Subscribe to our weekly newsletters for free

Subscribe to an email

If you want to subscribe to World & New World Newsletter, please enter
your e-mail

Energy & Economics
Global business connection concept. Double exposure world map on capital financial city and trading graph background. Elements of this image furnished by NASA

Liaison countries as foreign trade bridge builders in the geo-economic turnaround

by Eva Willer

Introduction Geopolitical tensions are making global trade increasingly difficult. In order to reduce the associated risk of default, companies are shifting their trade relations to trading partners that are politically similar to them. In the course of the beginnings of geo-economic fragmentation, politically and economically like-minded countries are also gaining in importance for German and European decision-makers. Liaison countries1 in particular can form a counterforce to the trend towards polarization in foreign trade - especially between the USA and China: they are characterized by a pronounced economic and trade policy openness that overrides differences between geopolitical or ideological camps. Consequently, the question arises: How can relevant connecting countries for Germany and Europe be identified? What opportunities and risks do closer trade relations with these countries offer in order to strengthen foreign trade resilience in geopolitically uncertain times?  With a high degree of openness - defined as the sum of imports and exports in relation to gross domestic product - of over 80 percent2 , the German economy is strongly integrated into global trade. Accordingly, the disruptive effect of geo-economic fragmentation on the German economy would be above average. The defensive strategy to strengthen Germany's economic security by pushing for trade policy independence would only reinforce geo-economic fragmentation. Against the backdrop of comparatively high economic vulnerability, it is necessary to focus on those potential partner countries with which German and European foreign trade could be developed and expanded even under the condition of increasing fragmentation.  Geoeconomic Fragmentation  The term "geo-economic fragmentation" is used to describe the politically motivated reorganization of global goods and financial flows, in which strategic, economic and political interests primarily determine the choice of countries of origin and destination for trade flows.3 In the scenario of geo-economic fragmentation, the result would be the formation of a bloc within the global community of states, which would fundamentally change the regulatory structure of global economic networking. In this case, trade and investment would probably concentrate from a previously diverse range of economic partner countries - prior to the formation of the bloc - on those countries that now - since the formation of the bloc - belong to the same bloc.  The likelihood of this scenario occurring and leading to an increased fragmentation of the global economic order has increased again in the recent past. For example, Donald Trump's second term as US president is causing increasing geopolitical uncertainty worldwide.  Statements on the concrete form of a possible demarcation of potential blocs are subject to a great deal of uncertainty. However, the division of a large part of the global economy into a "US bloc" and a "China bloc" is a conceivable scenario for which German politics and business should prepare.  Data already shows that, at a global level, foreign trade openness has decreased in the recent past. Data from the World Trade Organization (WTO) illustrates the increasing hurdles in global trade in goods. While 3.1% of global imports were still affected by tariff or non-tariff barriers to trade in 2016 - including under WTO rules - this figure rose to 11.8% in 2024 over the following years.4 This development goes hand in hand with a noticeable loss of importance and enforcement of the WTO since the 2010s, which previously played a central role as the guardian of the rules-based global economic order.  Studies by the International Monetary Fund (IMF) have already found indications of an incipient geo-economic fragmentation along potential bloc borders. It shows that trade in goods and foreign direct investment between countries that would belong to the opposing camp in the event of a bloc formation declined on average in 2022 and 2023 - in contrast to foreign trade between countries that are geopolitically close.5  In this initial phase of geo-economic fragmentation, liaison countries are beginning to establish themselves as a counterforce, holding the fragmenting global community of states together with new trade and investment routes.  Identification of liaison countries Specifically, liaison countries have the following characteristics: a pronounced openness to foreign trade in the form of a high foreign trade quota and low tariff and non-tariff trade barriers, as well as pronounced economic relations with partner countries from different geopolitical camps. The geopolitical orientation of countries can be examined using data on voting behavior within the United Nations.6 This involves analyzing whether a country can be assigned to the US or Chinese camp - or whether there is no pronounced proximity and therefore political neutrality or "non-alignment" in the sense of ideological independence. The data-based identification of connecting countries is relatively new. Empirical analyses are also limited to connecting countries in the context of US-Chinese foreign trade - specifically US imports from China. In this case, the characteristics of a connecting country can be broken down into (1) "non-alignment" - i.e. a geopolitical distance to both a Western and an Eastern bloc - as well as (2) an increase in imports and foreign investment from China and (3) a simultaneous increase in exports to the United States. In a narrower sense, this is an evasive reaction to trade restrictions, i.e. circumventing trade. If the foreign trade indicators - specifically the trade and investment data relating to the US and China - of "non-aligned" countries for the period from 2017 to 2020 show corresponding characteristic-related changes compared to previous years, these can be identified as countries connecting the US and China.  The analysis of trade data shows that the value of direct exports from China to the USA fell during Donald Trump's first term in office. At the same time, both Chinese exports to some of the "non-aligned" countries and exports from these countries to the USA have increased significantly. These countries have presumably stepped in as a link on the export route from China to the US after the previously direct trade flow was interrupted by trade barriers and had to find a new route. Companies producing in China are therefore likely to have sought new, indirect ways to maintain access to the US sales market.  A certain statistical inaccuracy in the foreign trade data makes it difficult to draw a definitive conclusion in this context. It should be noted: No single commodity can be tracked across national borders in trade data collection. Whether the additional goods imported from China actually found their way to the United States can only be assumed approximately. However, if the trade flows are aggregated, a clearer picture emerges and the circumvention trade via selected connecting countries - including Vietnam and Mexico - becomes visible.  Data on foreign direct investment rounds off the analysis.7 "Non-aligned" countries in which an increase in Chinese investment can be seen between 2016 and 2020 in addition to trade flows can be identified as connecting countries. Here, too, available data suggests that the companies concerned either exported their goods to the United States via a stopover or even outsourced parts of their production destined for the US market to connecting countries. Five connecting countries between the US and China Based on the 2017-2020 study period, various connecting countries can be empirically identified that were used to indirectly maintain access to the US market. In terms of foreign trade volume, the economically most important connecting countries include Mexico, Vietnam, Poland, Morocco and Indonesia.8 All five countries are characterized by the fact that both their exports of goods to the US and their imports of goods from China increased significantly between 2017 and 2020. In addition, greenfield investments (foreign direct investment to set up a new production facility) have risen significantly compared to the period before 2017.  However, the five countries show different priorities in their development, which differentiate them in their role as connecting countries between the USA and China. In Vietnam, exports to the USA in particular have risen sharply. China has been the most important procurement market for Vietnamese companies for years. Poland, Mexico and Indonesia are characterized as connecting countries primarily by the significant increase in imports from China. Morocco, in turn, was able to attract more Chinese foreign investment in particular. Greenfield investments have almost tripled here since 2017. However, Poland - a rather surprising candidate for the role of liaison country, as it is intuitively assigned to the US-oriented bloc - is positioned fairly centrally between the US and China according to the analysis of voting behavior within the United Nations9. In addition, Poland qualifies primarily due to the sharp rise in greenfield investments from China, primarily in the expansion of domestic battery production.10  It cannot be concluded from the previous studies on the USA and China whether German companies are also circumventing trade barriers from the USA via the countries identified. As the trade policy conflicts between the US and China differ significantly from those between the EU and China, there has been a lack of comparable empirical data to analyze connecting countries in the EU context. Opportunities and challenges As the German economy is strongly oriented towards foreign trade and is closely networked with both the USA and China, German companies play a particularly exposed role in the area of tension between the USA and China. Increased economic exchange with potential connecting countries would offer German companies an opportunity to mitigate the expected shock of a geopolitical bloc. They could at least maintain international trade to a certain extent and thus secure some of the endangered sales and procurement markets. On the other hand, there are also costs associated with expanding foreign trade relations with potential connecting countries. The greater complexity also increases the risk in the value chains. Companies that position themselves wisely within this trade-off buy themselves valuable time in the event of a shock to reorganize themselves against the backdrop of changed foreign trade conditions.  From the perspective of foreign trade policy, it is also possible to examine the extent to which stronger foreign trade cooperation with (potential) connecting countries could have advantages. The trade-off between resilience and complexity must then be assessed at a macroeconomic level, beyond individual company interests. In order to make it easier for companies to connect to potential connecting countries and to create appropriate framework conditions, German and European policy can build on existing comprehensive strategies at national and European level. Both the China Strategy11 and the National Security Strategy12 focus foreign policy on connecting countries as part of a stronger economic and political risk diversification. There is also a similar framework at European level with the EU's Strategic Compass13 . Following on from this, the German government could create targeted incentives to open up new markets in liaison countries, which would diversify critical supply chains and reduce one-sided dependencies.  At the same time, connecting countries pose a challenge. These can be used to circumvent foreign trade measures such as sanctions if flows of goods can find alternative routes via connecting countries more easily than before.  In order to realize opportunities and overcome challenges, close cooperation between science, politics and companies is required. This first requires the identification of a selection of potential connecting countries through scientifically sound analysis. This creates the basis for the subsequent steps in which European and German policymakers work closely with companies to create attractive framework conditions for trade with potential connecting countries - for example through bilateral trade agreements.  Attractive foreign trade framework conditions can create the necessary incentive to actually expand trade relations with potential connecting countries. Companies need to weigh up individual cases and make forward-looking decisions: To what extent is there a risk of a loss of production triggered by geopolitical conflicts? And how much would the complexity of the value chain increase if more potential connecting countries were included? Ultimately, the actual choice of preferred sales and procurement markets lies with the individual companies. LicenseThis work is licensed under CC BY 4.0 References1. Verbindungsländer werden im Sinne von Connectors verstanden, vgl. Gita Gopinath/Pierre-Olivier Gourinchas/Andrea F Presbitero/Petia Topalova, Changing Global Linkages: A New Cold War?, Washington, D.C.: IMF, April 2024 (IMF Working Paper) <https://www.imf.org/en/Publications/WP/Issues/2024/04/05/Changing-Global-Linkages-A-New-ColdWar-547357/>. 2. Statistisches Bundesamt (Destatis), Außenwirtschaft. 2025, <https://www.destatis.de/DE/Themen/Wirtschaft/Globalisierungsindikatoren/aussenwirtschaft.html#246 078/>.  3. Shekahar Aiyar/Franziska Ohnsorge, Geoeconomic Fragmentation and ‚Connector’ Countries, Online verfügbar unter:  <https://mpra.ub.uni-muenchen.de/121726/1/MPRA_paper_121726.pdf>.4. WTO, WTO Trade Monitoring Report, Genf, November 2024, <https://www.wto.org/english/tratop_e/tpr_e/factsheet_dec24_e.pdf/>. 5. Gita Gopinath/Pierre-Olivier Gourinchas/Andrea F Presbitero/Petia Topalova, Changing Global Linkages: A New Cold War?, Washington, D.C.: IMF, April 2024 (IMF Working Paper) <https://www.imf.org/en/Publications/WP/Issues/2024/04/05/Changing-Global-Linkages-A-New-ColdWar-547357/>.  6. Michael A. Bailey/Anton Strezhnev/Erik Voeten, »Estimating Dynamic State Preferences from United Nations Voting Data«, Journal of Conflict Resolution, 61 (2017) 2, S. 430-456, <https://journals.sagepub.com/doi/10.1177/0022002715595700/>.7. Gita Gopinath/Pierre-Olivier Gourinchas/Andrea F Presbitero/Petia Topalova, Changing Global Linkages: A New Cold War?, Washington, D.C.: IMF, April 2024 (IMF Working Paper) <https://www.imf.org/en/Publications/WP/Issues/2024/04/05/Changing-Global-Linkages-A-New-ColdWar-547357/>. War-547357. 8. Enda Curran/Shawn Donnan/Maeva Cousin, »These Five Countries are Key Economic ‚Connectors‘ in a Fragmenting World«, in Bloomberg (online), 1.11.2023, <https://www.bloomberg.com/news/articles/2023-1102/vietnam-poland-mexico-morocco-benefit-from-us-china-tensions/>.9. Michael A. Bailey/Anton Strezhnev/Erik Voeten, »Estimating Dynamic State Preferences from United Nations Voting Data«, Journal of Conflict Resolution, 61 (2017) 2, S. 430-456, <https://journals.sagepub.com/doi/10.1177/0022002715595700/>.  10. Enda Curran/Shawn Donnan/Maeva Cousin, »These Five Countries are Key Economic ‚Connectors‘ in a Fragmenting World«, in Bloomberg (online), 1.11.2023, <https://www.bloomberg.com/news/articles/202311-02/vietnam-poland-mexico-morocco-benefit-from-us-china-tensions/>.11. Auswärtiges Amt, China‐Strategie der Bundesregierung, Berlin, Juli 2023, <https://www.auswaertigesamt.de/resource/blob/2608578/810fdade376b1467f20bdb697b2acd58/china-strategie-data.pdf/>.  12. Auswärtiges Amt, Integrierte Sicherheit für Deutschland: Nationale Sicherheitsstrategie, Berlin, Juni 2023, <https://www.bmvg.de/resource/blob/5636374/38287252c5442b786ac5d0036ebb237b/nationalesicherheitsstrategie-data.pdf/>.  13. Rat der Europäischen Union, Ein Strategischer Kompass für Sicherheit und Verteidigung, Brüssel, März 2022, <https://data.consilium.europa.eu/doc/document/ST-7371-2022-INIT/de/pdf/>.

Energy & Economics
Amsterdam, The Netherlands - Thursday, August 27, 2020 - Photo of early edition book, Adam Smith The Wealth of Nations

