question of health, trade, economic, and environmental stability. Climate change is driving a security crisis in the Arctic as melting ice caps open new warship routes and shift geopolitical dynamics; it is fueling economic instability as resources become scarce and weather patterns disrupt industries; and it is intensifying border pressures as displaced populations seek refuge from climate disasters. The Biden administration and the European Commission made commendable progress on some climate targets and with spending programs to reach them. But more will be needed. Policymakers should adopt a NATO-style approach to long-term decarbonization and work to boost the green economies of the United States and the European Union (EU) together, not separately. 

State of play

The blessing of addressing climate change is the simplicity of the goal: reduce carbon emissions. The complexity lies in doing so in a way that is coordinated, fair, mutually beneficial, and, above all, maximally implemented to get as close to carbon neutral as possible. Fears concerning energy reliability, stunted economic growth, and global competitiveness are commonly cited barriers to achieving this goal. But the beauty of international cooperation is that it lightens each of those potential burdens. The problem, therefore, is also the solution.

Both the United States and the EU have put forward significant financial plans to invest in green technology and create avenues for the green transition of key industries. The US Inflation Reduction Act (IRA) was created to stimulate the US energy transition with an explicit focus on green businesses, and the EU’s European Green Deal was created as a counterpoint to boost European competitiveness in green markets. While the IRA focuses on subsidies as incentives for companies to pursue green transitions, and the European Green Deal focuses on regulations rather than incentives, each plan is by design insular. The IRA, for example, unleashed $369 billion in climate spending over the next ten years, encompassing primarily three categories of subsidies dedicated to electric vehicle (EV) purchases, clean-tech investments, and carbon-neutral electricity production. Certain green tech sectors, such as hydrogen energy or battery production, could be transatlantic and cooperative to create synergy and lower costs. Furthermore, refocusing on European and US investments to build mutual supply chains for electric vehicles or integrated power grids would allow for easier sharing of renewable energy.

At the supranational level, the EU has also made significant gains in setting climate targets. With programs like NextGenerationEU, the Fit for 55 package, and the REPowerEU Plan, which each set ambitious decarbonization goals, the outgoing European Commission showed clear political will to prioritize a green agenda.

The strategic imperative

In the wake of the energy crisis sparked by Russia’s full-scale invasion of Ukraine in 2022, making European economies energy self-reliant has become crucially intertwined with overall long-term geopolitical security. This is applicable to not only mitigating catastrophic climate events but also to reducing dependency on strategic adversaries. More than four decades ago, US President Ronald Reagan foresaw the strategic weaponization of Europe’s, particularly Germany’s, reliance on Russian natural gas and its potential implications for the national security of NATO allies. A climate coalition could begin with the longstanding defense allies established by NATO and then could hopefully expand to include other nations from Latin America, Africa, and Asia. Such a movement would also put positive pressure on countries that have expressed reservations about supranational decarbonization goals, namely reaching net-zero emissions in order to evade global climate catastrophe.

Looking ahead

More work has to be done on both sides of the Atlantic. While a milestone in US climate policy, the IRA alone will not meet climate targets. Early estimates indicate the United States needs to spend $10 trillion by 2032 in order to get on track to reach net-zero emissions by 2050.

Similarly, research by the Institut Rousseau suggests that the EU will need to spend €1.5 trillion per year to meet its 2050 zero emissions target. Total EU gross domestic product (GDP) in 2023 was roughly €17 trillion, which would make this annual commitment figure as much as 8 percent of total GDP. Consequently, funding remains a consistent deficit in reaching decarbonization goals.

Beyond the EU level, most EU members do not invest enough in low-carbon energy systems. For example, the EU’s Climate Action Progress Report 2023 states: “Progress by Member States towards the EU 2050 collective climate neutrality objective still appears insufficient. For some Member States, progress in recent years is not consistent with the effort required in the coming decades to meet the long-term climate targets,” failing to meet the supranational objectives laid out by the aforementioned plans. In Germany, although greenhouse gas emissions fell by 10 percent in 2023, experts still report that the country will not meet its 2030 goal of reducing its emissions by 65 percent by 2030. As a result, most EU members are not on track to meet their carbon emission targets. Drawing on a shared spending strategy enforced by a mutually accountable coalition structure could help pressure individual members to meet larger shared goals.

Allocating more resources toward meeting these obligations may prove more difficult with the shifting political winds across the continent. Far-right political parties made significant gains in European Parliament elections this year, and far- and hard-right parties have grown domestically within several key EU nations, such as the Netherlands, France, and Germany. Many of these parties have spent recent years incorporating climate policy criticism into their campaigns. Germany’s far-right Alternative for Deutschland, for example, has called for Germany’s complete withdrawal from all climate agreements, reinforcing its long-standing climate denialism. The rise of the National Rally in France ahead of the July snap elections highlighted concerns over the party’s anti-environment agenda. While there are many divisions among the far right at the EU level, far-right parties may easily unite against green initiatives and block key spending. And far-right parties are not the only ones to highlight skepticism toward the possibility of a climate-spending baseline.

In addressing the urgent need for a cohesive and international response to climate change, it is imperative to foster investment strategies that prioritize collaboration with nations demonstrating a commitment to cooperative engagement. A case in point is Hungary’s ambitious initiative to position itself as Europe’s leading producer of EV batteries. While this endeavor holds potential for significant economic growth, it raises critical concerns regarding the alignment of Hungary’s political stance with the broader goals of climate cooperation.

