Global | Geoeconomic Fragmentation, a Vulnerability for the Climate Transition

Summary

The geoeconomic fragmentation triggered by geopolitical concerns makes climate transitions more vulnerable, for example in the EU, which depends on politically distant suppliers of decarbonization inputs, or in emerging economies, which rely on external flows of sustainable finance.

Key points

• Key points:
• Geoeconomic fragmentation, driven by geopolitical tensions, is increasing restrictive trade measures, including those affecting renewables.
• The EU’s reliance on politically distant suppliers for critical inputs (e.g., rare earths, electric batteries) makes it particularly vulnerable to supply disruptions and heightens decarbonization risks.
• Fragmentation also impairs the allocation of sustainable finance, hindering cross-border investment flows crucial for climate transitions, especially in emerging economies.

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