The Relationship Between Energy and Capital: Insights from The Wealth of Nations

by Simon Mair

Abstract To deliver low-carbon transitions, we must understand the dynamics of capital. To this end, I develop a theory of energy-capital relations by reading Adam Smith’s The Wealth of Nations from an energy-analysis perspective. I argue that, for Smith, capital is any resource used to support production with the intention of generating profits through market exchange. In The Wealth of Nations, capital enables access to new sources of energy and increases energy efficiency. This theory of energy-capital relations explains trends seen in historical energy data: because it is profit driven, capital does not save energy, it redirects it to new uses. This suggests that low-carbon investment can only enable a low-carbon transition if coupled to a systematic challenge to the profit drive.JEL Classification: B12, O44, P18, Q43, Q57Keywordseconomic growth, low-carbon transitions, Adam Smith, history of economic thought, capital, energy, capitalism 1. Introduction: Energy, Capital and Low-Carbon Transitions Under Capitalism To date, the green rhetoric of states and companies has not led to meaningful reductions in carbon emissions. In absolute terms, annual global carbon emissions from fossil fuels increased from ~6 gigatons of carbon per year in 1990 to ~10 gigatons of carbon per year in 2022 (Friedlingstein et al. 2023). Carbon emissions are largely driven by the energy system that supports the capitalist economy, and there is no evidence that this is decarbonizing at the global scale. In 2020, fossil fuels accounted for around 80 percent of total world energy supply, the same figure as in 1990 (IEA 2022). In 2022 carbon emissions from fossil fuels accounted for around 90 percent of total global carbon emissions, up from 80 percent in 1990 (Friedlingstein et al. 2023). Carbon emissions from energy and industrial processes hit an all-time high in 2023 (IEA 2024). To change this increasingly dire picture, it is essential that we understand the economic drivers of emissions, and what economic changes are needed to reverse current trends. There is disagreement over the extent and nature of economic change needed to facilitate a low-carbon energy transition. Radical economists agree that the global reliance on fossil fuels will require going beyond market-based solutions (Li 2011; Pianta and Lucchese 2020; Pollin 2019). But this still leaves us with a broad spectrum of options (Chester 2014). Can a low-carbon transition be implemented within a broadly capitalist framework if it is guided by an interventionist industrial strategy (Pollin 2015)? Or does it require changes to fundamental capitalist dynamics (Davis 2019; Riley 2023)? To cast new light on these debates, I take a step back from the immediate issues and take a history of economic thought approach. To this end, I explore the relationship between capital and energy in Adam Smith’s (1975) The Wealth of Nations. I use the resulting view of energy-capital relations to put forward an explanation of how energy use has developed under capitalism, and to explain why a low-carbon transition is unlikely without addressing core capitalist dynamics. The decision to develop the analysis of energy-capital relations from The Wealth of Nations is grounded in the more general epistemological claim that returning to older works of economic theory is a useful way to conduct economic analysis. Blaug (1990) reminds us that all current economic theory is built from seldom read historical texts, and historians of economic thought have argued that revisiting these texts offers the opportunity to uncover new ways of interpreting key ideas, providing theoretical context that may have been forgotten (Bögenhold 2021; Schumpeter 1954). Additionally, actively engaging with historical thought presents the possibility for moments of creativity as old and new ideas are brought together. For example, Mair, Druckman, and Jackson (2020) use an analysis of economic ideas in utopian texts from the twelfth to nineteenth centuries to develop a vision of work in a post-growth future, and Stratford (2020, 2023) develops a theory of rents and resource extraction grounded in an analysis of the historical evolution of the concept of rent. The general approach of critical engagement with history of thought is perhaps best developed in the Marxist literature, where a substantive body of work draws on Marx’s writings to critically explore environment-economy relationships (e.g., Malm 2016; Moore 2017; Pirgmaier 2021; Saitō 2022). On the other hand, relatively little attention has been paid to Adam Smith in the context of ecological or environmental economic analysis. Most recent interest in Smith’s environmental thought has come from environmental historians (see Steeds 2024 for a review). However, Steeds (2024), building on Jonsson (2014), has made the case for reading Smith as an ecological economist, arguing that Smith shares core ontological precepts of the discipline—notably that it is the environment that underpins all economic activity. Smith (1975) is particularly relevant to debates about low-carbon transitions because The Wealth of Nations is the starting point for an interpretation of capital theory that has become widely used in energy-economy analyses. Capital theory itself has a long and storied history, with analysts giving it a variety of characteristics (Cannan 1921; Kurz 1990; Mair 2022). Contemporary economic analyses of energy generally use a physical concept of capital. A common position for economists who focus on energy is that energy is important because energy use and capital are “quantity complements”: all else equal, when capital increases the energy used in production increases (Elkomy, Mair, and Jackson 2020; Finn 2000; Sakai et al. 2019). Conceived of as “representative machinery,” capital is seen as the physical stuff that channels energy use into production (Keen, Ayres, and Standish 2019: 41). Or as Daly (1968: 397) puts it, “physical capital is essentially matter that is capable of trapping energy and channeling it to human purposes.” This physical conception has its roots in the dominant interpretation of capital from The Wealth of Nations. Prior to The Wealth of Nations, capital was a predominantly monetary construct, but historians of economic thought argue that after The Wealth of Nations, capital is taken to be predominantly physical (Hodgson 2014; Schumpeter 1954). However, I argue that Smith’s view of capital is actually a long way from the almost purely physical views seen in much energy-economy work. Rather, Smith’s view of capital is proto-Marxist. As Evensky (2005: 141) puts it, “Whether or not it was from Smith that Marx developed his notion of capital as self-expanding value, the outlines of that conception were certainly available to him in Smith.” From Smith’s perspective, capital is defined primarily as a socio-physical construct (Blaug 1990; Evensky 2005; Meek 1954). Capital sometimes has physical forms, which enables it to interact with flows of energy, but these are always conditioned by the social dynamics of profit and exchange. Making a direct connection to energy requires reading Smith from the contemporary perspective of energy-economy analysis as developed by the subdisciplines of ecological, biophysical, and exergy economics (Brockway et al. 2019; Jackson 1996; Keen, Ayres, and Standish 2019; Smil 2017a). This is because, as a construct, “capital” pre-dates “energy,” and Smith was writing before the first recorded use of the term energy as we would understand it today (by physicist Thomas Young in 1807, see: Frontali 2014). So although work into energy—particularly among ecological economists and their forerunners in energy systems analysis (Cleveland et al. 1984; Odum 1973; Sakai et al. 2019)—uses a concept of capital that has its roots in an interpretation of Smith’s capital theory, explicit links are missing in Smith’s text. Despite this, Steeds (2024) argues that Smith’s analysis of agriculture shows an understanding of what contemporary analysts would call energy, a theme I develop here focusing on Smith’s conceptualization of capital. The rest of this article is structured as follows. In section 2, I set out an interpretation of Smith’s capital theory from The Wealth of Nations that emphasizes the way it sees physical elements of capital as defined by social forces. In section 3, I outline the ways that energy fits into Smith’s theory of capital. This is the first contribution of the article, as I make novel links between Smith’s capital theory and contemporary energy-economy analysis. In section 4, I apply this interpretation of energy-capital relations to the historical evolution of energy use under capitalism, and the question of low-carbon transitions. This is the second contribution of the article, as I argue that Smith’s capital theory highlights the importance of the social context of energy systems. Specifically, it provides compelling explanations for the phenomenon of “energy additions”—where past “transitions” under capitalism have been associated with the overall growth of energy use (York and Bell 2019). This implies that the challenge of a low-carbon transition is not only investment in low-carbon energy systems but in challenging the logic of capitalism such that low-carbon energy can replace, rather than add to, the use of high-carbon energy. 2. Capital as a Socio-physical Construct in The Wealth of Nations Interpretations of Smith’s capital theory generally emphasize its physical aspects (e.g., Cannan 1921; Hodgson 2014; Schumpeter 1954). These readings focus on Smith’s initial description of capital as a subset of the accumulation of the physical outputs of production (in Smith’s terminology “stock” [cf. Smith 1975: 279]), and the skills and abilities of workers (Smith 1975: 282). The focus on physical aspects of Smith’s capital theory makes sense from a history of ideas perspective. The physical aspects of Smith’s capital stand in contrast with earlier definitions that were primarily monetary (Hodgson 2014). There is also an intellectual lineage that can be traced in Smith’s views on capital, principally through Smith’s relationship with the French Physiocratic school whose own economic analysis emphasized physical flows (Meek 1954; Schumpeter 1954). However, the fact that Smith introduced a new role for physical goods within a broader concept of capital does not imply that Smith’s theory of capital was purely physical (Robinson 1962). Rather, Smith views capital as the accumulated monetary and physical resources that are brought into production to generate a profit. To see this, let us look first at Smith’s view of circulating capital. Smith splits capital into two forms, circulating and fixed, and he is explicit that circulating capital has both monetary and physical forms. For Smith, circulating capital is defined by the fact that to turn a profit from it, its owner must give it up in exchange for something else. Consequently, circulating capital takes multiple forms: it is the money that will be used to pay wages to a worker, the product produced by that worker, the money realized at the point of sale of the product, and the commodities purchased using the money realized. As Smith (1975: 279) puts it, circulating capital is continually going from the capitalist “in one shape, and returning to him in another. . . it is only by means of such circulation. . . that it can yield him any profit.” Circulating capital is a process of purchasing and selling resources, often with a monetary form, in order to make more money (Evensky 2005). Circulating capital has different forms (some physical, some not) at different points in its circulation, but it is consistently capital. Even when capital takes on its physical form, for Smith it is the underlying social dynamics of exchange and profit that define it as capital. In his opening to book 2, Smith argues that capital is an emergent property of exchange-based economies (Smith 1975: 276). In a society with no division of labor, he argues, people are self-sufficient, and there is very little exchange. But once you have a division of labor, you get exchange because each worker uses their labor to produce a subset of the goods needed to live. Other workers use their labor to produce a different subset of goods. The two then trade with one another to ensure all their needs are met. Drawing on the work of the Physiocrats, Smith then observes that production takes time (Schumpeter 1954). Consequently, in a market system, the purchasing of goods from other people “cannot be made till such time as the produce of his own labor has not only been completed, but sold” (Smith 1975: 276). This means that in either a monetary or barter economy, there has to be a stock of physical goods previously accumulated in order to enable work to happen before the products of that work have been sold (or are available for barter). For Smith, these goods are a form of capital. In this sense, capital can be physical commodities—but physical commodities accumulated in order to support exchange. For Smith, profits are also an essential part of the definition of capital (Meek 1954). Whether fixed or circulating, physical or monetary, what makes something capital is the desire of the capitalist to earn money from it (e.g., Smith 1975: 281, 332). Smith’s theory of profit is scattered through The Wealth of Nations and is not entirely comprehensive (Blaug 1990; Christensen 1979). However, Smith does identify a construct called profits with some core tendencies that are sufficient to group him in the classical approach to profit as surplus and deduction (Hirsch 2021; Kurz 1990; Meek 1977). For Smith, surplus is primarily derived from the value that labor adds to raw materials. This value then goes to pay the wages of the worker and other costs of production, one of which is “the profits of their employer” (Smith 1975: 66). So, Smith’s theory of profit is deductive. Profit is the money capitalists attempt to gain back from production after all costs—including wages—have been accounted for (Meek 1977). An important addition here is that the profit drive for Smith is speculative: capitalists bring capital to support production because they “expect” to generate more money (Smith 1975: 279, 332)—it is not guaranteed. The attempt to gain profit is because capitalists use this as their income (cf. Smith 1975: 69, 279). This attempt is central to the dynamics of capital because profit is the “sole motive” that a capitalist has for bringing their resources into the exchange cycle of the economy (Smith 1975: 374). To summarize, for Smith, capital is the accumulated resources (whether physical or monetary) brought to bear in support of exchange-based production, the ultimate aim of which is to provide the owner of capital with an income (profits). Consequently, it is not correct to view Smith’s capital theory as purely or even predominantly physical. Rather Smith’s capital is a socio-physical construct. This interpretation is not a refutation of other readings that emphasize the physical aspect of Smith’s theory. The physical elements are present, are important, and are relevant to our discussion of energy. However, the underlying premise is always that these physical elements are defined by social relations of profits and exchange. This analysis fits with readings of Smith that see his capital theory as proto-Marxist because of the way it frames capital in terms of social relations (Hodgson 2014; Pack 2013; Tsoulfidis and Paitaridis 2012). But it strongly cautions away from discussions of capital that abstract from these social relations in ways that leave capital as purely physical things. As with Marx (2013), when Smith talks about capital as physical things, his focus is on the way the physical interacts with social relations. 3. How Does Energy Fit into Smith’s Capital Theory? Having sketched an interpretation of Smith’s capital theory focusing on the interplay of profit, exchange dynamics, and monetary and physical resources, we can turn to the question of how energy fits into Smith’s capital theory. In this section, I draw on energy-economy analysis to suggest two key ways in which energy might fit into Smith’s capital theory: 1. Capital is used to bring new energy sources into production.2. Capital is used to make existing energy flows more efficient. 3.1. Accessing new energy sources For Smith, one of the key ways that capitalists aim to generate profits from capital is by using it to increase labor productivity (in Smith’s terms “abridging” labor, see: Smith 1975: 17, 282). Here we have a link to energy-economy analysis, where labor productivity is often described in terms of substituting human labor for other forms of energy—since the industrial revolution this has typically happened through some form of fossil fuel–powered machinery (Smil 2017a). Smith discusses machinery in a number of places across The Wealth of Nations. Indeed, Kurz (2010: 1188) writes that one of Smith’s key growth mechanisms is the replacement of “labor power by machine power.” In chapter 11 of book 1 of The Wealth of Nations (Smith 1975: 263), Smith discusses how cloth production in Italy was made more productive than in England by employing wind and water mills in the former, while the latter treaded it by foot. This is the same example pointed to by energy scientist Vaclav Smil (2017a), who argues that the introduction of waterwheels into industrial production were a source of substantive labor productivity growth. Energy-analysis allows us to say why the wind and water is more productive than the treading. Energy provides a variety of functions, known as “energy services,” which are essential for production processes (Grubler et al. 2012). These are intuitive when put in the context of everyday experiences: achieving a comfortable temperature in an office or workplace requires thermal energy. Transporting goods or people requires kinetic energy. In the case of cloth production, the fulling process requires kinetic energy to manipulate the fibers of the cloth. To deliver energy services, energy sources go through a series of transformations, known as the conversion chain (Brockway et al. 2019; Grubler et al. 2012). Energy is accessible to us through different carriers—known as primary energy sources (such as food, oil, or gas). In most use cases primary energy sources are then converted into other forms before delivering their service (Smil 2017b). This conversion is done by “conversion technologies.” Muscles are a “technology” that can be used to convert the chemical energy in food into mechanical energy. Oil or solar energy may be converted into electricity. Different economic processes may use multiple forms of energy with energy from multiple carriers requiring transformation multiple times. From the perspective of increasing labor productivity, what is important is having energy available to do “useful” work (meaning provide the specific energy services that serve the interests of the system) (Brockway et al. 2019). The more energy available to do useful work, the more economic activity can be carried out per person. One way to increase the amount of useful energy available is by adding new primary energy sources to the system. This process often requires new conversion processes that enable the energy in the primary energy sources to be accessed and converted into energy services. In the case of cloth production, the introduction of wind or water mills is an example of capital taking the form of a new conversion technology that enables access to a different primary energy source (Smil 2017b). In the human-powered treading process, solar energy is converted into chemical energy through the agricultural system. The chemical energy in food products acts as the primary energy source. People then eat this food, converting it to mechanical energy that manipulates the cloth as they tread it under foot. On the other hand, a wind or water mill introduces a new conversion technology that enables access to the energy available in wind and water by converting it into mechanical energy. Note that this process is not only about energy efficiency. Wind and water mills are typically more energy efficient than human-power, but just as crucially they are more powerful: they bring a greater quantity of energy into the process of cloth production (Smil 2017b). The importance of scale is seen across energy-economy analysis. Hall and Klitgaard (2012: 117) draw on Polyani’s (1944) substantive definition of an economy to argue that all economic activity is the application of work to transform natural resources into goods and services. In the past, most of the work of transformation was done through muscle-power, but today muscle-power is a much smaller proportion of total work carried out because of the development of machinery that allows us to supplement our muscles with the “‘large muscles’ of fossil fuels.” 3.2. Increasing energy efficiency There are places in The Wealth of Nations where we might hypothesize about energy efficiency gains explicitly. For instance, Smith tells an apocryphal tale involving a child and a fire engine, presented as an example of innovation leading to labor productivity growth. Smith writes that in the earliest fire engines a boy would be employed to open and shut different valves, until one such boy finds a way to connect the valves such that they “open and shut without his assistance” (Smith 1975: 20). Such an innovation adjusts capital in order to enable it to convert more of the primary energy source into useful energy. Prior to the boy’s innovation, the system required two primary energy inputs: the fossil energy to power the machine, and the food energy to power the boy. Once the boy innovates, the primary energy associated with his action is removed from the process and the machine uses only the fossil energy, thus increasing its overall energy efficiency. But machinery is not the only way in which humans’ access and turn energy flows toward growth of the economy in Smith’s capital theory. Smith considers the useful abilities of workers to be a form of capital and here we can see another place where energy efficiency may fit into Smiths capital theory. When defining the useful abilities of workers Smith refers to dexterity: the skills and abilities acquired by workers through the repetition and simplification of tasks. When defining dexterity Smith talks about it in terms of efficiency gains. For example, a worker specializing in the production of nails will become more skilled in their production, and hence more efficient (Smith 1975: 18). But nowhere does Smith imply that an increase in dexterity is miraculous. And although it is intimately bound up with social organization through the division of labor, we can see how energy may fit into the process. Specifically, the increase in dexterity can be understood as partly a function of the fact that energy flows are being used more efficiently. Workers learn the best way to stir the fire, to heat iron and shape the head of the nail. An increase in the skill of a worker enables them to use energy more efficiently. In this way, more efficient use of energy flows can be seen as one of the ways that the division of labor enables increases in productivity. 3.3. Summary of the energy-capital relation in The Wealth of Nations Smith views capital as the monetary and physical resources that are brought by capitalists into exchange processes with the intention of generating an income for themselves. Smith, like Marx, is clear that all production ultimately rests on inputs from the natural environment, so it is not surprising that in The Wealth of Nations we found examples of a subset of capital that generates profits by changing the way energy is used in production processes. Specifically, I presented two mechanisms that can be identified in The Wealth of Nations: bringing new energy sources into the economy (the transition from human power to wind and waterpower in the fulling process), and being made more energy efficient (through machinery innovations and specialization of labor). We can now apply this interpretation of Smith’s energy-capital theory to the question of low-carbon transitions. The examples I have elaborated support Steeds (2024: 35) notion that Smith has an “intuitive” understanding of energy. Some of the critical functions of Smith’s conception of capital can be explained in terms of how it mediates our relationship to energy. In this way, Smith’s reading is close to more modern accounts of the role of energy (Keen, Ayres, and Standish 2019, Sakai et al. 2019). But what differentiates Smith’s from these accounts is an explicit emphasis on the social context in which energy is used by capital. Some accounts of the energy-economy relationship effectively, or explicitly, reduce production to energy use. In Smith’s account by contrast, energy use is framed and shaped by social forces. Recalling Smith’s core understanding of capital from section 2, it is clear that energy is being harnessed by capital in an attempt to generate profits within a market process. In other words, in a capitalist economy where most production follows the logic of capital, the major driver of energy use will be the attempt to generate incomes for the owners of capital. This insight, though simple, is often overlooked and has profound implications for a low-carbon transition. 4. A Smithian Analysis of Low-Carbon Transitions Under Capitalism In this section, I apply the insights from the reading of Smith’s capital theory to historical data on energy use under capitalism. I argue that the theory provides a simple and compelling explanation for the constant expansion of energy use as new forms of energy have been added to the mix. Capitalists seek to use energy to grow their profits; therefore, they invest in efficiency measures or new energy sources in order to increase the total energy available to them. Energy is never saved in the sense of not being used. Rather, it is made available to new profit-seeking ventures. Across both mainstream and radical interventions into low-carbon transition debates, there is often a focus on the investment needed to grow low-carbon and energy efficiency programs (e.g., Hrnčić et al. 2021; Pollin 2015, 2019; Qadir et al. 2021). The central argument in these works is that low-carbon transitions require substantial but not unreasonable levels of investment in low-carbon energy and energy efficiency programs. Approaching this from the perspective of energy-capital relations developed in this article, we are looking at the need to transition capital from one conversion technology to another. Today, much capital takes the form of conversion technologies designed to access the energy in fossil fuels. For a low-carbon economy we need capital to take the form of conversion technologies that can access energy in wind, solar, or other low-carbon forms. It is tempting to think about this in terms of the transition described by Smith from labor power to wind power in the fulling process. However, there is a fundamental difference between the transition from one energy source to another as developed in The Wealth of Nations, and that needed in the low-carbon transition. Historically, transitions between dominant energy sources under capitalism have been consistent with Smith’s argument that capital is only motivated by the desire for profit. Past energy transitions under capitalism have been driven by a search for greater profits enabled by the new energy sources, not by pro-social or pro-ecological values. For example, Malm (2016) argues that the English transition from wood to water was driven by the desire of capitalists to concentrate and better control their workforce, simultaneously reducing losses from theft, making workers more efficient, and bringing a greater scale of energy into the production process. The consequence of the consistent searching for profits in capitalist energy transitions is that we have very few examples of energy sources declining under capitalism at the macro-scale. Under capitalism, energy transitions are better described as energy additions (York and Bell 2019). In recent decades, there has been a remarkable growth in the use of low-carbon energy sources, but at no point in this period has energy production from fossil fuels decreased (figure 1; Malanima 2022). Indeed, looking at the evolution of 9 categories of primary energy sources since 1820 (figure 1), only fodder has seen a prolonged decrease under capitalism. For instance, in absolute terms, energy from coal overtakes fuelwood as the largest primary energy carrier in the late 1800s. But after this point the energy supplied by fuelwood continues to grow. Even in the case of fodder, although it has been in decline for approximately sixty years it still provided more than twice as much energy in 2020 than it did in 1820. Looking specifically at low-carbon fuels, the charts for renewables and nuclear energy show dramatic spikes and rapid growth. But these spikes do not coincide with declines in any other fuel source, and the International Energy Agency (IEA 2023a, 2023b) reports that 2022 was an all-time high for coal production, and forecasts record oil production in 2024.   Figure 2 depicts global energy efficiency, the scale of global production, and the total primary energy use 1820–2018. Energy efficiency of the global capitalist economy has improved drastically over the two-hundred-year period covered: in 2018, producing one unit of output took only 40 percent of the energy it would have taken in 1820. But as energy efficiency has grown, so has total energy use and total output, and these changes dwarf the gains in energy efficiency. In 2018, 41 times as much energy was used as in 1820, while global production grew by 2 orders of magnitude over the same period.   From the lens of our interpretation of Smith’s capital theory, the constant expansion of fossil fuel use alongside renewables and energy efficiency gains is not surprising. The purpose of capital development and deployment in our Smithian lens is to increase income for capitalists by facilitating exchange. So, we would expect capitalists to invest in capital that enables them to access new sources of energy, like renewables, in order to bring a greater scale and quantity of energy into production. But we would also expect them to continue to invest in fossil fuels for the same reasons. More energy means more production means more profit. Likewise, we would expect capitalists to use their capital to increase energy efficiency: this reduces their costs. But we would also expect capitalists to take subsequent energy savings and use them to increase production further. As energy is used more efficiently in any given process, more energy is available to be used elsewhere in the economy or, as new energy sources are brought into production, the old sources are made available for new processes (Garrett 2014; Sakai et al. 2019; York and Bell 2019). As long as the capitalist appetite for greater incomes is present, they will seek to direct energy “savings” into new or expanded forms of production. The practical implication of this theoretical analysis is that investment in low-carbon energy sources and energy efficiency measures—no matter how bold the proposals—will not succeed without a change to the social dynamics of capitalist production. Achieving a low-carbon transition therefore requires the formidable task of coupling a large and sustained investment program in renewables and energy efficiency with a challenge to the structural logic of capital. This requires wide-ranging shifts within capitalist economies to build low-carbon energy infrastructure and develop ways of producing that disrupt the constant profit chasing of capital. The former is required to ensure action can begin now, while the latter is needed to ensure that low-carbon investments do not simply continue to expand the energy base of capitalist production. Elaborating on such possibilities is beyond the scope of this article. However, there are research programs that seek to understand alternatives to profit-driven capitalist production, notably work in post-capitalism and the post-growth/degrowth literatures that identify noncapitalist logics of production (Gibson-Graham 2014; Colombo, Bailey, and Gomes, 2024; Mair 2024; Vandeventer, Lloveras, and Warnaby 2024). A useful future direction for research lies in asking how such non-capitalist modes of production might be scaled and applied to the global energy system. 5. Conclusion In this article I have used a history of economic thought approach to analyze the relationship between energy and capital. Rereading The Wealth of Nations, I argued that Smith’s theory of capital is fundamentally socio-physical. Smith views capital as any accumulated resource that is used to support the exchange cycle of the market economy with the expectation that this will return a profit for the owner of the resource. Based on this reading, I argued that there are two ways in which energy might enter into Adam Smith’s capital theory: (1) capital is used to bring new energy sources into production; and (2) capital is used to make existing energy flows more efficient. Using this view of energy-capital relations, we can explain the major trends in historical energy-capital relations under capitalism. Over the last two hundred years, energy use has grown continuously, and the incorporation of new primary energy sources has not systematically led to reductions in older primary energy sources. This is consistent with the idea that capital is used to bring new energy sources into production. Investment in renewables is what we would expect: renewable energy technology allows capitalists to access new primary energy sources. They use this to generate more profits. They continue to invest in fossil fuel technology for the same reasons. Over the last two hundred years, there have been substantive gains in energy efficiency, and these have not led to reductions in energy use. This is consistent with the idea that capital is used to make energy use more efficient. The motivation of capitalists to make energy more efficient is to be more profitable. They then take energy savings from energy efficiency gains and use these to increase production, in an attempt to make more profits. The implication of this analysis is that investment in low-carbon technology and energy efficiency is the (relatively!) easy part of achieving a low-carbon transition. These dynamics are fundamentally compatible with the logics of capital. The barrier to achieving a low-carbon transition is that as long as this investment takes the form of “capital” (i.e., it chases profits and supports exchange processes), then it is unlikely that investment in renewables or energy efficiency programs will reduce energy use from fossil fuels. To achieve a low-carbon transition we must invest in low-carbon technology and energy efficiency, while simultaneously developing new organizational forms that challenge the capitalist dynamics of expansion and accumulation. AcknowledgmentsI would like to thank Christiane Heisse, Don Goldstein, and Robert McMaster, for their careful reviews and Enid Arvidson for her editorial work, all of which greatly improved the article. I would like to thank participants of the workshops Economic Theory for the Anthropocene (organized by the Centre for the Understanding of Sustainable Prosperity and the University of Surrey Institute for Advanced Studies) and The Political Economy of Capitalism (organized by the Institute for New Economic Thinking Young Scholar Initiative working groups on the Economics of Innovation and Economic History). Particular thanks to Richard Douglas, Angela Druckman, Ben Gallant, Elena Hofferberth, Tim Jackson, Andy Jarvis, Mary O’Sullivan, and Elke Pirgmaier for fruitful discussions. I would like to thank the Marxist Internet Archive for making The Wealth of Nations freely available.Declaration of Conflicting InterestsThe author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.FundingThe author disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This work was partly funded by the Economic and Social Research Council through the Centre for the Understanding of Sustainability, grant no. ES/M010163/1.ORCID iDSimon Mair https://orcid.org/0000-0001-5143-8668Note1 The full sources for the Maddison Project Database are Abad and Van Zanden (2016); Álvarez-Nogal and De La Escosura (2013); Baffigi (2011); Barro and Ursúa (2008); Bassino et al. (2019); Bértola et al. (2012); Bértola (2016); Broadberry et al. (2015); Broadberry, Custodis, and Gupta (2015); Broadberry, Guan, and Li (2018); Buyst (2011); Cha et al. (2022); Chilosi and Ciccarelli (2021); De Corso (2013); de la Escosura (2009); Díaz-Bahamonde, Lüders, and Wagner (2007); Eloranta, Voutilainen, and Nummela (2016); Fourie and Van Zanden (2013); Fukao et al. (2015); Fukao, Ma, and Yuan (2007); Gregory (2004); Grytten (2015); Herranz-Loncán and Peres-Cajías (2016); Ivanov (2008); Kostelenos et al. (2007); Krantz (2017); Malanima (2011); Malinowski and van Zanden (2017); Markevich and Harrison (2011); Milanovic (2011); Pamuk and Shatzmiller (2011); Pamuk (2006); Prados De la Escosura (2017); Ridolfi (2017); Santamaría (2005); Scheidel and Friesen (2009); Schön and Krantz (2016); Shah (2017); Smits, Horlings, and Van Zanden (2000); Stohr (2016); Sugimoto (2011); Van Zanden (2012); Van Zanden and Van Leeuwen (2012); Ward and Devereux (2012); Wu (2013); Xu et al. (2017).ReferencesAbad Leticia Arroyo, Luiten Jan, Zanden Van. 2016. Growth under extractive institutions? Latin American per capita GDP in colonial times. The Journal of Economic History 76 (4): 1182–215. Álvarez-Nogal Carlos, Prados De La Escosura Leandro. 2013. The rise and fall of Spain (1270–1850). The Economic History Review 66 (1): 1–37. Baffigi Alberto. 2011. Italian National Accounts, 1861-2011. Economic History Working Paper no. 18. Rome: Bank of Italy. https://www.bancaditalia.it/pubblicazioni/quaderni-storia/2011-0018/index.html?com.dotmarketing.htmlpage.language=1. Barro Robert J., Ursúa José F. 2008. Macroeconomic Crises Since 1870. NBER Working Paper no. 13940. Cambridge, MA: National Bureau of Economic Research. https://www.nber.org/papers/w13940 Bassino Jean-Pascal, Broadberry Stephen, Fukao Kyoji, Gupta Bishnupriya, Takashima Masanori. 2019. Japan and the great divergence, 730–1874. Explorations in Economic History 72: 1–22. Bértola Luis. 2016. El PIB per cápita de Uruguay 1870–2015: Una Reconstrucción. Programa de Historia Económica y Social Unidad Multidisciplinaria Working Paper no. 48. Montevideo, Uruguay: Universidad de la República. Accessed at https://www.colibri.udelar.edu.uy/jspui/handle/20.500.12008/27146.Bértola Luis, Antonio Ocampo José, Bértola Luis, Antonio Ocampo José. 2012. The Economic Development of Latin America Since Independence. Initiative for Policy Dialogue. Oxford: Oxford University Press. Blaug Mark. 1990. Economic Theory in Retrospect. Cambridge: Cambridge University Press.Bögenhold Dieter. 2021. History of economic thought as an analytic tool: Why past intellectual ideas must be acknowledged as lighthouses for the future. In Neglected Links in Economics and Society: Inequality, Organization, Work and Economic Methodology, ed. Dieter Bögenhold, 161–80. Cham, Switzerland: Springer International. Broadberry Stephen, Campbell Bruce M. S., Klein Alexander, Overton Mark, Van Leeuwen Bas. 2015. British Economic Growth, 1270–1870. Cambridge: Cambridge University Press.Broadberry Stephen, Custodis Johann, Gupta Bishnupriya. 2015. India and the great divergence: An Anglo-Indian comparison of GDP per capita, 1600–1871. Explorations in Economic History 55: 58–75. Broadberry Stephen, Guan Hanhui, Daokui Li David. 2018. China, Europe, and the great divergence: A study in historical national accounting, 980–1850. The Journal of Economic History 78 (4): 955–1000. Brockway Paul, Sorrell Stephen, Foxon Timothy, Miller Jack. 2019. Exergy economics—New insights into energy consumption and economic growth. In Transitions in Energy Efficiency and Demand: The Emergence, Diffusion, and Impact of Low-Carbon Innovation, eds. Kirsten E. H., Debbie Hopkins Jenkins, 133–55. Abingdon, UK: Routledge.Buyst Erik. 2011. Towards estimates of long-term growth in the southern low countries, ca. 1500–1846. Results presented at the Conference on Quantifying Long Run Economic Development, Venice, March 22–24.Cannan Edwin. 1921. Early history of the term capital. The Quarterly Journal of Economics 35 (3): 469–81 Cha Myung Soo, Nyeon Kim Nak, Park Ki-Joo, Park Yitaek. 2022. Historical Statistics of Korea. Singapore: Springer. Chester Lynne. 2014. To change or reform capitalism: Addressing the ecological crisis. Review of Radical Political Economics 46 (3): 406–12. Chilosi David, Ciccarelli Carlo. 2021. Southern and Northern Italy in the Great Divergence: New Perspectives from the Occupational Structure. Bank of Italy Economic History Working Paper no. 47. Rochester, NY: SSRN-Elsevier. https://ssrn.com/abstract=3852318.Christensen Paul P. 1979. Sraffian themes in Adam Smith’s theory. Journal of Post Keynesian Economics 2 (1): 94–109. Cleveland Cutler, Costanza Robert, Hall Charles, Kaufmann Ralph. 1984. Energy and the US economy: A biophysical perspective. Science 225 (4665): 890–97. Colombo Laura, Bailey Adrian, Gomes Marcus. 2024. Scaling in a post-growth era: Learning from Social Agricultural Cooperatives. Organization 31 (6): 907–28. Daly Herman. 1968. On economics as a life science. Journal of Political Economy 76 (3): 392–406. Davis Ann E. 2019. Salvation or commodification? The role of money and markets in global ecological preservation. Review of Radical Political Economics 51 (4): 536–43. De Corso Giuseppe. 2013. Venezuelan economic growth from the conservative oligarchy to the Bolivarian revolution (1830–2012). Revista de Historia Económica [Journal of Iberian and Latin American Economic History] 31 (3): 321–57.de la Escosura Leandro Prados. 2009. Lost decades? Economic performance in post-independence Latin America. Journal of Latin American Studies 41 (2): 279–307. Díaz-Bahamonde José, Lüders Rolf, Wagner Gert. 2007. Economía Chilena 1810–2000. Producto Total y Sectorial. Una Nueva Mirada. Working Paper no. 315. Santiago: Pontificia Universidad Católica de Chile. https://econpapers.repec.org/paper/ioedoctra/315.htm.Elkomy Shimaa, Mair Simon, Jackson Tim. 2020. Energy and Productivity: A Review of the Literature. CUSP Working Paper no. 21. Guildford, UK: Centre for the Understanding of Sustainable Prosperity. https://cusp.ac.uk/wp-content/uploads/pp-energy-report.pdf#ppem.Eloranta Jari, Miikka Voutilainen, Nummela Ilkka. 2016. Estimating Finnish Economic Growth Before 1860. Rochester, NY: SSRN-Elsevier. https://dx.doi.org/10.2139/ssrn.4706862.Evensky Jerry. 2005. Adam Smith’s Moral Philosophy. Cambridge: Cambridge University Press. Finn Mary. 2000. Perfect competition and the effects of energy price increases on economic activity. Journal of Money, Credit and Banking 32 (3): 400–16. Fourie Johan, Luiten Jan, Zanden Van. 2013. GDP in the Dutch Cape Colony: The national accounts of a slave-based society. South African Journal of Economics 81 (4): 467–90. Friedlingstein Pierre, O’Sullivan Michael, Jones Matthew W., Andrew Robbie M., Bakker Dorothee, Hauck Judith, Landschützer Peter, Le Quéré Corinne, Luijkx Ingrid T., Peters Glen. 2023. Global carbon budget 2023. Earth System Science Data 15 (12): 5301–69. Frontali Clara. 2014. History of physical terms: “Energy.” Physics Education 49 (5): 564. Fukao Kyoji, Bassino Jean-Pascal, Makino Tatsuji, Paprzycki Ralph, Settsu Tokihiko, Takashima Masanori, Tokui Joji. 2015. Regional Inequality and Industrial Structure in Japan: 1874–2008. Tokyo: Maruzen.Fukao Kyoji, Ma Debin, Yuan Tangjun. 2007. Real GDP in pre-war East Asia: A 1934–36 benchmark purchasing power parity comparison with the US. Review of Income and Wealth 53 (3): 503–37. Garrett Tim. 2014. Long-run evolution of the global economy: 1. Physical basis. Earth’s Future 2 (3): 127–51. Gibson-Graham J. K. 2014. Being the revolution, or, how to live in a “more-than-capitalist” world threatened with extinction. Rethinking Marxism 26 (1): 76–94. Gregory Paul R. 2004. Russian National Income, 1885–1913. Cambridge: Cambridge University Press.Grubler Arnulf, Johansson Thomas, Muncada Luis, Nakicenovic Nebojsa, Pachauri Shonali, Riahi Keywan, Rogner Hans-Holger, Strupeit Lars. 2012. Global Energy Assessment: Toward a Sustainable Future. Cambridge: Cambridge University Press and IIASA.Grytten Ola Honningdal. 2015. Norwegian Gross Domestic Product by Industry 1830–1930. Norges Bank Working Paper no. 19/2015. Rochester, NY: SSRN-Elsevier. https://papers.ssrn.com/abstract=2714378.Hall Charles, Klitgaard Kent. 2012. Energy and the Wealth of Nations: Understanding the Biophysical Economy. New York: Springer. Herranz-Loncán Alfonso, Alejandro Peres-Cajías José. 2016. Tracing the reversal of fortune in the Americas: Bolivian GDP per capita since the mid-nineteenth century. Cliometrica 10 (1): 99–128. Hirsch Roni. 2021. Risk and trouble: Adam Smith on profit and the protagonists of capitalism. American Journal of Political Science 65 (1): 166–79. Hodgson Geoffrey. 2014. What is capital? Economists and sociologists have changed its meaning: Should it be changed back? Cambridge Journal of Economics 38 (5): 1063–86. Hrnčić Boris, Pfeifer Antun, Jurić Filip, Duić Neven, Ivanović Vladan, Vušanović Igor. 2021. Different investment dynamics in energy transition towards a 100% renewable energy system. Energy 237: 121526. IEA (International Energy Agency). 2022. World Energy Statistics and Balances—Data Product. Paris: International Energy Agency. https://www.iea.org/data-and-statistics/data-product/world-energy-statistics-and-balances.IEA (International Energy Agency).2023a. Global Coal Demand Set to Remain at Record Levels in 2023—News. Paris: International Energy Agency. https://www.iea.org/news/global-coal-demand-set-to-remain-at-record-levels-in-2023.IEA (International Energy Agency). 2023b. Oil Market Report—October 2023—Analysis. Paris: International Energy Agency. https://www.iea.org/reports/oil-market-report-october-2023.IEA (International Energy Agency). 2024. CO2 Emissions in 2023. Paris: International Energy Agency. https://www.iea.org/reports/co2-emissions-in-2023.Ivanov Martin. 2008. Understanding economic and social developments in the periphery: Bulgarian national income 1892–1924. East Central Europe 34–35 (1–2): 219–44. Jackson Tim. 1996. Material Concerns: Pollution, Profit and Quality of Life. Abingdon, UK: Routledge. Jonsson Fredrik Albritton. 2014. Adam Smith in the forest. In The Social Lives of Forests, eds. Hecht Susanna B., Morrison Kathleen D., Padoch Christine, 45–54. Chicago, IL: University of Chicago Press. Keen Steve, Ayres Robert, Standish Russell. 2019. A note on the role of energy in production. Ecological Economics 157: 40–46. Kostelenos Georgios, Vasiliou Dimitrios, Kounaris Euua, Petmezas Socrates, Sfakianakis Michail. 2007. Gross Domestic Product 1830-1939. Sources of Economic History of Modern Greece, Quantitative Data and Statistical Series 1830–1939. Athens: Historical Archive of the National Bank of Greece and Centre for Planning and Economic Research. https://www.rug.nl/ggdc/historicaldevelopment/maddison/releases/maddison-project-database-2020.Krantz Olle. 2017. Swedish GDP 1300–1560: A Tentative Estimate. Lund Papers in Economic History no. 152. Lund: Lund University, Department of Economic History. https://ideas.repec.org//p/hhs/luekhi/0152.html.Kurz Heinz. 1990. Debates in capital theory. In Capital Theory, eds. John Eatwell, Milgate Murray, Newman Peter, 79–93. London: Palgrave Macmillan. Kurz Heinz. 2010 Technical progress, capital accumulation and income distribution in classical economics: Adam Smith, David Ricardo, and Karl Marx. The European Journal of the History of Economic Thought 17 (5): 1183–222. Li Minqi. 2011. The 21st century crisis: Climate catastrophe or socialism. Review of Radical Political Economics 43 (3): 289–301. Mair Simon. 2022. Writing our way to sustainable economies? How academic sustainability writing engages with capitalism. Environment and Planning A: Economy and Space 54 (7): 1460–74. Mair Simon. 2024. Language, climate change, and cities beyond capitalism. Journal of City Climate Policy and Economy 2 (2): 171–88. Mair Simon, Druckman Angela, Jackson Tim. 2020. A tale of two utopias: Work in a post-growth world. Ecological Economics 173. Malanima Paolo. 2011. The long decline of a leading economy: GDP in central and northern Italy, 1300–1913. European Review of Economic History 15 (2). 169–219. Malanima Paolo. 2022. World Energy Consumption: A Database 1820–2020. Cambridge, MA: Harvard University. https://histecon.fas.harvard.edu/energyhistory/DATABASE%20World%20Energy%20Consumption(MALANIMA).pdf.Malinowski Mikołaj, van Zanden Jan Luiten. 2017. Income and its distribution in preindustrial Poland. Cliometrica 11 (3): 375–404. Malm Andreas. 2016. Fossil Capital: The Rise of Steam Power and the Roots of Global Warming. New York: Verso.Markevich Andrei, Harrison Mark. 2011. Great war, civil war, and recovery: Russia’s national income, 1913 to 1928. The Journal of Economic History 71 (3): 672–703. Marx Karl. 2013. Capital: A Critical Analysis of Capitalist Production. Hertfordshire, UK: Wordsworth.Meek Ronald. 1954. Adam Smith and the classical concept of profit. Scottish Journal of Political Economy 1 (2): 138–53. Meek Ronald. 1977. Smith, Marx, and After: Ten Essays in the Development of Economic Thought. London: Chapman and Hall. Milanovic Branko. 2011. Maddison Project Database: Estimates Provided to the Maddison-Project. https://www.rug.nl/ggdc/historicaldevelopment/maddison/releases/maddison-project-database-2020.Moore Jason. 2017. The Capitalocene, part 1: On the nature and origins of our ecological crisis. The Journal of Peasant Studies. 44 (3): 594–630. Odum Howard. 1973. Energy, ecology, and economics. Ambio 2 (6): 220–27.Pack Spencer. 2013. Adam Smith and Marx. In The Oxford Handbook of Adam Smith, eds. Christopher Berry, Pia Paganelli Maria, Smith Craig, 523–538. Oxford: Oxford University Press.Pamuk Şevket. 2006. Estimating economic growth in the Middle East since 1820. The Journal of Economic History 66 (3): 809–28. Pamuk Şevket, Shatzmiller Maya. 2011. Real Wages and GDP per Capita in the Medieval Islamic Middle East in Comparative Perspective, 700–1500. Presented at the 9th Conference of the European Historical Economics Society, Dublin, September 2–3.Pianta Mario, Lucchese Matteo. 2020. Rethinking the European green deal: An industrial policy for a just transition in Europe. Review of Radical Political Economics 52 (4): 633–41. Pirgmaier Elke. 2021. The value of value theory for ecological economics. Ecological Economics 179. Polanyi Karl. 1944. The Great Transformation. Boston: Beacon Press.Pollin Robert. 2015. Greening the Global Economy. Cambridge, MA: MIT Press. Pollin Robert. 2019. Advancing a viable global climate stabilization project: Degrowth versus the Green New Deal. Review of Radical Political Economics 51 (2): 311–19. Prados De la Escosura Leandro. 2017. Spanish Economic Growth, 1850–2015. Basingstoke, UK: Springer Nature. Qadir Sikandar Abdul, Al-Motairi Hessah, Tahir Furqan, Al-Fagih Luluwah. 2021. Incentives and strategies for financing the renewable energy transition: A review. Energy Reports 7: 3590–606. Ridolfi Leonardo. 2017. The French economy in the Longue Durée: A study on real wages, working days and economic performance from Louis IX to the revolution (1250–1789). European Review of Economic History 21 (4): 437–8. Riley Dylan. 2023. Drowning in deposits. NLR Sidecar. https://newleftreview.org/sidecar/posts/drowning-in-deposits.Robinson Joan. 1962. Economic Philosophy. London: Penguin.Saitō Kōhei. 2022. Marx in the Anthropocene: Towards the Idea of Degrowth Communism. Cambridge: Cambridge University Press.Sakai Marco, Brockway Paul, Barrett John, Taylor Paul. 2019. Thermodynamic efficiency gains and their role as a key “engine of economic growth.” Energies 12 (1): 110. Santamaría Antonio. 2005. Las Cuentas Nacionales de Cuba, 1690–2005. Unpublished manuscript. Madrid: Centro de Estudios Históricos and Centro Superior de Investigaciones Científicas. https://www.rug.nl/ggdc/historicaldevelopment/maddison/releases/maddison-project-database-2020.Scheidel Walter, Friesen Steven. 2009. The size of the economy and the distribution of income in the Roman empire. The Journal of Roman Studies 99: 61–91. Schön Lennart, Krantz Olle. 2016. New Swedish Historical National Accounts Since the 16th Century in Constant and Current Prices. Lund Papers in Economic History, General Issues, No. 140. Lund, Sweden: Lund University, Department of Economic History. https://lucris.lub.lu.se/ws/files/5872822/8228142.pdf.Schumpeter Joseph. 1954. History of Economic Analysis. Abingdon, UK: Taylor and Francis.Shah Sultan Nazrin. 2017. Charting the Economy: Early 20th Century Malaya and Contemporary Malaysian Contrasts. Oxford: Oxford University Press South East Asia.Smil Vaclav. 2017a. Energy and Civilization: A History. Cambridge, MA: MIT Press. Smil Vaclav. 2017b. Energy Transitions: Global and National Perspectives, 2nd edition. Santa Barbara, CA: Praeger.Smith Adam. 1975. The Glasgow Edition of the Works and Correspondence of Adam Smith volume 2: An Inquiry into the Nature and Causes of the Wealth of Nations, ed. William Todd. Online: Oxford Scholarly Editions. https://www-oxfordscholarlyeditions-com.libproxy.york.ac.uk/display/10.1093/actrade/9780199269570.book.1/actrade-9780199269570-work-1.Smits Jan-Pieter, Horlings Edwin, van Zanden Jan Luiten. 2000. The Measurement of Gross National Product and Its Components, 1800–1913. Growth and Development Centre Monograph Series no. 5. Groningen, the Netherlands: Groningen University. https://www.rug.nl/ggdc/docs/mono5.pdf.Steeds Leo. 2024. Adam Smith as ecological economist. In Environment and Ecology in the History of Economic Thought, ed. Vitor Schincariol, 29–48. Abingdon, UK: Routledge. Stohr Christian. 2016. Trading Gains: New Estimates of Swiss GDP, 1851–2008. Economic History Working Paper no. 245/2016. London: London School of Economics and Political Science, Economic History Department. https://eprints.lse.ac.uk/67032/Stratford Beth. 2020. The threat of rent extraction in a resource-constrained future. Ecological Economics 169: 106524. Stratford Beth. 2023. Rival definitions of economic rent: Historical origins and normative implications. New Political Economy 28 (3): 347–62. Sugimoto Ichiro. 2011. Economic Growth of Singapore in the Twentieth Century: Historical GDP Estimates and Empirical Investigations. Singapore: World Scientific. Tsoulfidis Lefteris, Paitaridis Dimitris. 2012. Revisiting Adam Smith’s theory of the falling rate of profit. International Journal of Social Economics 39 (5): 304–13. Van Zanden, Luiten Jan. 2012. Economic Growth in Java 1815–1939: The Reconstruction of the Historical National Accounts of a Colonial Economy. Unpublished Maddison-Project Working Paper no. WP 3. Groningen, the Netherlands: Groningen University. https://www.rug.nl/ggdc/historicaldevelopment/maddison/releases/maddison-project-database-2020.Van Zanden, Luiten Jan, Van Leeuwen Bas. 2012. Persistent but not consistent: The growth of national income in Holland 1347–1807. Explorations in Economic History 49 (2): 119–30. Vandeventer James Scott, Lloveras Javier, Warnaby Gary. 2024. The transformative potential of everyday life: Shared space, togetherness, and everyday degrowth in housing. Housing, Theory and Society 41 (1): 69–88. Ward Marianne, Devereux John. 2012. The road not taken: Pre-revolutionary Cuban living standards in comparative perspective. The Journal of Economic History 72 (1): 104–32. Wu Harry X. 2013. China’s Growth and Productivity Performance Debate Revisited—Accounting for China’s Sources of Growth with a New Data Set. New York: The Conference Board. https://www.conference-board.org/publications/publicationdetail.cfm?publicationid=2690.Xu Yi, Shi Zhihong, van Leeuwen Bas, Ni Yuping, Zhang Zipeng, Ma Ye. 2017. Chinese national income, ca. 1661–1933. Australian Economic History Review 57 (3): 368–93. York Richard, Elizabeth Bell Shannon. 2019. Energy transitions or additions? Why a transition from fossil fuels requires more than the growth of renewable energy. Energy Research & Social Science 51: 40–43. 