Hungary’s inclination to cultivate favorable relations with Russia, coupled with a recurrent disregard for democratic principles and a tendency toward isolationism, as well as China’s sizable investment in Hungary’s EV market, poses risks to the integrity of global efforts to confront climate change. Budapest’s nationalist approach and its reluctance to uphold cooperative relationships within the EU—and beyond—underscore the danger of consolidating control over essential resources, such as EV battery production, in the hands of an increasingly unilateralist government.

To safeguard the efficacy of climate change policies, it is essential to ensure that investment frameworks are designed to engage with countries that demonstrate a steadfast commitment to collaboration and shared democratic values. By prioritizing partnerships with nations that embrace a cooperative mindset, policymakers can cultivate a more resilient and unified approach to addressing the global climate crisis.

Policy recommendations

An Atlantic Council policy memo last year outlined a proposal for a NATO-style approach to targeting long-term decarbonization. This could still be the strongest proposal for a transatlantic partnership dedicated to the shared goal of combating climate change. If climate change can be understood as a global security threat—a threat to economies, infrastructure, future growth, and a world free of conflict over resources—then the best way to tackle it is a NATO-style approach to climate change budgeting. If shared defense spending can be pooled with a target of 2 percent of GDP from member nations, why can’t the same model be applied to climate change?

EU member states and the United States should set national-level spending targets based on annual GDP to fairly contribute to achieving decarbonization goals established by the Paris Agreement. This coalition-style approach would ensure mutual accountability and create a forum for high-level negotiation to produce predictable funding for decarbonization-related policy in the ongoing effort to fight climate change.

A transatlantic cooperative shared-spending target based on GDP would create a fair mutual incentive that allows each country to contribute according to its economic ability, rather than distribute the responsibility piecemeal according to the domestic agendas of each member state. This is intended as a strengthened version of Nationally Determined Contributions (NDC) as outlined by the Paris Agreement, which in its current form creates a dispersed and volatile approach vulnerable to short-term political changes when the solution must be sustained, reliable, and predictable. NDCs would of course continue to exist, but an alliance structure would strengthen those contributions, and that 2 percent of GDP spending would be combined and redistributed as needed based on climate goal needs.

The EU’s neighboring countries, who are currently not included in the EU’s broader initiatives, would be able to join this spending coalition and could use their participation to accelerate EU membership. Turkey and Ukraine, for example, could demonstrate their commitment to EU plans and values and further their accession processes by contributing to this partnership.

Remember the mutual benefit of a GDP-based funding system.

Using NATO as a model, it is important to remember that the Alliance is a contract of mutual security. The benefit that NATO members gain from participation is the promise of mutual aid. Therefore, a decarbonization-focused spending target must also promise common funds to aid in a series of climate-related crises. Member participation would guarantee that part of the spending would be allocated not only to future-proofing infrastructure and green technology but would also be able to be directed toward alleviating the costs imposed by climate-related crises.

This would provide an obvious benefit for countries such as the Netherlands, which faces immediate threats from coastal flooding and storms. But what about nations that have expressed reservations about climate change policies as an expensive and unnecessary burden?

Take Poland, for example. What benefit would Poland gain from this partnership? It faces little of the immediate climate risks that a country like the Netherlands might face when it comes to rising sea levels, and it is traditionally heavily reliant on coal for its economy and to keep the lights on, with coal yielding 63.7 percent of Poland’s energy generation mix in 2023.

Yet climate change is already impacting Poland. Changing weather patterns increase the risk of wildfires, crop failures, and water pollution. In just one example, the Oder River, which marks Germany’s eastern border and Poland’s west, has experienced several massive fish kills in the past two years, which experts have attributed to algae blooms caused by high levels of salinity and other pollutants from coal-powered industrial runoff and extended hot weather. A mutual spending target would allocate resources to alleviate these and other environmental catastrophes as well as to invest in solutions that protect against such disasters in the future. Climate policy spending could also be used to offset secondary climate-related expenses, such as air pollution, which leads to millions being spent on treating lung-related health concerns.

Countries applying for aid from this coalition to address damages from climate change may also need to commit to invest some of the aid in green industrial alternatives and other agendas to reach broader decarbonization goals. This reinforces the coalition’s mission to prevent future climate disasters by addressing the root cause—carbon emissions—through proactive investment.

Rather than focusing on initiatives to bolster US or EU industry separately, refocus initiatives to lower costs through cooperation.

The IRA and the European Green Deal both create joint investment in green technologies. Both approaches use subsidies to boost progress in green tech and entice investment, presumably each at the other’s expense. But the IRA and the European Green Deal are not mutually exclusive. Rather, they are complementary.

The United States and the EU could set a number of standards and regulations for private businesses that operate on both sides of the Atlantic, such as requirements for businesses to disclose greenhouse gas emissions, and standards for businesses to adapt to more energy efficiency rather than offsetting carbon emissions. According to a report from the Center for Active Stewardship, companies representing 71 percent of the S&P 500 by market capitalization and 87 percent of the index’s direct emissions have set voluntary net-zero goals. By requiring emissions disclosure and setting energy efficiency requirements, US-EU cooperation could standardize emissions and avoid creating a competition imbalance.


Carol Schaeffer is a nonresident senior fellow with the Atlantic Council’s Europe Center, host of the Transform Europe Debrief series, and a reporting and journalism fellow with the Jain Family Institute, focusing on decarbonization, the energy transition, and European policy.

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