Climate change mitigation efforts are forcing countries around the world to adopt vastly different policies on industry and trade, causing conflicts between them. These new divisions over the management of the climate crisis are putting pressure on international alliances and the global trading system, heralding a future in which policies to prevent environmental destruction may also lead to more frequent cross-border trade wars. In recent months, the US and Europe have proposed or introduced subsidies, tariffs and other measures aimed at accelerating the transition to green energy. Their proponents argue that governments should proactively expand cleaner energy sources and punish those who emit the most greenhouse gases in the hope of averting catastrophe.

Opponents of the measures say such policies often put foreign countries and companies at a disadvantage because governments subsidize their own industries or impose new tariffs on foreign goods. The policy is a departure from the long-standing status quo in trade, in which the United States and Europe often joined forces through the World Trade Organization to try to break down barriers and encourage countries to treat their products more equally to encourage international trade.

Now, new policies are turning close allies against each other, widening cracks in the already fragile system of global trade governance. “The climate crisis requires economic transformation on a scale and speed that humanity has never undertaken in our entire 5,000-year written history,” said Todd Tucker, director of industrial policy and trade at the Roosevelt Institute, who is a proponent of some of the measures. . . . The current global trading system sends tens of millions of shipping containers of sofas, clothing and auto parts from foreign factories to the United States every year, often at surprisingly low prices. These prices, however, do not take into account environmental damage caused by distant manufacturing facilities or ships and aircraft carrying products. US and European officials say more is needed to discourage polluting trade. The former, in particular, want to reduce their dangerous dependence on China, especially for materials needed for the transition, such as solar panels and batteries for electric vehicles.

The Biden administration is introducing generous subsidies to stimulate the production of clean energy technologies, such as tax credits for the purchase of US-made clean cars, as well as for companies building new facilities for solar and wind energy equipment. Government officials hope climate change could be an opportunity for cooperation with allies. However, it has caused a split so far. The main point of contention was new tax credits for clean energy equipment and American-made cars.

European officials called the measure a “job killer” and expressed fear that it would lose out to the United States in new investment in batteries, green hydrogen, steel and other industries. A few days ago, and in response to Washington, EU officials began laying out their own plan to subsidize green energy industries, a move that critics fear will plunge the world into a costly and ineffective “subsidy war.”