Energy & Economics
Los Angeles, CA USA - May 23 2025 : Donald Trump on Climate Change, Drill Baby Drill

The temporal logic of Trump II’s climate denialism

by Heikki Patomäki

In a landmark advisory opinion, the International Court of Justice (ICJ) ruled on 23 July 2025 that all UN member states have legal obligations under international law to address climate change, which the court described as an existential threat to life on Earth. Powerful countries too must be held responsible for their current emissions and past inaction. Possibly in anticipation of such a ruling, Chris Wright, the US Secretary of Energy and former chief executive of Liberty Energy (an oilfield services company), published an article in The Economist a week earlier, arguing that “climate change is a by-product of progress, not an existential crisis”. Whereas the ICJ relied primarily on the IPCC reports, “which participants agree constitute the best available science on the causes, nature and consequences of climate change”, Wright’s view is based on a particular temporal logic.  According to the IPCC reports, most greenhouse gases come from burning fossil fuels, with additional emissions from agriculture, deforestation, industry, and waste. They drive global warming, which is projected to reach 1.5°C between 2021 and 2040, with 2°C likely to follow. Even 1.5°C is not considered safe for most nations, communities, and ecosystems, and according to IPCC, only deep, rapid, and sustained emission cuts can slow warming and reduce the escalating risks and damages. The 2024 state of the climate report, published in BioScience, presents even more worrying assessments. Among other things, the report cites surveys indicating that nearly 80% of these scientists anticipate global temperatures increasing by at least 2.5°C above preindustrial levels by the end of the century, and nearly half of them foresee a rise of at least 3°C.  Wright’s article suggests that the issue of amplifying doubt about climate change may have little to do with engagement with science but rather reflects a deeper temporal logic. This logic is rooted in a Whiggish account of progress to date, a resistance to the reality of the future and the desire for nostalgic restoration. I will explain these elements one by one. The first tier: Whiggism Wright disagrees with most scientific anticipations. His views are likely representative not only of the Trump II administration but also of conservative right-wing populism more generally. It is difficult to understand their climate denialism without an analysis of their views on time and temporality. The most important question concerns the reality of the future. At the first level, Wright provides a kind of textbook example of Whig history, portraying progress as linear, inevitable, and driven by liberal values. Herbert Butterfield introduced the idea of Whig history in his influential 1931 book The Whig Interpretation of History as a critique of a specific way of writing history that he regarded as flawed and intellectually dishonest. Focusing on inevitable progress distorts historical analysis by promoting simplified cause-and-effect reasoning and selective storytelling, emphasising present-day evaluation (and glorification) over understanding the real causes of historical change. In a Whiggish manner, Wright claims that the last 200 years have seen two big changes to the human condition: “human liberty” and affordable energy. As a result of these two things, life expectancy has nearly doubled, and the percentage of people living in extreme poverty has dropped from 90% to 10%. However, Wright’s argumentation is based on non-contextual and, in that sense, timeless representations of the world, despite its “progressivism”.  For example, consider the claim that extreme poverty has dropped from 90% to 10%. It is based on using a fixed dollar threshold, such as USD 2 per day, to measure poverty over 200 years. This is misleading because most people in the 19th century lived in largely non-monetised economies where subsistence needs were met outside of market exchange, and monetary income was minimal or irrelevant. These metrics also obscure shifting and context-bound definitions of basic needs; rely on incomplete historical data; and ignore the role of colonial dispossession and structural inequality in shaping global poverty. While it is true that life expectancy has doubled, largely due to improvements in hygiene and healthcare, the idea that extreme poverty has plummeted from 90% to under 10% also ignores the fact that the global population has grown eightfold, affecting the entire Earth system with devastating ecological and geological consequences. It further ignores that the rise in life expectancy and poverty reduction has come not only from liberalism or economic growth more generally but from ethical and political struggles and public health interventions. Often, these struggles have been fought in the name of socialism and won despite capitalist incentives, market mechanisms, and related political forces. The second tier: blockism At a deeper level, Wright’s views seem to presuppose what Roy Bhaskar calls “blockism”: the postulation of a simultaneous conjunctive totality of all events. This may sound abstract, but it has been a common assumption among many 20th-century physicists and philosophers that the universe forms a static, closed totality. This view stems from an atomist ontology, where individuals are seen as abstract, events follow regular patterns, time is viewed as spatial, and laws that can be expressed mathematically are considered reversible.  In such a conception, time appears as just another “spatial” dimension. According to the block universe model, the past, present, and future all exist equally and tenselessly. The universe is imagined as a four-dimensional geometric object, like a “block” of spacetime. Time is not something that “flows” or “passes”; instead, all moments are spatially extended points in a timeless whole. Blockism suggests that change and becoming are not truly real but are simply parts of our subjective experience.  The real challenge is to reconcile Whiggism and blockism. Wright is not a theorist and might not need to worry about the coherence of his ideas, but the issue is that Whiggism assumes movement, direction, and a normatively positive evolution of change, whereas the block universe denies real temporality: there is no becoming, no novelty, no agency – only timeless existence. Some versions of the block universe attempt to preserve development by proposing that the block grows. The “block” expands as new events are added to reality, but in this view, the present defines the upper boundary of the block, and the future is not truly real. This appears to be consistent with what Wright says about climate change. Everything he has to say about global warming is limited to one short paragraph: We will treat climate change as what it is: not an existential crisis but a real, physical phenomenon that is a by-product of progress. Yes, atmospheric CO2 has increased over time – but so has life expectancy. Billions of people have been lifted out of poverty. Modern medicine, telecommunications and global transportation became possible. I am willing to take the modest negative trade-off for this legacy of human advancement. From the ICJ’s perspective, this interpretation is dreadful, as the current impacts of climate change are already at odds with the rights of many groups of people. It also exhibits basic injustice, as many of the groups that suffer the most from these impacts have done next to nothing to cause the problem. However, here I am mostly concerned with the temporality of Wright’s claims. This temporality is a combination of Whiggism and blockism: so far, history has exhibited progress, but time and processes stop here, in our present moment. The third tier: nostalgia Wright’s view of time is not limited to an ultimately incoherent combination of Whiggism and blockism. There is also more than a mere hint of nostalgia. This is evident in the appeal of a Golden Age at the outset of his article: I am honoured to advance President Donald Trump’s policy of bettering lives through unleashing a golden age of energy dominance – both at home and around the world. The appeal to the Golden Age somewhat contradicts Whiggism. From a nostalgic perspective, it seems that society has been on a downward trajectory instead of progressing. In other words, regression must be possible. Within an overall Whiggish narrative, one can blame certain actors, such as the Democrats in the US political context, for causing moral and political decline.  A nationalist narrative of a “golden age” and a return to a better past (“making us great again”) is essentially connected to the denial of planetary-scale problems, such as climate change, that would clearly require novel global responses. Climate change from a real-time perspective By merging Whiggism with a block-universe ontology (either static or growing), one ends up with a pseudo-historicism that speaks of “progress” while erasing real time. In a way, such a view “performs change” through a highly selective historical narrative, while denying the ontological preconditions of real change. Real change – emergence, transformation, causation – requires a temporal ontology, where the future is real though not yet fully determined. Thus, there is no mention of global emissions that have continued to rise, their delayed effects, feedback loops, or emergent risks given multiple processes of intertwined changes. Are the basic IPCC models based on real historical time? IPCC models often treat the climate system as a bounded system with internally consistent and deterministic dynamics. The IPCC relies on modelling and uses Bayesian methods to assess uncertainties in climate projections. Bayesian statistics involve updating the probability of a hypothesis as more evidence becomes available, based on prior knowledge (priors) and new data (likelihoods). Such an approach tends to be conservative (based on moving averages, for example) and assumes the quantifiability of uncertainty. It may also convey illusory precision, especially when the underlying models or data are uncertain or incomplete. The IPCC models nonetheless indicate – in contrast to Wright – that the future is real, though the future is approached in a somewhat cautious and deterministic manner. However, many climate scientists go beyond the IPCC consensus by assuming that global heating may reach 2.5 °C or even above 3 °C degree warming by the end of the century.  From a critical scientific realist viewpoint, even such anticipations may be too circumspect. Assuming exponential growth (involving cascading events etc.) and given that recent data shows a rise from 1.0°C to 1.5°C in just 15 years (actual data taken on an annual basis, not moving averages), and using this as a basis for anticipating the future, we seem likely to reach the 2 °C mark in the 2040s and the 3 °C mark in the 2060s.  The plausibility of anticipations depends significantly on how the real openness of the future is treated. Anticipations are reflexive and can shape the future. Real time and historical change involves human freedom and ethics. The evolving universe, where time is real, is stratified, processual, and open-ended. Time involves genuine processes, real possibilities, agency, and emergent structures. Such characteristics indicate that the future is not predetermined but can be shaped by transformative agency.  To sum up, from a real historical time perspective, Wright’s combination of Whiggism, blockism, and nostalgia is a recipe for reactionary politics. Glorifying the present, thinking in a timeless way, and longing for a golden age of the past can play a major role in bringing about a dystopian planetary future.

Energy & Economics
Commodity and alternative asset, gold bar and crypto currency Bitcoin on rising price graph as financial crisis or war safe haven, investment asset or wealth concept.

Assessing Bitcoin and Gold as Safe Havens Amid Global Uncertainties: A Rolling Window DCC-GARCH Analysis

by Anoop S Kumar , Meera Mohan , P. S. Niveditha

Abstract We examine the roles of Gold and Bitcoin as a hedge, a safe haven, and a diversifier against the coronavirus disease 2019 (COVID-19) pandemic and the Ukraine War. Using a rolling window estimation of the dynamic conditional correlation (DCC)-based regression, we present a novel approach to examine the time-varying safe haven, hedge, and diversifier properties of Gold and Bitcoin for equities portfolios. This article uses daily returns of Gold, Bitcoin, S&P500, CAC 40, and NSE 50 from January 3, 2018, to October 15, 2022. Our results show that Gold is a better safe haven than the two, while Bitcoin exhibits weak properties as safe haven. Bitcoin can, however, be used as a diversifier and hedge. This study offers policy suggestions to investors to diversify their holdings during uncertain times. Introduction Financial markets and the diversity of financial products have risen in both volume and value, creating financial risk and establishing the demand for a safe haven for investors. The global financial markets have faced several blows in recent years. From the Global Financial Crisis (GFC) to the outbreak of the pandemic and uncertainty regarding economic policy measures of governments and central banks, the financial markets including equity markets around the world were faced with severe meltdowns. This similar behavior was observed in other markets including equity and commodity markets, resulting in overall uncertainty. In this scenario, the investors normally flock toward the safe-haven assets to protect their investment. In normal situations, investors seek to diversify or hedge their assets to protect their portfolios. However, the financial markets are negatively impacted when there are global uncertainties. Diversification and hedging methods fail to safeguard investors’ portfolios during instability because almost all sectors and assets are negatively affected (Hasan et al., 2021). As a result, investors typically look for safe-haven investments to safeguard their portfolios under extreme conditions (Ceylan, 2022). Baur and Lucey (2010) provide the following definitions of hedge, diversifier, and safe haven: Hedge: An asset that, on average, has no correlation or a negative correlation with another asset or portfolio. On average, a strict hedge has a (strictly) negative correlation with another asset or portfolio.Diversifier: An asset that, on average, has a positive correlation (but not perfect correlation) with another asset or portfolio. Safe haven: This is the asset that in times of market stress or volatility becomes uncorrelated or negatively associated with other assets or a portfolio. As was previously indicated, the significant market turbulence caused by a sharp decline in consumer spending, coupled with insufficient hedging opportunities, was a common feature of all markets during these times (Yousaf et al., 2022). Nakamoto (2008) suggested a remedy by introducing Bitcoin, a “digital currency,” as an alternative to traditional fiduciary currencies (Paule-Vianez et al., 2020). Bitcoin often described as “Digital Gold” has shown greater resilience during periods of crises and has highlighted the potential safe haven and hedging property against uncertainties (Mokni, 2021). According to Dyhrberg (2016), the GFC has eased the emergence of Bitcoin thereby strengthening its popularity. Bouri et al. (2017) in their study indicate that Bitcoin has been viewed as a shelter from global uncertainties caused by conventional banking and economic systems. Recent research has found that Bitcoin is a weak safe haven, particularly in periods of market uncertainty like the coronavirus disease 2019 (COVID-19) crisis (Conlon & McGee, 2020; Nagy & Benedek, 2021; Shahzad et al., 2019; Syuhada et al., 2022). In contrast to these findings, a study by Yan et al. (2022) indicates that it can function as a strong safe haven in favorable economic times and with low-risk aversion. Ustaoglu (2022) also supports the strong safe-haven characteristic of Bitcoin against most emerging stock market indices during the COVID-19 period. Umar et al. (2023) assert that Bitcoin and Gold are not reliable safe-havens. Singh et al. (2024) in their study reveal that Bitcoin is an effective hedge for investments in Nifty-50, Sensex, GBP–INR, and JPY–INR, at the same time a good diversifier for Gold. The study suggests that investors can incorporate Bitcoin in their portfolios as a good hedge against market volatility in equities and commodities markets. During the COVID-19 epidemic, Barbu et al. (2022) investigated if Ethereum and Bitcoin could serve as a short-term safe haven or diversifier against stock indices and bonds. The outcomes are consistent with the research conducted by Snene Manzli et al. (2024). Both act as hybrid roles for stock market returns, diversifiers for sustainable stock market indices, and safe havens for bond markets. Notably, Bhuiyan et al. (2023) found that Bitcoin provides relatively better diversification opportunities than Gold during times of crisis. To reduce risks, Bitcoin has demonstrated a strong potential to operate as a buffer against global uncertainty and may be a useful hedging tool in addition to Gold and similar assets (Baur & Lucey, 2010; Bouri et al., 2017; Capie et al., 2005; Dyhrberg, 2015). According to Huang et al. (2021), its independence from monetary policies and minimal association with conventional financial assets allow it to have a safe-haven quality. Bitcoins have a substantial speed advantage over other assets since they are traded at high and constant frequencies with no days when trading is closed (Selmi et al., 2018). Additionally, it has been demonstrated that the average monthly volatility of Bitcoin is higher than that of Gold or a group of international currencies expressed in US dollars; nevertheless, the lowest monthly volatility of Bitcoin is lower than the maximum monthly volatility of Gold and other foreign currencies (Dwyer, 2015). Leverage effects are also evident in Bitcoin returns, which show lower volatilities in high return periods and higher volatilities in low return times (Bouri et al., 2017; Liu et al., 2017). According to recent research, Bitcoins can be used to hedge S&P 500 stocks, which increases the likelihood that institutional and retail investors will build secure portfolios (Okorie, 2020). Bitcoin demonstrates strong hedging capabilities and can complement Gold in minimizing specific market risks (Baur & Lucey, 2010). Its high-frequency and continuous trading further enrich the range of available hedging tools (Dyhrberg, 2016). Moreover, Bitcoin spot and futures markets exhibit similarities to traditional financial markets. In the post-COVID-19 period, Zhang et al. (2021) found that Bitcoin futures outperform Gold futures.Gold, silver, palladium, and platinum were among the most common precious metals utilized as safe-haven investments. Gold is one such asset that is used extensively (Salisu et al., 2021). Their study tested the safe-haven property of Gold against the downside risk of portfolios during the pandemic. Empirical results have also shown that Gold functions as a safe haven for only 15 trading days, meaning that holding Gold for longer than this period would result in losses to investors. This explains why investors buy Gold on days of negative returns and sell it when market prospects turn positive and volatility decreases (Baur & Lucey, 2010). In their study, Kumar et al. (2023) tried to analyse the trends in volume throughout futures contracts and investigate the connection between open interest, volume, and price for bullion and base metal futures in India. Liu et al. (2016) in their study found that there is no negative association between Gold and the US stock market during times of extremely low or high volatility. Because of this, it is not a strong safe haven for the US stock market (Hood & Malik, 2013). Post-COVID-19, studies have provided mixed evidence on the safe-haven properties of Gold (Bouri et al., 2020; Cheema et al., 2022; Ji et al., 2020). According to Kumar and Padakandla (2022), Gold continuously demonstrates safe-haven qualities for all markets, except the NSE, both in the short and long term. During the COVID-19 episode, Gold’s effectiveness as a hedge and safe-haven instrument has been impacted (Akhtaruzzaman et al., 2021). Al-Nassar (2024) conducted a study on the hedge effectiveness of Gold and found that it is a strong hedge in the long run. Bhattacharjee et al. (2023) in their paper examined the symmetrical and asymmetrical linkage between Gold price levels and the Indian stock market returns by employing linear autoregressive distributed lag and nonlinear autoregressive distributed lag models. The results exhibit that the Indian stock market returns and Gold prices are cointegrated. According to the most recent study by Kaczmarek et al. (2022), Gold has no potential as a safe haven, despite some studies on the COVID-19 pandemic showing contradictory results. The co-movements of Bitcoin and the Chinese stock market have also normalized as a result of this epidemic (Belhassine & Karamti, 2021). Widjaja and Havidz (2023) verified that Gold was a safe haven asset during the COVID-19 pandemic, confirming the Gold’s safe-haven characteristic. As previously pointed out, investors value safe-haven investments in times of risk. Investors panic at these times when asset prices fall and move from less liquid (risky) securities to more liquid (safe) ones, such as cash, Gold, and government bonds. An asset must be bought and sold rapidly, at a known price, and for a reasonably modest cost to be considered truly safe (Smales, 2019). Therefore, we need to properly re-examine the safe-haven qualities of Gold and Bitcoin due to the mixed evidences regarding their safe-haven qualities and the impact of COVID-19 and the war in Ukraine on financial markets. This work contributes to and deviates from the body of existing literature in the following ways. We propose a novel approach in this work to evaluate an asset’s time-varying safe haven, hedge, and diversifier characteristics. This research examines the safe haven, hedging, and diversifying qualities of Gold and Bitcoin against the equity indices; S&P 500, CAC 40, and NSE 50. Through the use of rolling window estimation, we extend the methodology of Ratner and Chiu (2013) by estimating the aforementioned properties of the assets. Comparing rolling window estimation to other conventional techniques, the former will provide a more accurate representation of an asset’s time-varying feature. This study explores the conventional asset Gold’s time-varying safe haven, hedging, and diversifying qualities during crises like the COVID-19 pandemic and the conflict in Ukraine. We use Bitcoin, an unconventional safe-haven asset, for comparison. Data and Methodology We use the daily returns of three major equity indices; S&P500, CAC 40, and NSE 50 from January 3, 2018, to October 15, 2022. The equity indices were selected to represent three large and diverse markets namely the United States, France, and India in terms of geography and economic development. We assess safe-haven assets using the daily returns of Gold and Bitcoin over the same time. Equity data was collected from Yahoo Finance, Bitcoin data from coinmarketcap.com, and Gold data from the World Gold Council website. Engle (2002) developed the DCC (Dynamic Conditional Correlation)-GARCH model, which is frequently used to assess contagion amid pandemic uncertainty or crises. Time-varying variations in the conditional correlation of asset pairings can be captured using the DCC-GARCH model. Through employing this model, we can analyse the dynamic behavior of volatility spillovers. Engle’s (2002) DCC-GARCH model contains two phases; 1. Univariate GARCH model estimation2. Estimation of time-varying conditional correlation. For its explanation, mathematical characteristics, and theoretical development, see here [insert the next link in “the word here” https://journals.sagepub.com/doi/10.1177/09711023251322578] Results and Discussion The outcomes of the parameters under the DCC-GARCH model for each of the asset pairs selected for the investigation are shown in Table 1.   First, we look at the dynamical conditional correlation coefficient, ρ.The rho value is negative and insignificant for NSE 50/Gold, NSE 50 /BTC, S&P500/Gold, and S&P500/BTC indicating a negative and insignificant correlation between these asset pairs, showing Gold and Bitcoin as potential hedges and safe havens. The fact that ρ is negative and significant for CAC 40/Gold suggests that Gold can be a safe haven against CAC 40 swings. The asset pair CAC/BTC, on the other hand, has possible diversifier behavior with ρ being positive but statistically insignificant. Next, we examine the behavior of the DCC-GARCH parameters; α and β. We find that αDCC is statistically insignificant for all the asset pairs, while βDCC is statistically significant for all asset pairs. βDCC quantifies the persistence feature of the correlation and the extent of the impact of volatility spillover in a particular market’s volatility dynamics. A higher βDCC value implies that a major part of the volatility dynamics can be explained by the respective market’s own past volatility. For instance, the NSE 50/Gold’s βDCC value of 0.971 shows that there is a high degree of volatility spillover between these two assets, with about 97% of market volatility being explained by the assets’ own historical values and the remainder coming from spillover. Thus, we see that the volatility spillover is highly persistent (~0.8) for all the asset pairs except NSE 50/BTC. The results above show that the nature of the dynamic correlation between the stock markets, Bitcoin and Gold is largely negative, pointing toward the possibility of Gold and Bitcoin being hedge/safe haven. However, a detailed analysis is needed to confirm the same by employing rolling window analysis, and we present the results in the forthcoming section. We present the rolling window results for S&P500 first. We present the regression results for Gold in Figure 1 and Bitcoin in Figure 2   Figure 1. Rolling Window Regression Results for S&P500 and Gold.Note: Areas shaded under factor 1 represent significant regression coefficients. In Figure 1, we examine the behavior of β0 (intercept term), β1, β2, and β3 (partial correlation coefficients). The intercept term β0 will give an idea about whether the asset is behaving as a diversifier or hedge. Here, the intercept term shows significance most of the time. However, during 2018, the intercept was negative and significant, showing that it could serve as a hedge during geopolitical tensions and volatilities in the global stock market. However, during the early stages of COVID-19, we show that the intercept is negative and showing statistical significance, suggesting that Gold could serve as a hedge during the initial shocks of the pandemic. These findings are contrary to the results in the study by Tarchella et al. (2024) where they found hold as a good diversifier. Later, we find the intercept to be positive and significant, indicating that Gold could act as a potential diversifier. But during the Russia-Ukraine War, Gold exhibited hedge ability again. Looking into the behavior of β1, which is the partial correlation coefficient for the tenth percentile of return distribution shows negative and insignificant during 2018. Later, it was again negative and significant during the initial phases of COVID-19, and then negative in the aftermath, indicating that Gold could act as a weak safe haven during the COVID-19 pandemic. Gold could serve as a strong safe haven for the SP500 against volatility in the markets brought on by the war in Ukraine, as we see the coefficient to be negative and large during this time. From β2 and β3, the partial correlation coefficients of the fifth and first percentile, respectively, show that Gold possesses weak safe haven properties during COVID-19 and strong safe haven behavior during the Ukraine crisis. Next, we examine the characteristics of Bitcoin as a hedge/diversifier/safe haven against the S&P500 returns. We present the results in Figure 2.   Figure 2. Rolling Window Regression Results for S&P500 and Bitcoin.Note: Areas shaded under factor 1 represent significant regression coefficients. Like in the previous case, we begin by analysing the behavior of the intercept coefficient, which is β0. As mentioned earlier the intercept term will give a clear picture of the asset’s hedging and diversifier property. In the period 2018–2019, the intercept term is positive but insignificant. This could be due to the large volatility in Bitcoin price movements during the period. It continues to be minimal (but positive) and insignificant during 2019–2020, indicating toward weak diversification possibility. Post-COVID-19 period, the coefficient shows the significance and positive value, displaying the diversification potential. We see that the coefficient remains positive throughout the analysis, confirming Bitcoin’s potential as a diversifier. Looking into the behavior of β1 (the partial correlation coefficient at tenth percentile), it is positive but insignificant during 2018. The coefficient is having negative sign and showing statistical significance in 2019, suggesting that Bitcoin could be a good safe haven in that year. This year was characterized by a long list of corporate scandals, uncertainties around Brexit, and tensions in global trade. We can observe that throughout the COVID-19 period, the coefficient is showing negative sign and negligible during the March 2020 market meltdown, suggesting inadequate safe-haven qualities. However, Bitcoin will regain its safe-haven property in the coming periods, as the coefficient is negative and significant in the coming months. The coefficient is negative and shows statistical significance during the Ukrainian crisis, suggesting strong safe-haven property. Only during the Ukrainian crisis could Bitcoin serve as a safe haven, according to the behavior of β2, which displays the partial correlation coefficient at the fifth percentile. Bitcoin was a weak safe haven during COVID-19 and the Ukrainian crisis, according to β3, the partial correlation coefficient for the first percentile (coefficient negative and insignificant). According to the overall findings, Gold is a stronger safe haven against the S&P 500’s swings. This result is consistent with the previous studies of Triki and Maatoug (2021), Shakil et al. (2018), Będowska-Sójka and Kliber (2021), Drake (2022), and Ghazali et al. (2020), etc. The same analysis was conducted for the CAC 40 and the NSE 50; the full analysis can be found here [insert the next link in “the word here” https://journals.sagepub.com/doi/10.1177/09711023251322578]. However, it is important to highlight the respective results: In general, we may say that Gold has weak safe-haven properties considering CAC40. We can conclude that Bitcoin’s safe-haven qualities for CAC40 are weak. We can say that Gold showed weak safe-haven characteristics during the Ukraine crisis and good safe-haven characteristics for the NSE50 during COVID-19. We may say that Bitcoin exhibits weak safe haven, but strong hedging abilities to NSE50. Concluding Remarks In this study, we suggested a new method to evaluate an asset’s time-varying hedge, diversifier, and safe-haven characteristics. We propose a rolling window estimation of the DCC-based regression of Ratner and Chiu (2013). Based on this, we estimate the conventional asset’s time-varying safe haven, hedging, and diversifying properties during crises like the COVID-19 pandemic and the conflict in Ukraine. For comparison purposes, we include Bitcoin, a nonconventional safe-haven asset. We evaluate Gold and Bitcoin’s safe haven, hedging, and diversifier properties to the S&P 500, CAC 40, and NSE 50 variations. We use a rolling window of length 60 to estimate the regression. From the results, we find that Gold can be considered as a better safe haven against the fluctuations of the S&P 500. In the case of CAC 40, Gold and Bitcoin have weak safe-haven properties. While Bitcoin demonstrated strong safe-haven characteristics during the Ukraine crisis, Gold exhibited strong safe-haven characteristics during COVID-19 for the NSE 50. Overall, the findings indicate that Gold is the better safe haven. This outcome is consistent with earlier research (Będowska-Sójka & Kliber, 2021; Drake, 2022; Ghazali et al., 2020; Shakil et al., 2018; Triki & Maatoug, 2021). When it comes to Bitcoin, its safe-haven feature is weak. Bitcoin, however, works well as a diversifier and hedge. Therefore, from a policy perspective, investing in safe-haven instruments is crucial to lower the risks associated with asset ownership. Policymakers aiming to enhance the stability of financial portfolios might encourage institutional investors and other market players to incorporate Gold into their asset allocations. Gold’s strong safe-haven qualities, proven across various market conditions, make it a reliable choice. Gold’s performance during crises like COVID-19 highlights its potential to mitigate systemic risks effectively. Further, Bitcoin could also play a complementary role as a hedge and diversifier, especially during periods of significant volatility such as the Ukraine crisis. While Bitcoin’s safe-haven characteristics are relatively weaker, its inclusion in a diversified portfolio offers notable value and hence it should not be overlooked. Further, policymakers may consider how crucial it is to monitor dynamic correlations and periodically rebalance portfolios to account for shifts in the safe haven and hedging characteristics of certain assets. Such measures could help reduce the risks of over-reliance on a single asset type and create more resilient portfolios that can better withstand global economic shocks. For future research, studies can be conducted on the estimation of the rolling window with different widths. This is important to understand how the safe-haven property changes across different holding periods. Further, more equity markets would be included to account for the differences in market capitalization and index constituents. This study can be extended by testing these properties for multi-asset portfolios as well. We intend to take up this study in these directions in the future. Data Availability StatementNot applicable.Declaration of Conflicting InterestsThe authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.FundingThe authors received no financial support for the research, authorship, and/or publication of this article.ReferencesAkhtaruzzaman M., Boubaker S., Lucey B. M., & Sensoy A. (2021). Is gold a hedge or a safe-haven asset in the COVID-19 crisis? Economic Modelling, 102, 105588. Crossref. Web of Science.Al-Nassar N. S. (2024). Can gold hedge against inflation in the UAE? A nonlinear ARDL analysis in the presence of structural breaks. PSU Research Review, 8(1), 151–166. Crossref.Barbu T. C., Boitan I. A., & Cepoi C. O. (2022). Are cryptocurrencies safe havens during the COVID-19 pandemic? A threshold regression perspective with pandemic-related benchmarks. Economics and Business Review, 8(2), 29–49. Crossref.Baur D. G., & Lucey B. M. (2010). Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold. Financial Review, 45(2), 217–229. Crossref.Będowska-Sójka B., & Kliber A. (2021). Is there one safe-haven for various turbulences? The evidence from gold, Bitcoin and Ether. The North American Journal of Economics and Finance, Elsevier, 56, 101390. Crossref.Belhassine O., & Karamti C. (2021). Contagion and portfolio management in times of COVID-19. Economic Analysis and Policy, 72, 73–86. Crossref. PubMed. Web of Science.Bhattacharjee A., Das J., & Kumar S. (2023). Evaluating the symmetrical and asymmetrical linkage between gold price and Indian stock market in the presence of structural change. NMIMS Management Review, 31(4), 288–297. Crossref. Web of Science.Bhuiyan R. A., Husain A., & Zhang C. (2023). Diversification evidence of Bitcoin and Gold from wavelet analysis. Financial Innovation, 9(1), 100. Crossref. PubMed. Web of Science.Bouri E., Azzi G., & Dyhrberg A. H. (2017). On the return-volatility relationship in the Bitcoin market around the price crash of 2013. Economics, 11(1), 2. Crossref.Bouri E., Gupta R., Tiwari A. K., & Roubaud D. (2017). Does Bitcoin hedge global uncertainty? Evidence from wavelet-based quantile-in-quantile regressions. Finance Research Letters, 23, 87–95. Crossref. Web of Science.Bouri E., Shahzad S. J. H., Roubaud D., Kristoufek L., & Lucey B. (2020). Bitcoin, gold, and commodities as safe havens for stocks: New insight through wavelet analysis. The Quarterly Review of Economics and Finance, 77, 156–164. Crossref. Web of Science.Brenner M., & Galai D. (1989). New financial instruments for hedge changes in volatility. Financial Analysts Journal, 45(4), 61–65. Crossref.Capie F., Mills T. C., & Wood G. (2005). Gold as a hedge against the dollar. Journal of International Financial Markets, Institutions and Money, 15(4), 343–352. Crossref.Ceylan Ö. (2022). Hedging Effectiveness of the VIX ETPs: An analysis of the time-varying performance of the VXX. In Handbook of research on new challenges and global outlooks in financial risk management (pp. 384–401). IGI Global. Crossref.Cheema M. A., Faff R., & Szulczyk K. R. (2022). The 2008 global financial crisis and COVID-19 pandemic: How safe are the safe haven assets? International Review of Financial Analysis, 83, 102316. Crossref. PubMed. Web of Science.Conlon T., & McGee R. (2020). Safe haven or risky hazard? Bitcoin during the COVID-19 bear market. Finance Research Letters, 35, 101607. Crossref. PubMed. Web of Science.Demir E., Gozgor G., Lau C. K. M., & Vigne S. A. (2018). Does economic policy uncertainty predict the Bitcoin returns? An empirical investigation. Finance Research Letters, 26, 145–149. Crossref. Web of Science.Drake P. P. (2022). The gold-stock market relationship during COVID-19. Finance Research Letters, 44, 102111. Crossref. PubMed. Web of Science.Dwyer G. P. (2015). The economics of Bitcoin and similar private digital currencies. Journal of Financial Stability, 17, 81–91. Crossref. Web of Science.Dyhrberg A. H. (2015). Hedging capabilities of bitcoin. Is it the virtual gold? Finance Research Letters, 1–6. https://doi.org/10.1016/j.frl.2015.10.025Dyhrberg A. H. (2016). Hedging capabilities of bitcoin. Is it the virtual gold? Finance Research Letters, 16, 139–144. https://doi.org/10.1016/j.frl.2015.10.025 Web of Science.Engle R. (2002). Dynamic conditional correlation: A simple class of multivariate generalized autoregressive conditional heteroskedasticity models. Journal of Business & Economic Statistics, 20(3), 339–350. Crossref. Web of Science.Ghazali M. F., Lean H. H., & Bahari Z. (2020). Does gold investment offer protection against stock market losses? Evidence from five countries. The Singapore Economic Review, 65(02), 275–301. Crossref.Hasan M. B., Hassan M. K., Rashid M. M., & Alhenawi Y. (2021). Are safe haven assets really safe during the 2008 global financial crisis and COVID-19 pandemic? Global Finance Journal, 50, 100668. Crossref. PubMed.Hood M., & Malik F. (2013). Is gold the best hedge and a safe haven under changing stock market volatility? Review of Financial Economics, 22(2), 47–52. Crossref.Huang Y., Duan K., & Mishra T. (2021). Is Bitcoin really more than a diversifier? A pre-and post-COVID-19 analysis. Finance Research Letters, 43, 102016. Crossref.Ji Q., Zhang D., & Zhao Y. (2020). Searching for safe-haven assets during the COVID-19 pandemic. International Review of Financial Analysis, 71, 101526. Crossref. PubMed. Web of Science.Kaczmarek T., Będowska-Sójka B., Grobelny P., & Perez K. (2022). False safe haven assets: Evidence from the target volatility strategy based on recurrent neural network. Research in International Business and Finance, 60, 101610. Crossref. Web of Science.Kumar A. S., & Padakandla S. R. (2022). Testing the safe-haven properties of gold and bitcoin in the backdrop of COVID-19: A wavelet quantile correlation approach. Finance Research Letters, 47, 102707. Crossref. PubMed. Web of Science.Kumar M. A., Swathi J., Pallavi T. A., & Bavana S. (2023). Volume progression and price–volume relationship of commodity futures: Case of bullion and base metals. NMIMS Management Review, 31(4), 265–274. https://doi.org/10.1177/09711023241230463 Web of Science.Liu C. S., Chang M. S., Wu X., & Chui C. M. (2016). Hedges or safe havens—Revisit the role of gold and USD against stock: A multivariate extended skew-t copula approach. Quantitative Finance, 16(11), 1763–1789. Crossref.Liu R., Zhichao S., Wei G., & Wang W. (2017). GARCH model with fat-tailed distributions and Bitcoin exchange rate returns. Journal of Accounting, Business and Finance Research, 1(1), 71–75. https://doi.org/10.2139/ssrn.3666106 Crossref.Mokni K. (2021). When, where, and how economic policy uncertainty predicts Bitcoin returns and volatility? A quantiles-based analysis. The Quarterly Review of Economics and Finance, 80, 65–73. Crossref.Nagy B. Z., & Benedek B. (2021). Higher co-moments and adjusted Sharpe ratios for cryptocurrencies. Finance Research Letters, 39, 101543. Crossref. Web of Science.Nakamoto S. (2008). Bitcoin: A peer-to-peer electronic cash system. Bitcoin. https://bitcoin.org/bitcoin.pdfOkorie D. I. (2020). Could stock hedge Bitcoin risk(s) and vice versa? Digital Finance, 2(1), 117–136. Crossref.Paule-Vianez J., Prado-Román C., & Gómez-Martínez R. (2020). Economic policy uncertainty and Bitcoin. Is Bitcoin a safe-haven asset? European Journal of Management and Business Economics, 29(3), 347–363. Crossref.Ratner M., & Chiu C. C. J. (2013). Hedging stock sector risk with credit default swaps. International Review of Financial Analysis, 30, 18–25. Crossref. Web of Science.Salisu A. A., Raheem I. D., & Vo X. V. (2021). Assessing the safe haven property of the gold market during COVID-19 pandemic. International Review of Financial Analysis, 74, 101666. Crossref. PubMed. Web of Science.Saxena S., & Villar A. (2008). Hedging instruments in emerging market economies. Financial globalisation and emerging market capital flows. BIS Papers, 44, 71–87.Selmi R., Mensi W., Hammoudeh S., & Bouoiyour J. (2018). Is Bitcoin a hedge, a safe haven or a diversifier for oil price movements? A comparison with gold. Energy Economics, 74, 787–801. Crossref. Web of Science.Shahzad S. J. H., Bouri E., Roubaud D., Kristoufek L., & Lucey B. (2019). Is Bitcoin a better safe-haven investment than gold and commodities? International Review of Financial Analysis, 63, 322–330. Crossref. Web of Science.Shakil M. H., Mustapha I. H. M., Tasnia M., & Saiti B. (2018). Is gold a hedge or a safe haven? An application of ARDL approach. Journal of Economics, Finance and Administrative Science, 23(44), 60–76. Crossref.Singh V. V., Singh H., & Ansari A. (2024). Bitcoin as a distinct asset class for hedging and portfolio diversification: A DCC-GARCH model analysis. NMIMS Management Review, 32(1), 7–13. Crossref. Web of Science.Smales L. A. (2019). Bitcoin as a safe haven: Is it even worth considering? Finance Research Letters, 30, 385–393. Crossref. Web of Science.Snene Manzli Y., Alnafisah H., & Jeribi A. (2024). Safe haven ability of energy and agricultural commodities against G7 stock markets and banking indices during COVID-19, Russia–Ukraine War, and SVB collapse: Evidence from the wavelet coherence approach. Discrete Dynamics in Nature and Society, 2024(1), 2587000. Crossref.Syuhada K., Suprijanto D., & Hakim A. (2022). Comparing gold’s and Bitcoin’s safe-haven roles against energy commodities during the COVID-19 outbreak: A vine copula approach. Finance Research Letters, 46, 102471. Crossref. PubMed. Web of Science.Tarchella S., Khalfaoui R., & Hammoudeh S. (2024). The safe haven, hedging, and diversification properties of oil, gold, and cryptocurrency for the G7 equity markets: Evidence from the pre-and post-COVID-19 periods. Research in International Business and Finance, 67, 102125. Crossref. Web of Science.Triki M. B., & Maatoug A. B. (2021). The GOLD market as a safe haven against the stock market uncertainty: Evidence from geopolitical risk. Resources Policy, 70, 101872. Crossref. Web of Science.Umar Z., Bossman A., Choi S. Y., & Teplova T. (2023). The relationship between global risk aversion and returns from safe-haven assets. Finance Research Letters, 51, 103444. Crossref. Web of Science.Ustaoglu E. (2022). Safe-haven properties and portfolio applications of cryptocurrencies: Evidence from the emerging markets. Finance Research Letters, 47, 102716. Crossref. Web of Science.Widjaja M., & Havidz S. A. H. (2023). Are gold and cryptocurrency a safe haven for stocks and bonds? Conventional vs Islamic markets during the COVID-19 pandemic. European Journal of Management and Business Economics (ahead-of-print).Yan Y., Lei Y., & Wang Y. (2022). Bitcoin is a safe-haven asset and a medium of exchange. Axioms, 11(8), 415. Crossref.Yousaf I., Plakandaras V., Bouri E., & Gupta R. (2022). Hedge and safe haven properties of gold, US Treasury, Bitcoin, and Dollar/CHF against the FAANA companies and S&P 500 (Department of Economics, Working Paper Series No. 2022–27). University of Pretoria.Zhang Y., Zhu P., & Xu Y. (2021). Has COVID-19 changed the hedge effectiveness of bitcoin? Frontiers in Public Health, 9. https://doi.org/10.3389/fpubh.2021.704900

Energy & Economics
tsmc is a Taiwanese collective circuit manufacturing company with advanced manufacturing processes

US Semiconductor Reindustrialization: Implications for the World

by Anastasia Tolstukhina

In recent years, US leadership has embraced techno-nationalism amid geopolitical and technological rivalry with China, aiming to minimise reliance on imported chips from Asia. These components are crucial for producing consumer goods, military hardware, and AI systems. The United States set the ambitious goal of developing a self-sufficient semiconductor supply chain during Donald Trump’s first term, and continued under Joe Biden. There is consensus in the United States on the critical role of unfettered access to chips when it comes to ensuring economic and national security. It is unlikely that this technological policy dynamic will undergo significant shifts in the foreseeable future. Despite a shared objective among both Republicans and Democrats to revive the US semiconductor industry, their approaches diverge significantly. Donald Trump has his own vision for advancing this sector, one that contrasts sharply with Joe Biden’s strategy. For instance, Trump has criticised aspects of Biden-era initiatives, including the 2022 CHIPS and Science Act, which he has called counterproductive. Trump, on the other hand, favours a more aggressive tariff policy and a reduction in federal spending, arguing that major tech companies can do well without additional government support. The future balance of power—both technological and geopolitical—among the key global actors will be shaped by the development trajectory of the US semiconductor industry. Biden’s semiconductor legacy The United States holds a dominant position in chip design, but maintains a relatively modest share in global semiconductor manufacturing—just 10 percent according to SIA data in 2022, and slightly up to 11 percent according to 2025 data provided by TrendForce research firm. Major US tech giants like Nvidia or Qualcomm remain heavily reliant on chips produced in Taiwan. This dependency has increasingly been seen as unacceptable by US leadership, especially in the context of the ongoing tech war with China. Washington now views such reliance as a significant national security risk. During Donald Trump’s first presidential term, the decision was made to attract leading chip manufacturers—most notably Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker—to set up operations in the United States. This initiative proved successful: in 2020, TSMC agreed to invest $12 billion to build a chip fabrication plant in Arizona (Fab 21).   The Biden administration continued Trump’s push to revitalise the semiconductor industry. In August 2022, the CHIPS and Science Act was passed, allocating about $53 billion in government subsidies for the semiconductor sector, along with tax incentives to encourage both foreign and domestic firms to establish chip manufacturing operations on US soil. Additionally, the CHIPS for America programme was introduced to address several key goals, namely, to secure a stable supply chain for both cutting-edge and legacy semiconductors, to reinforce US leadership in R&D, and to boost employment, as investment in the chip industry was expected to generate hundreds of thousands of new jobs in microelectronics-related fields. Biden’s programme has borne fruit. Major chipmakers have launched large-scale construction of fabs across the United States. In 2022, Intel started building a $28 billion facility in Ohio; Samsung initiated two plants in Texas worth about $40 billion; and TSMC decided to expand its Arizona site to three modules, increasing its total investment from $12 billion to $65 billion. According to TSMC CEO C.C. Wei, the Arizona facility began mass production in the fourth quarter of 2024 using its N4 (4nm class) process technology, with performance comparable to its fabs in Taiwan. This marks the most advanced semiconductor production facility currently operating in the United States. Plans are in place to launch a second module for 3nm chip production by 2028, followed by a third module by 2030, which will manufacture 2nm and 1.6nm chips and their variants. The Biden team aimed for the United States to capture 20 percent of global advanced chip manufacturing by 2030. Democrats have adopted a comprehensive approach to rebuilding the semiconductor industry not just focusing on building advanced fabs, but also investing in support areas such as chip testing and packaging, materials production, and R&D. A substantial $13 billion in federal funds has been earmarked for these purposes. For instance, grants and loans were used to support GlobalFoundries’ plans to build an advanced packaging and photonics centre in New York State. Arizona State University also received significant support from the US Department of Commerce, including a $100 million allocation for research and development in next-generation chip packaging technologies. Wide geographic distribution is a striking feature of the emerging US semiconductor supply chain (Figure 1). Key activities are being established across numerous states: Oregon (semiconductor manufacturing), Idaho (semiconductor and material manufacturing), Utah (semiconductor manufacturing), Montana (equipment manufacturing), Colorado (semiconductor and material manufacturing), New Mexico (packaging), Kansas (semiconductor manufacturing and packaging), Louisiana (equipment manufacturing), Missouri (materials), Minnesota (semiconductor manufacturing),Michigan (materials),Indiana (packaging and semiconductor manufacturing), Ohio (materials and semiconductor manufacturing), Vermont (semiconductor R&D and manufacturing), Pennsylvania (materials), North Carolina (semiconductor manufacturing), Georgia (materials and semiconductor manufacturing), and Florida (materials and semiconductor manufacturing). Among these, several states stand out for their significance and comprehensive involvement: California (semiconductor manufacturing and R&D), Arizona (semiconductor, equipment, and material manufacturing, packaging, R&D), Texas (semiconductor and material manufacturing, packaging, R&D), and New York (materials, semiconductor manufacturing, and R&D).   According to a 2024 study by the Boston Consulting Group commissioned by the Semiconductor Industry Association (SIA), over 90 projects have been launched in 28 states since the CHIPS Act was passed, totalling nearly $450 billion in private investment. However, the Biden administration did not pursue full semiconductor self-sufficiency as a goal. There was recognition that recreating the entire supply chain domestically would, even at the initial stage, require a vast amount of time and financial resourcesНадпись: MichiganНадпись: IndianaНадпись: Pennsylvania estimated at around $1 trillion. Therefore, US policymakers have advocated for a collective semiconductor supply chain among allies and partners by building international alliances. In 2022, the Unite States proposed creating the CHIP 4 alliance (United States, South Korea, Japan, and Taiwan), which, with coordinated efforts, could have become a dominant force in the semiconductor industry capable of influencing nearly every segment of the global value chain, with the exception of assembly and testing, where mainland China currently plays a leading role. In this way, Trump’s initiative to revive the semiconductor industry has not only continued under Biden, but evolved into a more ambitious and costly programme. The SIA, in its above report, painted an optimistic picture for the future of the US semiconductor sector. It projects that chip manufacturing capacity in the United States will triple over the next decade (2022–2032), growing by 203 percent. This expansion is expected to require $646 billion in investment, or 28 percent of global capital spending in the semiconductor industry. As a result, the United States could increase its share of global chip production from the current 10 percent to 14 percent by 2032. Additionally, experts estimate that the new projects will create over 58,000 new jobs in the semiconductor sector and hundreds of thousands more in related industries.   Despite its ambitious nature, the initial phase of Biden’s semiconductor programme has revealed several challenges. The industry has run into numerous internal obstacles slowing the construction of manufacturing facilities, including a shortage of skilled labour, high labour and construction material costs, bureaucratic hurdles (e.g., obtaining environmental permits), slow disbursement of promised subsidies by the US authorities, union-related delays, cultural differences, and more. These issues have caused delays in launching chip fabrication plants, thereby slowing the pace at which the US can achieve relative technological autonomy in the rapidly evolving semiconductor field. For example, TSMC postponed the start of mass production at the first module of Fab 21 from 2024 to 2025, and delayed the second module from 2026 to 2027–2028. Intel’s costly attempt to reclaim leadership in advanced chip manufacturing has strained its budget, forcing the company to delay its Ohio fab launch from 2025 to 2030. Samsung, initially planning to start production in Texas in the second half of 2024, pushed the timeline to 2025. These delays in fab construction also impacted the schedules of launching supplier plants, including chemical and material producers like LCY Chemical, Solvay, Chang Chun Group, KPPC Advanced Chemicals (Kanto-PPC), and Topco Scientific. The external component of the Biden administration’s technology policy has also failed to develop as envisioned. After several years of existence, the CHIP 4 has failed to become a multilateral coordination mechanism, and its potential members have not assumed any binding commitments. Only one virtual meeting was held in 2023. The reason lies in internal disagreements within the alliance and concerns about various risks, including geopolitical ones. Under the Biden administration, the United States made a strong start in the semiconductor sector, launching a wide range of fab construction projects and attracting billions of dollars in public and private investment. However, the process of reviving the US semiconductor industry has proven slower than anticipated. Government subsidies have been disbursed sluggishly, with some companies yet to receive their funding, and the construction of many high-tech industrial facilities has been postponed. Moreover, Biden overestimated the willingness of US allies and partners to join formal technological alliances. Trump’s radical approach To encourage both domestic and foreign chip suppliers to set up manufacturing in the United States, Donald Trump, in contrast to Joe Biden, chose coercion (tariffs) over incentives (government subsidies). Criticising his predecessor’s CHIPS Act, Trump argued that companies didn’t need money, but rather motivation in the form of import tariffs ranging from 25 percent to 100 percent. In his view, such measures would compel businesses to invest in US chip manufacturing, especially since these companies have the financial capacity and, therefore, don’t need to rely on government funding. Almost immediately after taking office, Trump threatened chip manufacturers with higher tariffs. At first glance, this move might seem economically illogical. Why, for instance, punish TSMC—a key partner of major US fabless companies like Nvidia, Apple, and Qualcomm—especially when there is no comparable alternative, either in the United States or globally? Even Intel, despite its struggles, depends on wafers from the Taiwanese firm (its import dependency is about 30 percent). Yet despite apparent lack of logic, the “stick” approach proved effective. In early March 2025, TSMC announced plans to invest approximately $100 billion to build three new fabs for high-performance semiconductor wafers, two advanced chip packaging plants, and one R&D centre. This raises the question: did the world’s largest chipmaker really get spooked by Trump’s tariff threats and, therefore, decide to make an unprecedented investment in the US economy? In theory, TSMC—sitting in the centre of the global microelectronics industry—could have passed tariff-related costs on to its American clients, who would have had little choice but to continue purchasing its products due to the lack of viable alternatives. Furthermore, a significant share of TSMC’s semiconductors is not shipped directly to the United States, but instead follows a supply chain tour through Asia, where the bulk of chip packaging, testing, and electronics assembly occurs (this infrastructure is only just beginning to take shape in the United States, and that process is anything but fast). Analysts at Bernstein suggest that political pressure, rather than tariffs themselves, drove TSMC’s decision. That assessment holds some merit, but it appears that a combination of factors was at play. First, TSMC itself is interested in expanding its global presence. Taiwan’s Minister of Economic Affairs Kuo Jyh-Huei commented on TSMC’s $100 billion investment in the US semiconductor sector by saying, “TSMC already has plants in the United States and Japan, and is now building a new one in Germany. This has nothing to do with tariffs. TSMC’s global expansion is a major development.” Similarly, in 2020 during Trump’s first term, company representatives said that the decision to build a plant in Arizona was “based on business needs.” Indeed, the move offers several benefits to TSMC, including increased company capitalisation and minimised risks in the event of conflict with mainland China or natural disasters (earthquakes are not uncommon in Taiwan). Second, the United States remains TSMC’s primary market, and the tariff threat did play its part. In Taiwan, there’s an understanding that when Trump talks about higher tariffs, he isn’t bluffing, because his seriousness was evident during his first term and was experienced first-hand by Canada and Mexico. On April 2, 2025, nearly the entire rest of the world—including Taiwan—faced a new wave of tariffs, with Taiwanese exports to the United States hit by a 32 percent duty (though semiconductors were not yet affected). A 100-percent tariff on semiconductors is unlikely, as it would significantly damage the market value of US tech firms. Still, protective barriers on semiconductors are expected—Trump’s administration has promised to implement them in the coming months. These measures aim to level the production cost of chips between the United States and Taiwan, thereby enhancing the competitiveness of US-made semiconductors. And finally, TSMC, together with the Taiwanese authorities, is not willing to mar relations with the United States for political reasons. This became evident from TSMC’s earlier decision to support US sanctions against mainland China by refusing to supply its most advanced chips manufactured using 7nm and more sophisticated process technologies even though that market had been a significant source of profit. After TSMC announced plans to expand its presence in the United States, the Trump administration decided to take more radical action and to scrap the CHIPS and Science Act, a signature achievement of the Biden administration. However, some Republican members of Congress are calling for the law to be preserved, albeit with certain amendments. Trump’s hands are not completely untied in this regard, so it is unlikely he can ignore Congress’s position. Even if the legislation gets amended, the process will likely be drawn out, as the CHIPS and Science Act received bipartisan support and has many supporters among Republicans. Another strategically important issue for the Trump administration is the competitiveness of domestic manufacturers. According to the Taiwanese leadership, TSMC will continue to expand operations in Taiwan, and the most advanced semiconductor technologies will not leave the country. For “the most powerful AI chips in the world to be made right here in America” efforts will be needed on the part of national champions—and soon. In 2025, the leader in producing the most advanced 2nm chips will be determined. The main contenders in this race are TSMC, Samsung, and Intel. Intel, however, finds itself in a difficult position. The company has been facing serious financial troubles for several years and lags behind competitors in mastering cutting-edge production processes. The year 2024 was one of Intel’s most challenging: it underwent a major restructuring (creating a separate chip manufacturing unit, Intel Foundry), posted record losses of $18 billion, and saw a significant drop in its stock price. As a result, about 15 percent of the workforce, including CEO Pat Gelsinger, was laid off; dividend payments were suspended; and a sweeping cost-cutting plan was launched, including deep cuts in capital expenditures over the coming years and a scaling back of global expansion plans. According to Intel Products CEO Michelle Johnston Holthaus, the company failed to capitalise effectively on the artificial intelligence boom and continues to fall behind its competitors technologically. Although Intel plans to begin 18A (2nm) chip production in 2025, there are no guarantees of competitiveness in power efficiency, performance, yield rate, cost, or timely mass production. In March, media reported that Nvidia and Broadcom began testing certain chip components, but such testing, of course, does not guarantee Intel will secure orders. Apparently, the Trump administration itself has doubts about the US company’s capabilities, as it has proposed that TSMC acquire shares in Intel Foundry. Negotiations with the Asian manufacturer began only in February 2025, meaning they are still at a very early stage.   What short-term challenges does the Trump administration face in revitalising the US semiconductor industry? Technological lag There is a high likelihood that the United States will continue to lag behind Taiwan for several years in the production of advanced semiconductors. TSMC plans to begin producing chips using a 1.4nm process by 2028, while on US soil—if deadlines aren’t pushed back again—the Taiwanese firm will only be producing 3nm chips by that time. Although some hope is being placed on Intel, there is no guarantee that the American champion will be able to compete with TSMC, or that a potential collaboration with TSMC (if it acquires a stake in Intel Foundry) will be successful. Inadequate production capacity Experts estimate that the output capacity of TSMC’s factories under construction in Arizona is less than one-fifth of the company’s 5nm and 3nm capacity in Taiwan. According to analysts at Bernstein Research, with the deployment of additional production in Arizona, the United States could raise its self-sufficiency in advanced chip production to 40-50 percent between 2030 and 2032. In the near term, this would only cover about half of the chip demand from US tech giants. Moreover, TSMC has not specified clear timelines or technologies for its US expansion. Intel could partly close the gap, but that depends on how competitive its chips are and how quickly it can overcome its financial difficulties. Slow rollout of production facilities TrendForce forecasts that the US share of global advanced chip production could grow from 11 percent to 22 percent by 2030. However, the construction of TSMC’s first Arizona plant took nearly five years, and there are no guarantees that future factories will be built fast enough to double US chip output by 2030. Labour shortage Developing a relatively self-sufficient microelectronics ecosystem requires a highly skilled workforce. However, the United States is facing severe staff shortages. By 2030, estimates suggest a shortfall of 67,000 to 90,000 professionals in the semiconductor field. China’s response to US sanctions The United States is not the only country leveraging interdependence in the semiconductor industry as a tool of pressure. China is responding in kind, though currently in a relatively restrained manner. In 2024, the Chinese government decided to completely ban exports of gallium, germanium, antimony, and ultra-hard materials to the United States even though the restrictions apply only to direct shipments. These actions not only drive up raw material prices (e.g., antimony prices more than tripled since early 2024), but also force US authorities to consider domestic mining and search for alternative suppliers abroad. High production costs According to the SIA, building and operating chip fabs in the United States is 30 to 50 percent more expensive than in Asia. Unofficial reports suggest that chips made at Fab 21 in Arizona cost 10 percent to 30 percent more than their Taiwanese counterparts (more precise figures are not publicly available). The high cost is attributed to expensive construction of facilities, high salaries (US engineers earn three times more than their Taiwanese counterparts, incomplete domestic semiconductor supply chains (some materials must still be imported)—TSMC CEO has complained about it—and complex logistics (finished wafers often need to be sent back to Taiwan or elsewhere for packaging).70 Even if tariffs eventually equalise chip pricing, US fabless companies like Apple or Nvidia may still find it more economical to source chips from Asia, where a properly functioning semiconductor ecosystem already exists—unlike in the United States, where such infrastructure is still in its infancy. Trump’s current tariff policy Imposing tariffs could lead to a significant increase in prices for components, equipment, and materials, while also injecting uncertainty into the semiconductor industry. For instance, it remains unclear how semiconductor manufacturers will operate under new tariffs on imported chip-making equipment sourced from the EU, Japan, South Korea, and Taiwan. The cost of such equipment can reach hundreds of millions of dollars—for example, the latest Low-NA EUV lithography machine from Dutch company ASML is priced at $235 million. If Intel, TSMC, and other firms are required to pay import duties of 20 percent or more, chip manufacturing in the United States will become prohibitively expensive, undermining investment plans of the manufacturers that have committed to building advanced fabs on American soil. Naturally, US officials understand that sharp moves in semiconductor policy—such as an aggressive tariff regime—carry significant risk and could spark a true technological crisis. In April 2025, the US Department of Commerce’s Bureau of Industry and Security (BIS) launched an investigation under Section 232 of the Trade Expansion Act of 1962 to determine the impact of semiconductor imports and related equipment on national security. Interested parties submitted comments, many urging extreme caution in this highly sensitive sector, which depends on a complex global supply chain split across multiple phases and countries. Thus, SIA recommended that any tariffs be phased in gradually to allow the US industry to continue functioning efficiently until domestic production capabilities are fully established. The US Chamber of Commerce called for restraint, warning that comprehensive tariffs on the semiconductor supply chain could damage US industry and undermine cooperation with allies and partners in achieving key national security goals. The Chamber also noted that foreign semiconductor companies have made long-term investment commitments to build capacity in the United States, and that political uncertainty and instability could jeopardise the stated goal of re-shoring semiconductor supply chains. *** As TSMC founder Morris Chang once said, America’s effort to ramp up its own chip production may well prove to be “a very expensive exercise in futility.” Microelectronics is one of the most complex industries in the world requiring not only massive financial investment, but also time. For decades, the industry developed within the framework of global division of labour. Now, building a relatively self-sufficient supply chain within a single country could take just as long. Yet, in the medium and long term, America’s push to revive its semiconductor industry may prove justified. The United States holds a strong position in the sector, and US companies control about 50 percent of the global semiconductor market. Furthermore, the United States remains a powerful magnet for talent, and possesses vast financial and political resources. Some experts believe that over time, the United States could weaken Taiwan’s dominance as the global hub of advanced chip manufacturing. The resurgence of the US semiconductor industry will reshape the global technological order in three key ways. First, it will trigger a transformation of the global semiconductor supply chain. Second, it will lead to greater US independence from imports of critical technologies, which means erosion of importance of some players in the industry, weakening their “technological shield”. Finally, it will cement US technological superiority in many critical industries, from AI to military systems, accelerating a global technological divide with profound geopolitical consequences. Indeed, America has the potential to become one of the world’s leading semiconductor production centres, provided that several key conditions are met, such as a favourable geopolitical environment, domestic political stability, and the absence of disruptive black swan events. However, Trump’s risky tariff policy could trigger unpredictable cascading effects, both domestically (e.g., higher prices for electronics and microelectronics products) and internationally (e.g., retaliatory tariffs by US trade partners), posing serious threats for the US semiconductor industry. First published in the Valdai Discussion Club.

Energy & Economics
To achieve sustainable environmental conservation, we must prioritize clean energy solutions to reduce our dependence on fossil fuels and promote a sustainable future for future generations.

Harnessing nuclear power for sustainable electricity generation and achieving zero emissions

by Mohamed Khaleel , Ziyodulla Yusupov , Sassi Rekik , Heybet Kılıç , Yasser F. Nassar , Hala J. El-Khozondar , Abdussalam Ali Ahmed

Note: some parts of the article have been excluded, if you want to go deep in the article please check  https://doi.org/10.1177/01445987251314504 for the complete version. Abstract Nuclear power plays a pivotal role in sustainable electricity generation and global net zero emissions, contributing significantly to this secure pathway. Nuclear power capacity is expected to double, escalating from 413 gigawatts (GW) in early 2022 to 812 GW by 2050 within the net zero emissions (NZE) paradigm. The global energy landscape is undergoing significant transformation as nations strive to transition to more sustainable energy systems. Amidst this shift, nuclear power has emerged as a crucial component in the pursuit of a sustainable energy transition. This study examines nuclear power's multifaceted role in shaping sustainable energy transition. It delves into nuclear energy's contributions toward decarbonization efforts, highlighting its capacity to provide low-carbon electricity and its potential role in mitigating climate change. Furthermore, the study explores the challenges and opportunities associated with integrating nuclear power into energy transition strategies, addressing issues such as safety, waste management, and public perception. In conclusion, the global nuclear power capacity is anticipated to reach approximately 530 GW by 2050, representing a substantial shortfall of 35% compared with the trajectory outlined in the NZE pathway. Under the NZE scenario, nuclear power demonstrates exceptional expansion, nearly doubling from 413 GW in early 2022 to 812 GW by 2050. Concurrently, the trajectory highlights a transformative shift in renewable energy investments, with annual expenditures surging from an average of US$325 billion during 2016–2020 to an impressive US$1.3 trillion between 2031 and 2035. These projections underscore the critical role of nuclear and renewable energy investments in achieving global sustainability and emission reduction goals. Introduction Global warming and greenhouse gas emissions pose some of the most pressing challenges of the 21st century. The combustion of fossil fuels for electricity generation is a major contributor to these issues, releasing billions of tons of carbon dioxide (CO2) into the atmosphere annually (Abbasi et al., 2020; Nassar et al., 2024; Rekik and El Alimi, 2024a). In this context, nuclear energy emerges as a critical component of the solution. Unlike fossil fuels, nuclear power generates electricity with minimal greenhouse gas emissions, offering a reliable and scalable alternative to bridge the gap between energy demand and decarbonization goals. It operates independently of weather conditions, providing consistent energy output and complementing the intermittency of renewable sources like wind and solar (Rekik and El Alimi, 2024b, 2024c). Furthermore, advancements in nuclear technologies, including small modular reactors (SMRs) and generation IV reactors, have addressed historical concerns related to safety, waste management, and cost-effectiveness (Lau and Tsai, 2023). In 2022, global investment in low-emission fuels will maintain a robust growth trajectory, reaching a sum of US$13 billion. A significant portion of this investment was allocated toward liquid biofuels, totaling US$9.4 billion, and biogas, amounting to US$2.7 billion. It is important to emphasize that liquid biofuels constituted approximately 80% of the overall investment surge observed in 2022, with investments in biogas contributing 4% of the total. The residual portion of the investment was directed toward low-emission hydrogen production, which attained a sum of US$1.2 billion in 2022, representing an almost fourfold increase compared to the figures recorded in 2021 (Khaleel et al., 2024).Nuclear power is a pivotal component of low-carbon energy, which significantly contributes to the realization of a low-carbon economy and establishment of a green energy grid (Arvanitidis et al., 2023; El Hafdaoui et al., 2024; Fragkos et al., 2021). According to current data, 442 nuclear power reactors are operational worldwide, collectively generating 393 gigawatts (GW) of electricity, thereby furnishing a consistent and dependable source of low-carbon power (Mathew, 2022). Nuclear electricity constitutes approximately 11% of the total global electricity generation, representing a substantial portion of the global low-carbon electricity production (Alam et al., 2019). Recent advancements have enhanced the affordability and appeal of nuclear power as an alternative source of energy. These advancements encompass progress in large reactor technologies, the emergence of novel approaches such as advanced fuel utilization and SMRs, engineering breakthroughs facilitating the extension of operational lifespans for existing reactors, and innovations in materials science and improved waste management practices (Kröger et al., 2020; Zhan et al., 2021). Fast breeder reactor technology has transitioned into a commercial realm, offering benefits beyond electricity generation by enabling the production of surplus fuel and enhancing the efficiency of nuclear waste incineration, surpassing the capabilities of existing commercial reactor technologies (Lau and Tsai, 2023). Nuclear power plays a substantial role within a secure global trajectory toward achieving net zero emissions (NZE) (Addo et al., 2023; Dafnomilis et al., 2023). Nuclear power capacity experiences a twofold increase, progressing from 413 GW at the outset of 2022 to 812 GW by 2050 within the NZE paradigm. It is apparent that the annual additions to nuclear capacity peaked at 27 GW per year during the 2030s, surpassing the levels observed in the preceding decade. Despite these advancements, the global proportion of nuclear power within the overall electricity generation portfolio has experienced a marginal decline, settling at 8% (Murphy et al., 2023; Ruhnau et al., 2023). Emerging and developing economies (EMDEs) substantially dominate global growth, constituting over 90% of the aggregate, with China poised to ascend as a preeminent nuclear power producer prior to 2030. Concurrently, advanced economies collectively witness a 10% augmentation in nuclear power capacity as retirements are counterbalanced by the commissioning of new facilities, predominantly observed in nations such as the United States, France, the United Kingdom, and Canada (Bórawski et al., 2024). Furthermore, annual global investment in nuclear power has experienced a notable escalation, soaring from US$30 billion throughout the 2010s to surpass US$100 billion by 2030, maintaining a robust trajectory above US$80 billion by 2050 (IEA, 2022). In 2022, global nuclear power capacity experienced a modest increase of approximately 1.5 GW, reflecting a marginal year-on-year growth of 0.3%. This expansion was primarily driven by new capacity additions that surpassed the retirement of an over 6 GW of existing capacity (Fernández-Arias et al., 2023; Mendelevitch et al., 2018). EMDEs accounted for approximately 60% of the new capacity additions, underscoring their increasing significance in the global nuclear energy landscape. Conversely, more than half of the retirements were observed in advanced economies, including Belgium, the United Kingdom, and the United States. Table 1 shows the nuclear power capacity by region in the NZE from 2018 to 2030.   In alignment with the Net Zero Scenario, it is imperative for the global nuclear capacity to undergo an expansion averaging approximately 15 GW per annum, constituting a growth rate slightly exceeding 3% annually, until 2030. This strategic augmentation is crucial for sustaining the contribution of the nuclear sector to electricity generation, maintaining its share at approximately 10% (Liu et al., 2023). Such an expansion necessitates concerted efforts in both advanced economies and EMDEs. Furthermore, prioritizing the extension of operational lifetimes of existing nuclear facilities within G7 member states would not only fortify the existing low-emission infrastructure, but also facilitate the integration of new nuclear capacity, thereby augmenting the overall nuclear energy portfolio. [...] The significant contribution of nuclear power to sustainable energy transitions is underscored by its multifaceted role in addressing the pressing challenges of climate change and energy security (Asif et al., 2024). As nations worldwide endeavor to shift toward greener energy systems, nuclear power has emerged as a critical pillar of the decarbonization journey. Its ability to provide low-carbon electricity, mitigate climate change impacts by 2050, and enhance energy security highlights its pivotal importance in the broader context of sustainable energy transitions (Bhattacharyya et al., 2023; NEA, 2015). Thus, to fully realize its potential, challenges such as safety, waste management, and public perception must be addressed effectively. By leveraging robust policy frameworks, technological advancements, and international collaboration, nuclear power is poised to play a vital role in shaping the future of sustainable energy transitions on a global scale. Furthermore, the dynamic landscape of nuclear power development is evident in the significant influence exerted by EMDEs, particularly China, which is expected to emerge as a leading nuclear power producer by 2030 (Fälth et al., 2021; Nkosi and Dikgang, 2021). Concurrently, advanced economies are witnessing notable expansions in nuclear power capacity driven by the commissioning of new facilities to offset retirements (Budnitz et al., 2018). This trend is further reinforced by a notable surge in annual global investment in nuclear power, underscoring the sustained commitment to nuclear energy's pivotal role in sustainable energy transitions in the foreseeable future (IEA, 2019). The primary objective of this article is to explore the strategic role of nuclear power in advancing global sustainability goals and achieving zero emissions. The objective is structured around the following key agendas: •Nuclear power: prominence and green electricity source•Nuclear's role in achieving net zero by 2050•Nuclear power's significance in power system adequacySpecific technologies for sustainability in nuclear energy production•Investment in nuclear power•Addressing policy implications This comprehensive analysis aims to provide actionable insights into harnessing nuclear power for sustainable electricity generation and its pivotal role in achieving global zero-emission targets. Data and methodology This article conducts an in-depth analysis of the role of nuclear power in achieving sustainable electricity generation and supporting NZE targets. The article also addresses the potential of nuclear energy as a prominent and environmentally favorable electricity source, examining nuclear power's contribution toward the net zero by 2050 goal, its critical importance in ensuring power system adequacy, investment imperatives, and the broader policy implications.  [...] Nuclear power: prominence and green electricity source In 2020, nuclear power will constitute approximately 10% of the global electricity generation portfolio. This proportion, which had previously stood at 18% during the late 1990s, has experienced a decline; nonetheless, nuclear energy retains its status as the second-largest provider of low-emission electricity, trailing only hydroelectricity, and serves as the primary source within advanced economies. Despite the substantial proliferation of wind and solar PV technologies, nuclear electricity production in 2020 surpassed the aggregate output of these renewable sources. As of 2021, the global cumulative installed nuclear capacity has reached 413 GW, with 270 GW of this total being installed in advanced economies (Guidi et al., 2023; Halkos and Zisiadou, 2023; Pan et al., 2023; Zhang et al., 2022). Nuclear power generation during this period amounted to 2653 TWh, positioning it as the second largest source of electricity generation after hydropower, which generated 4275 TWh, as depicted in Figure 1.   In addition to its significant role in power generation, nuclear energy plays a crucial role in mitigating carbon dioxide (CO2) emissions. Since the 1970s, nuclear power has helped avoid the global release of approximately 66 gigatons (Gt) of CO2 globally, as shown in Figure 2.   Without the contribution of nuclear power, cumulative emissions from electricity generation would have increased by approximately 20%, whereas total energy-related emissions would have increased by 6% over this period (Wagner, 2021). Advanced economies accounted for more than 85% of these avoided emissions, with the European Union accounting for 20 Gt and the United States for 24 Gt, representing over 40% and 25% of total electricity generation emissions, respectively. In the absence of nuclear power, Japan would have experienced an estimated 25% increase in emissions from electricity generation, whereas Korea and Canada would have seen an increase of approximately 50%. Nuclear's role in achieving net zero by 2050 Nuclear energy has emerged as a pivotal low-emission technology within the trajectory toward achieving NZE (Pioro et al., 2019). In addition, it serves as a complementary force, bolstering the accelerated expansion of renewables, thereby facilitating the reduction of emissions from the global electricity sector to net zero by 2040 (Krūmiņš and Kļaviņš, 2023; Islam et al., 2024). Beyond its intrinsic contribution to fostering a low-emission electricity supply, nuclear power is significant as a dispatchable generating asset, fortifying supply security through its provision of system adequacy and flexibility. Furthermore, it is instrumental in furnishing heat for district heating networks and in selecting industrial facilities. Despite this, the prospective role of nuclear energy hinges significantly on the deliberations and determinations of policymakers and industry stakeholders concerning the pace of new reactor construction initiatives and the continued operational lifespan of existing nuclear facilities (Li et al., 2016; Li et al., 2015).In terms of the NZE trajectory, the global nuclear power capacity exhibits a remarkable surge, nearly doubling from 413 GW at the onset of 2022 to 812 GW by 2050 (Price et al., 2023; Utami et al., 2022). This augmentation primarily stems from the vigorous initiation of new construction endeavors, which effectively counterbalance the gradual decommissioning of numerous extant plants. Such an escalation constitutes a pronounced acceleration in comparison to the preceding three decades, characterized by a mere 15% increment in capacity, equivalent to approximately 60 GW (Haneklaus et al., 2023; Obekpa and Alola, 2023; Sadiq et al., 2023). Figure 3 demonstrates the nuclear power capacity within each country/region under the NZE by 2050 scenario.   The expected growth in nuclear power capacity far exceeds the path outlined by the current policies and legal frameworks. According to the Stated Policies Scenario (STEPS), the nuclear capacity is projected to reach approximately 530 GW by 2050, which is 35% lower than that of the NZE pathway (Espín et al., 2023; Nicolau et al., 2023; Nnabuife et al., 2023; Wang et al., 2023). Without a significant shift from recent nuclear power development trends, achieving NZE would require a limited reliance on a smaller range of low-emission technologies. This could compromise energy security and lead to higher total investment costs, resulting in increased electricity prices for consumers. Table 2 shows the average annual capacity addition for global nuclear power in NZE from 1981 to 2030.   In 2022, the global deployment of new nuclear power capacity witnessed a notable upsurge, with 7.9 GW added, representing a substantial 40% increase compared to the preceding year (Ho et al., 2019). It is worth bearing in mind that China spearheaded this expansion by completing the construction of two reactors, maintaining its streak for consecutive years as the leading contributor to global nuclear power capacity augmentation. It is noteworthy that the projects were successfully completed in various other nations, including Finland, Korea, Pakistan, and the United Arab Emirates. Additionally, significant strides were made in the initiation of new construction endeavors, with the commencement of construction activities on five reactors in China, two reactors in Egypt, and one reactor in Turkey (Hickey et al., 2021). Nuclear power's significance in power system adequacy Nuclear power facilities have persistently underpinned the dependability of power systems, thereby bolstering the adequacy of the system. Across diverse national contexts, nuclear power plants have historically maintained operational readiness, manifesting availability rates consistently exceeding 90%, thereby demonstrating their reliability in power generation. Given that a substantial proportion of nuclear power capacity directly contributes to system adequacy metrics, its significance in fortifying system reliability and adequacy significantly outweighs its proportional contribution to the total power capacity (Orikpete and Ewim, 2024; Frilingou et al., 2023; Raj, 2023; Ragosa et al., 2024). The contribution of nuclear power to system adequacy is demonstrated by the consistent trajectory of its share within the aggregate dispatchable power capacity, hovering at around 8% between 2021 and 2050 within the NZE framework (IEA, 2022; OIES, 2024). Dispatchable electricity sources have historically constituted the primary mechanism for ensuring system adequacy, a trend that endures within the NZE paradigm, especially as electricity systems undergo evolution marked by an escalating reliance on variable solar photovoltaic (PV) and wind energy sources (Marzouk, 2024; Moon et al., 2024; Wisnubroto et al., 2023). It is indisputable that unabated fossil fuel resources predominantly dominate dispatchable capacity; however, their prominence clearly diminishes, declining by a quarter by 2030 within the NZE framework and experiencing a precipitous decline thereafter. Unabated coal-fired power, currently the most substantial dispatchable source, anticipates a decline exceeding 40% in operational capacity by 2030 and approaches a state of negligible contribution by the early 2040s. Conversely, the unabated natural gas-fired power capacity exhibits a sustained level of stability until 2030, primarily driven by the necessity to offset the diminishing role of coal; nonetheless, it subsequently undergoes a rapid descent throughout the 2030s. Oil, constituting a comparatively minor contributor, experiences rapid phasing out across most regions, except for remote locales, within the delineated scenario (Makarov et al., 2023; Ren et al., 2024). Figure 4 highlights the global capacity of dispatchable power categorized by category in the scenario of achieving NZE by 2050.   In this context, fossil fuels equipped with Carbon Capture, Utilization, and Storage (CCUS) technology have emerged as notable contributors to bolstering system adequacy. Yet, nuclear power remains a steady contributor to the power system flexibility. In advanced economies, the proportion of hour-to-hour flexibility is projected to increase from approximately 2% to 5% by 2050. Similarly, in EMDEs, this ratio is anticipated to increase from 1% to 3% over the same temporal span (Jenkins et al., 2018). It is worth highlighting that in France, where nuclear power fulfills the lion's share of electricity generation requisites, flexibility has been ingrained within reactor designs (Ho et al., 2019). This feature enables certain plants to swiftly modulate their output to align with the fluctuating electricity supply and demand, operating in a load-following mode (Chen, 2024; Jin and Bae, 2023; Kanugrahan and Hakam, 2023). Although many nations have not habitually engaged nuclear power in such operational dynamics, a considerable number of reactors are capable of performing load-following operations with minimal or no requisite technical adaptations (Caciuffo et al., 2020). Figure 5 demonstrates the hour-to-hour power system flexibility based on the source and regional grouping in the NZE by the 2050 scenario.   Innovation holds promise in enhancing the flexibility of nuclear power. Advanced technological advancements, such as SMRs, can facilitate nuclear reactors to adjust their electricity output with greater ease, as illustrated in Figure 6 (Ho et al., 2019; Lee, 2024; Wisnubroto et al., 2023). Moreover, these technologies offer the prospect of enabling reactors to transition toward generating heat or producing hydrogen either independently or concurrently with electricity generation. Initiatives are underway to disseminate information to policymakers and planners regarding the potential cost advantages associated with enhancing nuclear power flexibility.  Figure 6 demonstrates the nuclear system augmented by wind turbines for trigeneration.   Investment in nuclear power The renaissance of nuclear power within the NZE trajectory necessitates a substantial surge in investment in the coming decades. This surge is envisaged to encompass the construction of new nuclear reactors and extension of operational lifespans for existing facilities. Within this scenario, annual global investment in nuclear power is poised to escalate to exceed US$100 billion during the initial half of the 2030s within the NZE framework, surpassing the threefold average investment level of US$30 billion recorded during the 2010s (IEA, 2022). Subsequently, investment levels are expected to gradually decline as the imperative for dispatchable low emissions generating capacity diminishes, tapering to approximately US$70 billion by the latter half of the 2040s (Kharitonov and Semenova, 2023; Zimmermann and Keles, 2023). Over the period spanning from 2021 to 2050, the allocation of investment toward nuclear power constitutes a fraction representing less than 10% of the aggregate investment dedicated to low-emission sources of electricity (IEA, 2022). By comparison, within this framework, the annual investment in renewable energy experiences a notable escalation, escalating from an average of US$325 billion during the interval from 2016 to 2020 to US$1.3 trillion during the period 2031–2035 (EEDP, 2023; Rekik and El Alimi, 2024d). It is worth noting that the latter consideration elucidates the rationale behind the disproportionate allocation of investment toward advanced economies in later decades. China, for instance, requires an annual expenditure averaging close to US$20 billion on nuclear infrastructure by 2050, representing a nearly twofold increase compared to the average observed during the 2010s (Aghahosseini et al., 2023; Vujić et al., 2012). Conversely, other EMDEs witness a tripling of investment, reaching approximately US$25 billion per year, on average. In contrast to advanced economies, the imperative for investment in these nations is more pronounced in the period leading up to 2035 (Bhattacharyya et al., 2023; Khaleel et al., 2024). Thus, nuclear energy, despite its advantages as a low-carbon energy source, faces notable challenges. High capital costs and long deployment timelines, driven by complex construction and regulatory requirements, often hinder its adoption. The management of radioactive waste remains a costly and contentious issue, while safety concerns, shaped by historical incidents, continue to influence public perception. Additionally, reliance on uranium, with its geographically concentrated supply, raises geopolitical and environmental concerns. Nuclear power also competes with the rapidly advancing and cost-effective renewable energy sector, while decommissioning aging plants poses long-term financial and logistical burdens. Addressing these limitations through advanced technologies, public engagement, and international collaboration is crucial for enhancing nuclear energy's role in sustainable energy transitions. Technologies for sustainability in nuclear energy production The pursuit of sustainability in nuclear energy production has been supported by advancements in innovative technologies that enhance efficiency, safety, and environmental compatibility (Aktekin et al., 2024; Ali et al., 2024; Zheng et al., 2024; Khan et al., 2017). These technologies are crucial for positioning nuclear power as a key contributor to clean and sustainable energy transitions. Below are some of the most impactful technologies in this domain: Advanced nuclear reactors: Small modular reactors (SMRs): SMRs are compact, scalable, and safer than traditional large-scale reactors. Their modular design allows for deployment in remote locations, making them suitable for decentralized energy systems. Generation IV reactors: These reactors incorporate advanced cooling systems and fuel cycles to improve efficiency, safety, and waste reduction. Examples include sodium-cooled fast reactors and gas-cooled fast reactors. Thorium-based reactors: Thorium fuel cycle reactors use thorium-232 as an alternative to uranium, offering a more abundant and sustainable fuel source. Thorium reactors produce less nuclear waste and have a lower risk of proliferation. Fusion energy: Although still in the experimental stage, nuclear fusion promises to be a game-changing technology. Fusion produces minimal radioactive waste and harnesses abundant fuel sources like deuterium and tritium, making it a virtually limitless and clean energy solution. Molten salt reactors (MSRs): MSRs use liquid fuels or coolants, such as molten salts, which operate at lower pressures and higher temperatures. These reactors are inherently safer and have the capability to utilize a variety of fuel types, including spent nuclear fuel and thorium. Reactor safety enhancements: Passive safety systems: These systems enhance reactor safety by using natural forces like gravity, natural convection, or condensation to cool the reactor core without human intervention. Digital twin technologies: Digital simulations and monitoring of reactor systems allow for predictive maintenance and real-time safety management. Nuclear waste management technologies Fast reactors: These reactors can recycle spent fuel, reducing the volume and radioactivity of nuclear waste. Deep geological repositories: Advances in geotechnical engineering have improved the safety of long-term waste storage in deep geological formations. Hybrid nuclear-renewable systems: Combining nuclear power with renewable energy sources like wind and solar can optimize energy production and grid stability. Hybrid systems leverage the reliability of nuclear energy with the intermittency of renewables for a balanced, low-carbon energy mix. Artificial intelligence (AI) and machine learning: AI and machine learning technologies are being deployed to enhance reactor performance, optimize fuel usage, and improve operational safety. Predictive analytics also play a critical role in maintenance and risk assessment. Fuel advancements: High-assay low-enriched uranium (HALEU): HALEU fuels enable reactors to operate more efficiently and reduce waste. Accident-tolerant fuels (ATFs): These are designed to withstand extreme conditions, reducing the likelihood of core damage during accidents. Integrated energy systems: Nuclear reactors are increasingly being used for purposes beyond electricity generation, such as hydrogen production, district heating, and desalination. The integration of digital technologies, including AI and machine learning, coupled with fuel advancements like HALEU and accident-tolerant fuels, highlights the continuous evolution of the nuclear sector. These innovations not only enhance efficiency and safety but also expand the applications of nuclear energy beyond electricity generation to include hydrogen production, desalination, and district heating. Despite these technological advancements, the sustainable deployment of nuclear energy requires robust policy frameworks, increased investments, and public acceptance. Addressing these challenges is critical to unlocking the full potential of nuclear power in achieving global energy security and NZE by 2050. [...] Discussion and policy implications Nuclear power presents a compelling case as a sustainable energy source owing to its several key advantages. Its high-energy density allows for substantial electricity generation from minimal fuel, enabling continuous operation, unlike intermittent renewables, such as solar and wind (Rekik and El Alimi, 2023a, 2023b), thus contributing significantly to grid stability (Cramer et al., 2023). Furthermore, nuclear power is a crucial tool for emissions reduction, boasting virtually no greenhouse gas emissions during operation. Although lifecycle emissions associated with fuel processing and plant construction exist, they remain comparable to or lower than those of renewables. Several studies have reported on the energy production capabilities of nuclear power and its contribution to reducing greenhouse gas emissions compared to other energy sources. A key aspect of these analyses is quantifying the potential contribution of nuclear power to reducing greenhouse gas emissions and achieving net zero targets. However, direct comparison of reported data can be challenging due to variations in model assumptions, geographic scope, and time horizons.  [...] From another perspective, radioactive waste generation poses a significant challenge to nuclear power because of its long-term hazardous nature. This necessitates meticulous management and disposal strategies to mitigate potential social impacts. These impacts arise from perceived or actual risks to human health and the environment, fueling public anxiety and opposition to nuclear power, which is often expressed through protests and legal action (Kyne and Bolin, 2016; Nilsuwankosit, 2017; Ram Mohan and Namboodhiry, 2020). Additionally, communities near waste sites can experience stigmatization, resulting in decreased property values and social isolation. The persistent nature of radioactive waste also raises intergenerational equity issues, burdening future generations with its management (Deng et al., 2020; Mason-Renton and Luginaah, 2019). Thus, transparent communication and stakeholder engagement are crucial for building public trust and ensuring responsible radioactive waste management (Dungan et al., 2021; Sančanin and Penjišević, 2023). There are various radioactive waste disposal pathways, each with unique social and technical considerations. Deep geological disposal, an internationally favored method for high-level waste disposal, involves burying waste deep underground for long-term isolation. Interim storage provides a secure temporary holding until a permanent solution is obtained (Chapman, 1992; Grambow, 2022). Reprocessing spent nuclear fuel recovers reusable materials, reducing high-level waste but creating lower-level waste. Advanced reactor technologies aim to minimize waste and improve safety, potentially converting long-lived isotopes into shorter-lived isotopes (Dixon et al., 2020; Englert and Pistner, 2023). Choosing a disposal pathway requires careful evaluation of factors, such as waste type and volume, geology, feasibility, cost, and public acceptance, often leading to a combined approach. Ongoing community engagement and addressing concerns are essential to safe and responsible waste management. Effective management and disposal of this waste require advanced technological solutions, robust regulatory frameworks, and long-term planning to ensure safety and sustainability (Abdelsalam et al., 2024; Rekik and El Alimi, 2024a), Moreover, its relatively small land footprint compared to other energy sources, especially solar and wind farms, minimizes the ecosystem impact and makes it a sustainable option in densely populated areas (Poinssot et al., 2016; Sadiq et al., 2022). Nuclear power also enhances energy security by reducing reliance on fossil fuels, which is particularly valuable in countries with limited domestic resources (Cramer et al., 2023; Ichord Jr., 2022). Additionally, nuclear power exhibits synergy with other clean technologies, providing a stable baseload complementing variable renewables and facilitating hydrogen production for diverse energy applications (Abdelsalam et al., 2024; El-Emam and Subki, 2021; Salam and Khan, 2018; Rekik, 2024; Rekik and El Alimi, 2024e). Finally, ongoing advancements in reactor design, such as SMRs, promise enhanced safety, reduced costs, and greater deployment flexibility, further solidifying the role of nuclear power in decarbonizing the electricity sector (Aunedi et al., 2023). Supportive policies and international cooperation are essential for fully realizing the potential of nuclear energy. Streamlined licensing and regulatory frameworks are crucial for reducing deployment time and costs and ensuring that safety standards are met efficiently (Gungor and Sari, 2022; Jewell et al., 2019). Furthermore, incentivizing investments through financial tools such as tax credits and loan guarantees can attract private capital and create a level-playing field for nuclear power (Decker and Rauhut, 2021; Nian and Hari, 2017; Zimmermann and Keles, 2023). Addressing public perception through education and engagement is equally important for building trust and acceptance. Moreover, international cooperation is vital in several respects. The disposal of radioactive waste remains a complex issue, requiring careful long-term management and securing geological repositories to prevent environmental contamination owing to the long half-life of some isotopes. Furthermore, while modern reactors incorporate advanced safety features, the potential for accidents such as Chernobyl and Fukushima remains a concern because of the potential for widespread radiation release and long-term health consequences (Denning and Mubayi, 2016; Högberg, 2013; Wheatley et al., 2016). Moreover, the high initial costs associated with design, construction, and licensing present significant barriers to new nuclear projects, particularly in developing countries. In addition, the risk of nuclear proliferation, in which technology intended for peaceful energy production is diverted for weapons development, necessitates stringent international safeguards, as highlighted by following reference. Public perception also plays a crucial role because negative opinions and concerns about safety and waste disposal can create opposition to new projects. Finally, the decommissioning of nuclear plants at the end of their operational life is a complex and costly process that requires substantial resources and expertise to dismantle reactors and manage radioactive materials. [...] Conclusion The role of nuclear power in sustainable energy transition is multifaceted and significant. As nations worldwide strive to transition toward more environmentally friendly energy systems, nuclear power has emerged as a crucial component of the decarbonization journey. Its capacity to provide low-carbon electricity, mitigate climate change, and contribute to energy security underscores its importance in the broader context of sustainable energy transitions. Despite this, challenges such as safety, waste management, and public perception must be addressed to fully harness the potential of nuclear power to achieve sustainability goals. By leveraging policy frameworks, technological innovations, and international cooperation, nuclear power can play a vital role in shaping the future of sustainable energy transition on a global scale. In this context, EMDEs exert a substantial influence on global growth, collectively accounting for over 90% of the aggregate, with China positioned to emerge as the foremost nuclear power producer before 2030. Concurrently, advanced economies have witnessed a notable 10% increase in their nuclear power capacity. This augmentation is attributed to the commissioning of new facilities, which offset retirements, manifestly observed in nations such as the United States, France, the United Kingdom, and Canada. Furthermore, there is a marked escalation in annual global investment in nuclear power, surging from US$30 billion throughout the 2010s to surpass US$100 billion by 2030. This upward trajectory is robustly sustained, remaining above US$80 billion by 2050. In conclusion, the remarkable decline in the levelized cost of electricity (LCOE) for solar PV and wind power over the past decade has positioned renewable energy as a cost-competitive and viable alternative to fossil fuels in many regions. The over 80% reduction in LCOE for utility-scale solar PV from 2010 to 2022 exemplifies the economic feasibility of renewables. Concurrently, the steady growth in renewable energy capacity, spearheaded by solar and wind energy, underscores their critical role in the global energy transition. With renewable electricity capacity surpassing 3300 GW in 2023 and accounting for over one-third of the global power mix, renewable energy is undeniably at the forefront of efforts to achieve a sustainable, low-carbon energy future. Declaration of conflicting interestsThe authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.FundingThe authors received no financial support for the research, authorship, and/or publication of this article.ORCID iDSassi Rekik https://orcid.org/0000-0001-5224-4152Supplemental materialSupplemental material for this article is available online.ReferencesAbbasi K, Jiao Z, Shahbaz M, et al. (2020) Asymmetric impact of renewable and non-renewable energy on economic growth in Pakistan: New evidence from a nonlinear analysis. Energy Exploration & Exploitation 38(5): 1946–1967. Crossref. Web of Science.Abdelsalam E, Almomani F, Azzam A, et al. (2024) Synergistic energy solutions: Solar chimney and nuclear power plant integration for sustainable green hydrogen, electricity, and water production. Process Safety and Environmental Protection 186: 756–772. Crossref. Web of Science.Addo EK, Kabo-bah AT, Diawuo FA, et al. (2023) The role of nuclear energy in reducing greenhouse gas (GHG) emissions and energy security: A systematic review. International Journal of Energy Research 2023(1): 8823507.Aghahosseini A, Solomon AA, Breyer C, et al. (2023) Energy system transition pathways to meet the global electricity demand for ambitious climate targets and cost competitiveness. Applied Energy 331: 120401. Crossref. Web of Science.Ake SC, Arango FO, Ruiz RSG (2024) Possible paths for Mexico’s electricity system in the clean energy transition. Utilities Policy 87: 101716. Crossref. Web of Science.Aktekin M, Genç MS, Azgın ST, et al. (2024) Assessment of techno-economic analyzes of grid-connected nuclear and PV/wind/battery/hydrogen renewable hybrid system for sustainable and clean energy production in Mersin-Türkiye. Process Safety and Environmental Protection: Transactions of the Institution of Chemical Engineers, Part B 190: 340–353. Crossref. Web of Science.Alam F, Sarkar R, Chowdhury H (2019) Nuclear power plants in emerging economies and human resource development: A review. Energy Procedia 160: 3–10. Crossref.Ali M, Samour A, Soomro SA, et al. (2024) A step towards a sustainable environment in top-10 nuclear energy consumer countries: The role of financial globalization and nuclear energy. Nuclear Engineering and Technology 103142: 103142.Arvanitidis AI, Agarwal V, Alamaniotis M (2023) Nuclear-driven integrated energy systems: A state-of-the-art review. Energies 16(11): 4293. Crossref. Web of Science.Asif M, Solomon B, Adulugba C (2024) Prospects of nuclear power in a sustainable energy transition. Arabian Journal for Science and Engineering: 1–11. Crossref. Web of Science.Aunedi M, Al Kindi AA, Pantaleo AM, et al. (2023) System-driven design of flexible nuclear power plant configurations with thermal energy storage. Energy Conversion and Management 291: 117257. Crossref. Web of Science.Bhattacharya S, Banerjee R, Ramadesigan V, et al. (2024) Bending the emission curve—The role of renewables and nuclear power in achieving a net-zero power system in India. Renewable and Sustainable Energy Reviews 189: 113954. Crossref. Web of Science.Bhattacharyya R, El-Emam RS, Khalid F (2023) Climate action for the shipping industry: Some perspectives on the role of nuclear power in maritime decarbonization. E-Prime-Advances in Electrical Engineering, Electronics and Energy 4(2023): 100132. Crossref.Bórawski P, Bełdycka-Bórawska A, Klepacki B, et al. (2024) Changes in gross nuclear electricity production in the European union. Energies 17(14): 3554. Crossref. Web of Science.Budnitz RJ, Rogner HH, Shihab-Eldin A (2018) Expansion of nuclear power technology to new countries–SMRs, safety culture issues, and the need for an improved international safety regime. Energy Policy 119: 535–544. Crossref. Web of Science.Caciuffo R, Fazio C, Guet C (2020) Generation-IV nuclear reactor systems. EPJ Web of Conferences 246: 00011. Crossref.Cai ZB, Li ZY, Yin MG, et al. (2020) A review of fretting study on nuclear power equipment. Tribology International 144: 106095. Crossref. Web of Science.Chapman NA (1992) Natural radioactivity and radioactive waste disposal. Journal of Volcanology and Geothermal Research 50(1–2): 197–206. Crossref. Web of Science.Chen CC (2024) Comparative impacts of energy sources on environmental quality: A five-decade analysis of Germany’s Energiewende. Energy Reports 11: 3550–3561. Crossref. Web of Science.Cramer C, Lacivita B, Laws J, et al. (2023) What will it take for nuclear power to meet the climate challenge? Columbus, Atlanta, Boston, Houston, Toronto: McKinsey & Company. https://www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/what-will-it-take-for-nuclear-power-to-meet-the-climate-challenge.Dafnomilis I, den Elzen M, Van Vuuren DP (2023) Achieving net-zero emissions targets: An analysis of long- term scenarios using an integrated assessment model. Annals of the New York Academy of Sciences 1522(1): 98–108. Crossref. PubMed. Web of Science.Decker D, Rauhut K (2021) Incentivizing good governance beyond regulatory minimums: The civil nuclear sector. Journal of Critical Infrastructure Policy 2(2): 19–43. Crossref.Deng D, Zhang L, Dong M, et al. (2020) Radioactive waste: A review. Water Environment Research: A Research Publication of the Water Environment Federation 92(10): 1818–1825. Crossref. PubMed. Web of Science.Denning R, Mubayi V (2016) Insights into the societal risk of nuclear power plant accidents. Risk Analysis 37(1): 160–172. Crossref. PubMed. Web of Science.Dixon B, Hoffman E, Feng B, et al. (2020) Reassessing methods to close the nuclear fuel cycle. Annals of Nuclear Energy 147: 107652. Crossref. Web of Science.Dungan K, Gregg RWH, Morris K, et al. (2021) Assessment of the disposability of radioactive waste inventories for a range of nuclear fuel cycles: Inventory and evolution over time. Energy 221: 119826. Crossref. Web of Science.El-Emam RS, Subki MH (2021) Small modular reactors for nuclear-renewable synergies: Prospects and impediments. International Journal of Energy Research 45(11): 16995–17004. Crossref. Web of Science.El Hafdaoui H, Khallaayoun A, Ouazzani K. (2024) Long-term low carbon strategy of Morocco: A review of future scenarios and energy measures. Results in Engineering 21: 101724. Crossref. Web of Science.Englert M, Pistner C (2023) Technological readiness of alternative reactor concepts. Safety of Nuclear Waste Disposal 2: 209–209. Crossref.Espín J, Estrada S, Benítez D, et al. (2023) A hybrid sliding mode controller approach for level control in the nuclear power plant steam generators. Alexandria Engineering Journal 64: 627–644. Crossref. Web of Science.European Economy Discussion Papers (EEDP) (2023) The development of renewable energy in the electricity market. Available at: https://economy-finance.ec.europa.eu/ecfin-publications_en.Fälth HE, Atsmon D, Reichenberg L, et al. (2021) MENA compared to Europe: The influence of land use, nuclear power, and transmission expansion on renewable electricity system costs. Energy Strategy Reviews 33: 100590. Crossref. Web of Science.Fernández-Arias P, Vergara D, Antón-Sancho Á (2023) Global review of international nuclear waste management. Energies 16(17): 6215. Crossref. Web of Science.Fragkos P, Van Soest HL, Schaeffer R, et al. (2021) Energy system transitions and low-carbon pathways in Australia, Brazil, Canada, China, EU-28, India, Indonesia, Japan, Republic of Korea, Russia and the United States. Energy 216: 119385. Crossref. Web of Science.Frilingou N, Xexakis G, Koasidis K, et al. (2023) Navigating through an energy crisis: Challenges and progress towards electricity decarbonisation, reliability, and affordability in Italy. Energy Research & Social Science 96: 102934. Crossref. Web of Science.Grambow B (2022) Mini review of research requirements for radioactive waste management including disposal. Frontiers in Nuclear Engineering 1: 1052428. Crossref.Guidi G, Violante AC, De Iuliis S (2023) Environmental impact of electricity generation technologies: A comparison between conventional, nuclear, and renewable technologies. Energies 16(23): 7847. Crossref. PubMed. Web of Science.Gungor G, Sari R (2022) Nuclear power and climate policy integration in developed and developing countries. Renewable and Sustainable Energy Reviews 169: 112839. Crossref. Web of Science.Halkos G, Zisiadou A (2023) Energy crisis risk mitigation through nuclear power and RES as alternative solutions towards self-sufficiency. Journal of Risk and Financial Management 16(1): 45. Crossref. Web of Science.Haneklaus N, Qvist S, Gładysz P, et al. (2023) Why coal-fired power plants should get nuclear-ready. Energy 280: 128169. Crossref. Web of Science.Hickey SM, Malkawi S, Khalil A (2021) Nuclear power in the Middle East: Financing and geopolitics in the state nuclear power programs of Turkey, Egypt, Jordan and the United Arab Emirates. Energy Research & Social Science 74: 101961. Crossref. Web of Science.Ho M, Obbard E, Burr PA, et al. (2019) A review on the development of nuclear power reactors. Energy Procedia 160: 459–466. Crossref.Högberg L (2013) Root causes and impacts of severe accidents at large nuclear power plants. AMBIO 42(3): 267–284. Crossref. PubMed. Web of Science.Hunter CA, Penev MM, Reznicek EP, et al. (2021) Techno-economic analysis of long-duration energy storage and flexible power generation technologies to support high-variable renewable energy grids. Joule 5(8): 2077–2101. Crossref. Web of Science.Ichord RF Jr (2022) Nuclear energy and global energy security in the new tripolar world order. Available at: https://www.atlanticcouncil.org/blogs/energysource/nuclear-energy-and-global-energy-security-in-the-new-tripolar-world-order/.International Energy Agency (IEA) (2019) Nuclear power in a clean energy system, OECD Publishing, Paris. Available at: Crossref.International Energy Agency (IEA) (2022) Nuclear power and secure energy transitions, IEA, Paris. Available at: https://www.iea.org/reports/nuclearpower-and-secure-energy-transitions.Islam MM, Shahbaz M, Samargandi N (2024) The nexus between Russian uranium exports and US nuclear-energy consumption: Do the spillover effects of geopolitical risks matter? Energy 293: 130481. Crossref. Web of Science.Islam MS, Roy S, Alfee SL, et al. (2023) An empirical study of the risk-benefit perceptions between the nuclear and non-nuclear groups towards the nuclear power plant in Bangladesh. Nuclear Engineering and Technology 55(12): 4617–4627. Crossref. Web of Science.Jenkins JD, Zhou Z, Ponciroli R, et al. (2018) The benefits of nuclear flexibility in power system operations with renewable energy. Applied Energy 222: 872–884. Crossref. Web of Science.Jewell J, Ates SA (2015) Introducing nuclear power in Turkey: A historic state strategy and future prospects. Energy Research & Social Science 10: 273–282. Crossref. Web of Science.Jewell J, Vetier M, Garcia-Cabrera D (2019) The international technological nuclear cooperation landscape: A new dataset and network analysis. Energy Policy 128: 838–852. Crossref. Web of Science.Jin B, Bae Y (2023) Prospective research trend analysis on zero-energy building (ZEB): An artificial intelligence approach. Sustainability 15(18): 13577. Crossref. Web of Science.Kanugrahan SP, Hakam DF (2023) Long-term scenarios of Indonesia power sector to achieve nationally determined contribution (NDC) 2060. Energies 16(12): 4719. Crossref. Web of Science.Khaleel M, Yusupov Z, Guneser M, et al. (2024) Towards hydrogen sector investments for achieving sustainable electricity generation. Journal of Solar Energy and Sustainable Development 13(1): 71–96. Crossref.Khalid F, Bicer Y (2019) Energy and exergy analyses of a hybrid small modular reactor and wind turbine system for trigeneration. Energy Science & Engineering 7(6): 2336–2350. Crossref. Web of Science.Khan SU-D, Khan SU-D, Haider S, et al. (2017) Development and techno-economic analysis of small modular nuclear reactor and desalination system across Middle East and North Africa region. Desalination 406: 51–59. Crossref. Web of Science.Kharitonov VV, Semenova DY (2023) On the economic efficiency of nuclear power digitization under the conditions of global energy transition. Studies on Russian Economic Development 34(2): 221–230. Crossref.Kim P, Yasmine H, Yim MS, et al. (2024) Challenges in nuclear energy adoption: Why nuclear energy newcomer countries put nuclear power programs on hold? Nuclear Engineering and Technology 56(4): 1234–1243. Crossref. Web of Science.Kosai S, Unesaki H (2024) Nuclear power, resilience, and energy security under a vulnerability-based approach. Cleaner Energy Systems 7: 100107. Crossref.Kröger W, Sornette D, Ayoub A (2020) Towards safer and more sustainable ways for exploiting nuclear power. World Journal of Nuclear Science and Technology 10(3): 91–115. Crossref.Krūmiņš J, Kļaviņš M (2023) Investigating the potential of nuclear energy in achieving a carbon-free energy future. Energies 16(9): 3612. Crossref. Web of Science.Kwasi S, Cilliers J, Yeboua K, et al. (2025) A developing country’s perspective on race to sustainability: Sustainability for countries with weak economic performance—Case study: Egypt’s challenge and opportunities to 2050. In: The Sustainability Handbook, Volume 1. Elsevier, 511–569. Crossref.Kyne D, Bolin B (2016) Emerging environmental justice issues in nuclear power and radioactive contamination. International Journal of Environmental Research and Public Health 13: 00. Crossref. Web of Science.Lau HC, Tsai SC (2023) Global decarbonization: Current status and what it will take to achieve net zero by 2050. Energies 16(23): 7800. Crossref. Web of Science.Lee JI (2024) Review of small modular reactors: Challenges in safety and economy to success. Korean Journal of Chemical Engineering 41: 2761–2780. Crossref. Web of Science.Li N, Brossard D, Anderson AA, et al. (2016) How do policymakers and think tank stakeholders prioritize the risks of the nuclear fuel cycle? A semantic network analysis. Journal of Risk Research 21(5): 599–621. Crossref. Web of Science.Li N, Brossard D, Su LYF, et al. (2015) Policy decision-making, public involvement and nuclear energy: What do expert stakeholders think and why? Journal of Responsible Innovation 2(3): 266–279. Crossref.Lin B, Xie Y (2022) Analysis on operational efficiency and its influencing factors of China’s nuclear power plants. Energy 261: 125211. Crossref. Web of Science.Liu L, Guo H, Dai L, et al. (2023) The role of nuclear energy in the carbon neutrality goal. Progress in Nuclear Energy 162: 104772. Crossref. Web of Science.Makarov V, Kaplin M, Perov M, et al. (2023) Optimization of coal products supply for the power industry and the country’s economy. In: Studies in Systems, Decision and Control, Cham: Springer Nature Switzerland, pp.87–98.Markard J, Bento N, Kittner N, et al. (2020) Destined for decline? Examining nuclear energy from a technological innovation systems perspective Energy Research & Social Science 67: 101512. Crossref. Web of Science.Marzouk OA (2024) Expectations for the role of hydrogen and its derivatives in different sectors through analysis of the four energy scenarios: IEA-STEPS, IEA-NZE, IRENA- PES, and IRENA-1.5°C. Energies 17(3): 46. Crossref. Web of Science.Mason-Renton SA, Luginaah I (2019) Lasting impacts and perceived inequities: Community reappraisal of the siting of a regional biosolids processing facility in rural Ontario. Journal of Risk Research 22(8): 1044–1061. Crossref. Web of Science.Mathew MD (2022) Nuclear energy: A pathway towards mitigation of global warming. Progress in Nuclear Energy 143: 104080. Crossref. Web of Science.Mendelevitch R, Kemfert C, Oei PY, et al. (2018) The electricity mix in the European low-carbon transformation: Coal, nuclear, and renewables. In: Energiewende “Made in Germany”. Cham: Springer International Publishing, 241–282. Crossref.Moon HS, Song YH, Lee JW, et al. (2024) Implementation cost of net zero electricity system: Analysis based on Korean national target. Energy Policy 188: 114095. Crossref. Web of Science.Murphy C, Cole W, Bistline J, et al. (2023) Nuclear power’s future role in a decarbonized US electricity system (No. NREL/TP-6A20-84451). National Renewable Energy Laboratory (NREL), Golden, CO (United States).Nassar YF, El-Khozondar HJ, El-Osta W, et al. (2024) Carbon footprint and energy life cycle assessment of wind energy industry in Libya. Energy Conversion and Management 300: 117846. Crossref. Web of Science.Nian V, Hari MP (2017) Incentivizing the adoption of nuclear and renewable energy in Southeast Asia. Energy Procedia 105: 3683–3689. Crossref.Nicolau AS, Cabral Pinheiro VH, Schirru R, et al. (2023) Deep neural networks for estimation of temperature values for thermal ageing evaluation of nuclear power plant equipment. Progress in Nuclear Energy 156: 104542. Crossref. Web of Science.Nilsuwankosit S (2017) Report on feasibility study for radiation alarming data collection from containers at Laem Cha Bang International Sea Port, Thailand. Volume 4: Nuclear Safety, Security, Non-Proliferation and Cyber Security; Risk Management. American Society of Mechanical Engineers.Nkosi NP, Dikgang J (2021) South African attitudes about nuclear power: The case of the nuclear energy expansion. International Journal of Energy Economics and Policy 11(5): 138–146. Crossref.Nnabuife SG, Oko E, Kuang B, et al. (2023) The prospects of hydrogen in achieving net zero emissions by 2050: A critical review. Sustainable Chemistry for Climate Action 2: 100024. Crossref. Web of Science.Nuclear Energy Agency (NEA) (2015) Nuclear energy: Combating climate change. Available at: https://www.oecd-nea.org/jcms/pl_14914.Obekpa HO, Alola AA (2023) Asymmetric response of energy efficiency to research and development spending in renewables and nuclear energy usage in the United States. Progress in Nuclear Energy 156: 104522. Crossref. Web of Science.Orikpete OF, Ewim DRE (2024) Interplay of human factors and safety culture in nuclear safety for enhanced organisational and individual performance: A comprehensive review. Nuclear Engineering and Design 416: 112797. Crossref. Web of Science.Oxford Institute for Energy Studies (OIES) (2024) Nuclear energy in the global energy landscape: Advancing sustainability and ensuring energy security? Available at: https://www.oxfordenergy.org/wpcms/wp-content/uploads/2024/02/OEF-139-.pdf.Pan B, Adebayo TS, Ibrahim RL, et al. (2023) Does nuclear energy consumption mitigate carbon emissions in leading countries by nuclear power consumption? Evidence from quantile causality approach Energy & Environment 34(7): 2521–2543. Crossref. Web of Science.Pinho BE, Oliva JDJR, Maia Y L (2024) An approach for evaluation of the spent nuclear fuel management strategy for Brazilian nuclear power plants based on multi-criteria decision-making methodology. Nuclear Engineering and Design 424: 113186. Crossref. Web of Science.Pioro I, Duffey RB, Kirillov PL, et al. (2019) Current status and future developments in nuclear-power industry of the world. Journal of Nuclear Engineering and Radiation Science 5(2): 024001. Crossref.Poinssot C, Bourg S, Boullis B (2016) Improving the nuclear energy sustainability by decreasing its environmental footprint. Guidelines from life cycle assessment simulations. Progress in Nuclear Energy 92: 234–241. Crossref. Web of Science.Price J, Keppo I, Dodds PE (2023) The role of new nuclear power in the UK’s net-zero emissions energy system. Energy 262: 125450. Crossref. Web of Science.Ragosa G, Watson J, Grubb M (2024) The political economy of electricity system resource adequacy and renewable energy integration: A comparative study of Britain, Italy and California. Energy Research & Social Science 107: 103335. Crossref. PubMed. Web of Science.Raj AX (2023) Human reliability design—an approach for nuclear power plants in India. In: Risk, Reliability and Safety Engineering. Singapore: Springer Nature Singapore, 167–186.Ram Mohan MP, Namboodhiry SK (2020) An exploration of public risk perception and governmental engagement of nuclear energy in India. Journal of Public Affairs 20(3): e2086. Crossref. Web of Science.Rekik S (2024) Optimizing green hydrogen strategies in Tunisia: A combined SWOT-MCDM approach. Scientific African 26: e02438. Crossref. Web of Science.Rekik S, El Alimi S (2023a) Land suitability mapping for large-scale solar PV farms in Tunisia using GIS-based MCDM approach. In: 2023 IEEE International Conference on Artificial Intelligence & Green Energy (ICAIGE), pp.1–5: IEEE.Rekik S, El Alimi S (2023b) Wind site selection using GIS and MCDM approach under fuzzy environment: A case of Tunisia. In: 2023 IEEE International Conference on Artificial Intelligence & Green Energy (ICAIGE), pp.1–5: IEEE.Rekik S, El Alimi S (2024a) Prioritizing sustainable renewable energy systems in Tunisia: An integrated approach using hybrid multi-criteria decision analysis. Energy Exploration & Exploitation 42(3): 1047–1076. Crossref. Web of Science.Rekik S, El Alimi S (2024b) Unlocking renewable energy potential: A case study of solar and wind site selection in the Kasserine region, central-western Tunisia. Energy Science & Engineering 12(3): 771–792. Crossref. Web of Science.Rekik S, El Alimi S (2024c) A spatial perspective on renewable energy optimization: Case study of southern Tunisia using GIS and multicriteria decision making. Energy Exploration & Exploitation 42(1): 265–291. Crossref. Web of Science.Rekik S, El Alimi S (2024d) A GIS based MCDM modelling approach for evaluating large-scale solar PV installation in Tunisia. Energy Reports 11: 580–596. Crossref. Web of Science.Rekik S, El Alimi S (2024e) A spatial ranking of optimal sites for solar-driven green hydrogen production using GIS and multi-criteria decision-making approach: A case of Tunisia. Energy Exploration & Exploitation 42(6): 2150–2190. Crossref. Web of Science.Ren Y, Li G, Wang H, et al. (2024) China’s zero-coal power system future. International Journal of Electrical Power & Energy Systems 156: 109748. Crossref. Web of Science.Ruhnau O, Stiewe C, Muessel J, et al. (2023) Natural gas savings in Germany during the 2022 energy crisis. Nature Energy 8(6): 621–628. Crossref. Web of Science.Sadiq M, Shinwari R, Wen F, et al. (2023) Do globalization and nuclear energy intensify the environmental costs in top nuclear energy-consuming countries? Progress in Nuclear Energy 156: 104533. Crossref. Web of Science.Sadiq M, Wen F, Dagestani AA (2022) Environmental footprint impacts of nuclear energy consumption: The role of environmental technology and globalization in ten largest ecological footprint countries. Nuclear Engineering and Technology 54(10): 3672–3681. Crossref. Web of Science.Salam MA, Khan SA (2018) Transition towards sustainable energy production – A review of the progress for solar energy in Saudi Arabia. Energy Exploration & Exploitation 36(1): 3–27. Crossref. Web of Science.Sančanin B, Penjišević A (2023) Safe management of medical radiological waste. MEDIS - International Journal of Medical Sciences and Research 2(2): 7–13. Crossref.Temiz M, Dincer I (2021) Enhancement of a nuclear power plant with a renewable based multigenerational energy system. International Journal of Energy Research 45(8): 12396–12412. Crossref. Web of Science.Therme C (2023) French nuclear policy towards Iran: From the Shah to the Islamic Republic. Diplomacy & Statecraft 34(1): 117–139. Crossref. Web of Science.Utami I, Riski MA, Hartanto DR (2022) Nuclear power plants technology to realize net zero emission 2060. International Journal of Business Management and Technology 6(1): 158–162.Vujić J, Bergmann RM, Škoda R, et al. (2012) Small modular reactors: Simpler, safer, cheaper? Energy 45(1): 288–295. Crossref. Web of Science.Wagner F (2021) CO2 Emissions of nuclear power and renewable energies: A statistical analysis of European and global data. The European Physical Journal Plus 136(5): 62. Crossref. Web of Science.Wang Z, He Y, Duan Z, et al. (2023) Experimental study on transient flow characteristics in an equal-height-difference passive heat removal system for ocean nuclear power plants. International Journal of Heat and Mass Transfer 208: 124043. Crossref. Web of Science.Wheatley S, Sovacool B, Sornette D (2016) Of disasters and dragon kings: A statistical analysis of nuclear power incidents and accidents. Risk Analysis 37(1): 99–115. Crossref. PubMed. Web of Science.Wisnubroto DS, Sunaryo GR, Susilo YSB, et al. (2023) Indonesia’s experimental power reactor program (RDE). Nuclear Engineering and Design 404: 112201. Crossref. Web of Science.Yamagata H (2024) Public opinion on nuclear power plants in Japan, the United Kingdom, and the United States of America: A prescription for peculiar Japan. Energy Policy 185: 113939. Crossref. Web of Science.Yang X, Xue Y, Cai B (2024) Pathway planning of nuclear power development incorporating assessment of nuclear event risk. Journal of Modern Power Systems and Clean Energy 12(2): 500–513. Crossref. Web of Science.Zhan L, Bo Y, Lin T, et al. (2021) Development and outlook of advanced nuclear energy technology. Energy Strategy Reviews 34: 100630. Crossref. Web of Science.Zhang S, Liu J, Liu X (2022) Comparing the environmental impacts of nuclear and renewable energy in top 10 nuclear- generating countries: Evidence from STIRPAT model. Environmental Science and Pollution Research 30(11): 31791–31805. Crossref. Web of Science.Zheng S, Liu H, Guan W, et al. (2024) How do nuclear energy and stringent environmental policies contribute to achieving sustainable development targets? Nuclear Engineering and Technology 56(10): 3983–3992. Crossref. Web of Science.Zimmermann F, Keles D (2023) State or market: Investments in new nuclear power plants in France and their domestic and cross-border effects. Energy Policy 173: 113403. Crossref. Web of Science.

Energy & Economics
Mercosur and European Union agreement flag

Economic integration and convergence in globalization: An analysis of the relations between Mercosur, the Pacific Alliance and the European Union

by Giuseppe Ciccone , Davide Galletti

Abstract Globalization has posed significant challenges for Latin American countries, prompting them to rethink their economic integration models. Mercosur and the Pacific Alliance, the two main regional blocs, have faced processes of economic and political convergence, albeit with different approaches: Mercosur, oriented towards protectionism, and the Pacific Alliance, which is committed to trade liberalization. In this context, the European Union emerges as a key player with which both blocs have sought to strengthen their economic relations, through strategic agreements such as the one signed in 2019, the Mercosur-EU free trade agreement. The article examines the dynamics of economic integration in Latin America, analyzing the structural divergences between the blocs and their capacity to face global challenges. In particular, it delves into the implications of the Mercosur-EU agreement, with special attention to economic impacts, sectoral cooperation opportunities and environmental challenges. The research also includes a case study on the implementation of the agreement and future prospects, complemented by an interview with the Consul of Uruguay to analyze the diplomatic position and prospects for the development of relations between Latin America and the European Union. The objective of this work is to explore how economic integration models can contribute to face global challenges, promote sustainable development and strengthen Latin America's competitiveness in the global scenario Introduction Global Context of Cooperation Between the European Union and Latin America Future cooperation between the European Union (EU) and the main Latin American trade blocs — Mercosur and the Pacific Alliance — is expected to focus on key areas such as sustainability, digitalization, and technological innovation. These sectors are essential for modernizing the involved economies and building a long-term partnership capable of addressing the economic, environmental, and geopolitical challenges of today’s global landscape. One of the main opportunities for cooperation lies in the circular economy. The EU promotes sustainable production and consumption models that aim to reduce waste and optimize resources. This approach paves the way for close collaboration with Latin American countries in waste management and reducing the environmental impact of industrial activities. The potential economic and labor impacts of this collaboration are significant, as it could create new opportunities for innovation and development in strategic sectors. At the same time, digitalization is emerging as a key pillar for the economic transformation of both regions. The EU’s Digital Alliance, for example, aims to strengthen Latin American economies by promoting connectivity, the development of digital skills, and the creation of new technological ecosystems. This effort also includes social inclusion initiatives, targeting vulnerable sectors such as informal workers and the elderly population, to reduce the digital divide and foster social inclusion. Another area of cooperation is maritime transport. The EU intends to invest in advanced and sustainable port infrastructure to improve operational efficiency and reduce the environmental impact of port activities. This initiative aligns with global sustainability goals and the EU’s broader strategy to promote environmentally responsible trade practices. However, cooperation between the EU and Latin American trade blocs also faces challenges. While the Pacific Alliance appears more inclined toward adopting advanced technologies, Mercosur faces significant structural reforms to close the technological gap among its members. Despite these hurdles, the EU is committed to supporting both regions, strengthening its role as an economic and political partner, and promoting a development model that integrates sustainability and inclusiveness. In this context, digitalization, economic modernization, and infrastructure diversification emerge as key elements to address global challenges. These factors are essential for promoting fair and inclusive development in both regions, creating a favorable environment for innovation and sustainable economic growth. The European Union considers Latin America as a strategic partner not only because of its natural resources but also due to shared values, such as the fight against climate change. Within this framework, the EU’s Green Deal and the environmental diplomacy play a crucial role in supporting ecological transition in the region, with a particular focus on renewable energy, the protection of the Amazon, and sustainable agricultural practices. Nevertheless, challenges remain, including the strong influence of traditional economic sectors like agribusiness and limited institutional capacity in some countries. Despite these issues, the EU is working to encourage the adoption of strict environmental standards through investments in sustainable projects and clean technologies, helping to reduce deforestation and improve biodiversity. The cooperation with the Pacific Alliance is particularly strong due to the region’s openness to sustainability, whereas Mercosur faces internal obstacles such as regulatory fragmentation and coordination difficulties among its members. Still, the EU continues to support initiatives in renewable energy, energy efficiency, and the bioeconomy, creating important economic opportunities for the region. Rising geopolitical competition, especially with China and the United States, is pushing the EU to strengthen its ties with Latin America by backing initiatives like the Global Gateway, which aims to promote sustainable and transparent infrastructure. Programs like “Horizon Europe” support scientific development in the region, while initiatives such as Erasmus+ encourage cultural exchange and the training of a new generation of professionals. The EU stands out for its integrated approach, aiming to promote a development model that combines economic growth, social inclusion, and environmental protection—seeking to overcome political and economic barriers and foster effective and mutually beneficial cooperation between the two regions. The main challenge remains translating these ambitions into concrete actions. The adoption of shared standards and the reduction of non-tariff barriers will be key elements in achieving fruitful cooperation. Despite the difficulties, EU–Latin America cooperation has the potential to lead the future toward sustainable and inclusive development, with positive effects on global policy, the ecological transition, and international trade. Methodology The methodology used in the preparation of this article combined extensive documentary research with the collection of primary data through direct interviews. First, documentary research served as the main foundation for analyzing the issues discussed, such as the environmental impacts and diplomatic challenges related to the Association Agreement between the European Union and Mercosur. To that end, official sources were consulted, including documents from the European Commission and reports from the European Parliament, which provide detailed data and analyses on the trade, environmental, and social aspects of the agreement. This phase of the research included a review of institutional reports, political resolutions, and other public documents available online, offering a comprehensive view of regulatory developments and the political positions adopted by European institutions and Mercosur countries. In addition to documentary research, a distinctive element of this work was an interview conducted with the General Consul of Uruguay in Spain, who provided a direct diplomatic perspective on the topic. The interview aimed to gather insights and information on the agreement negotiations from Mercosur’s point of view, exploring the political dynamics and diplomatic challenges associated with the understanding between the two blocs. The topics addressed during the interview focused on how Mercosur perceives the agreement in relation to its economic and environmental priorities, and on the measures being taken to balance development and sustainability within the framework of European policies. Finally, the research methodology was enhanced through the triangulation of information obtained by comparing data from official EU sources with the insights gathered from the interview. This approach enabled the development of a balanced and comprehensive view of the topics discussed. The combination of qualitative methods allowed for an in-depth analysis of the challenges and opportunities arising from the Mercosur–EU Agreement, as well as its social, economic, and environmental implications at the international level. Development Inside the Agreement The free trade agreement between Mercosur and the European Union, signed in 2019 after more than twenty years of negotiations, stands as one of the most ambitious examples of interregional cooperation. This treaty, which aims to create one of the largest free trade areas in the world, involves nearly 770 million people and accounts for around 25% of global Gross Domestic Product (GDP). The significance of the agreement is heightened by the current geopolitical context, marked by a rise in protectionist policies and the growing influence of China, making it crucial to strengthen ties between the two regional blocs (European Commission, 2019).   Trade relations across both sides of the Atlantic are substantial. In the previous year, European exports to the four Mercosur countries amounted to €55.7 billion, while imports of goods totaled €53.8 billion. The roots of cooperation between the European Union and Mercosur go back to the 1990s, when the EU initiated a structured dialogue with Mercosur aimed at promoting trade liberalization, political dialogue, and cooperation in various sectors. The agreement signed in 2019 can be interpreted as a strategic response to increasing global protectionist pressures. However, the ratification process has been hindered by political disagreements, economic asymmetries, and concerns over potential environmental impacts, such as deforestation and pesticide use (López, 2020). The agreement has received support from several EU countries, including Germany, Spain, and Portugal, while others — such as France, Poland, and Ireland — have opposed it due to fears related to unfair competition and food safety. Specifically, the treaty could lead to increased imports of meat and other agricultural products from Mercosur, which raises concern among EU agricultural sectors. At the same time, Mercosur views the agreement as an opportunity to strengthen its international competitiveness and reduce its economic dependence on China and the United States (Pereira, 2021). The path to ratification, still ongoing, requires a lengthy legal process involving approvals by various national parliaments. If ratified, the agreement will help reduce tariffs and simplify customs procedures, benefiting strategic sectors such as industry, chemicals, and pharmaceuticals. However, ongoing disagreements among the involved countries continue to cast uncertainty over the future of the initiative (European Commission, 2019). The future of the free trade agreement between the European Union and Mercosur stands at a critical crossroads, facing the risk of a complete breakdown in negotiations or, alternatively, a "no-deal" scenario. However, between these two extreme outcomes, there are several intermediate solutions, which could include modifications to the treaty’s controversial points or even the possibility of granting a new mandate to the European Commission to renegotiate the agreement — either partially or entirely. Such modifications could lead to significant delays in the progress already made (Brito, 2021). The Portuguese presidency of the EU Council, which began on January 1, 2025, now faces a particularly complex situation as it attempts to steer the process toward a positive conclusion. Portuguese Foreign Minister Augusto Santos Silva has expressed his intent to accelerate the ratification process and promote the agreement’s entry into force. However, resistance from France, which fears negative impacts on its agricultural and livestock sectors, remains a major obstacle. Protests by French farmers, including demonstrations and road blockades, highlight internal difficulties within the European Union (Müller, 2020). Despite this opposition, the European Commission — backed by countries like Spain and Germany — continues to push for the agreement’s ratification, highlighting the enormous economic benefits for both parties. It is estimated that the agreement could result in a €15 billion increase in GDP for the European Union and €11.4 billion for the Mercosur countries. Moreover, the elimination of customs tariffs would boost European exports, particularly in sectors such as wine, alcoholic beverages, and dairy products. For the European Union, the agreement represents not only a strategic opportunity to expand trade with South America but also a mean to strengthen its economic security amid an unstable geopolitical context (European Commission, 2021). The deal is expected to create new commercial and employment opportunities with a positive impact on both regions’ economies. Particularly, it could attract sustainable investment into Mercosur, especially in high-tech sectors. Additionally, it would support the strengthening of supply chains and enhance the EU’s economic resilience, reinforcing strategic cooperation between the two regional blocs.   However, the success of the agreement will depend on both parties’ ability to overcome existing differences, address environmental and human rights concerns, and implement effective monitoring mechanisms. On Mercosur’s side, it will be necessary to undertake economic reforms to enhance competitiveness, stimulate innovation, and attract foreign investment. Meanwhile, the European Union will face the challenge of gradually reducing agricultural subsidies to ensure fair competition (Pereira, 2021). In summary, the free trade agreement between the European Union and Mercosur represents a significant opportunity to strengthen economic cooperation between two blocs with complementary economies: the EU, a global leader in the industrial sector, and Mercosur, one of the main exporters of agricultural raw materials. The agreement aims to increase bilateral trade and direct investment, particularly in the agricultural and industrial sectors, with important implications for the future of interregional cooperation and global trade. The Association Agreement between the EU and Mercosur has raised serious concerns of both environmental and diplomatic nature. While designed to strengthen economic and political ties between the two blocs, the agreement could have devastating environmental impacts, especially considering Mercosur’s heavy reliance on agricultural exports to the EU. Brazil, the leading exporter of products like soy, beef, and coffee, stands as a clear example of these issues. The demand for these products is directly linked to deforestation, with severe consequences for vital ecosystems such as the Amazon. Although deforestation in Brazil decreased by 50% in 2023 compared to the previous year, future projections remain worrisome. The access to European markets, guaranteed by the agreement, could accelerate land conversion and intensify pressure on natural resources. Some studies estimate that the agreement could lead to the conversion of between 560 and 1,730 km² of land — an impact that, although lower than the 13,235 km² of annual deforestation recorded in the Brazilian Amazon in 2021, remains significant (FAO, 2021). A crucial chapter of the agreement is the “Trade and Sustainable Development Chapter” (TSDC), which promotes cooperation between the EU and Mercosur on environmental issues and establishes a commitment to adhere to international climate agreements, such as the Paris Agreement. However, criticism of the TSDC focuses on the lack of binding enforcement mechanisms for environmental regulations and the absence of adequate sanctions, which limits the agreement’s ability to ensure compliance with environmental commitments. Despite the creation of a joint committee to monitor the implementation of the TSDC, its effectiveness is weakened by the lack of concrete punitive tools (European Commission, 2020). The European Commission also highlights the value that Mercosur can bring in terms of agricultural and fishery products to the European market. Some of these goods — such as soy, cocoa, and coffee — are items that EU member states cannot produce or only produce in minimal quantities. Others, such as beef, poultry, honey, and cheese, compete directly with European agricultural businesses. This has fueled rural anger, particularly among French, Polish, and Italian farmers, who accuse the EU of promoting unfair competition, given that South American producers are not subject to the same regulations as their European counterparts. Concerns about increasing deforestation and the weakening of environmental and social standards are among the primary fears expressed by environmental groups and certain EU member states. During Jair Bolsonaro’s presidency (2019–2022), environmental policies were significantly rolled back, exacerbating these concerns. However, the election of Luiz Inácio Lula da Silva has raised new hopes for a renewed commitment to environmental protection, although economic priorities may complicate the negotiation process (Doyle, 2023). Despite the criticisms, the agreement presents an opportunity to promote the sustainable management of natural resources, enhance transparency in production chains, and strengthen the enforcement of environmental laws in Mercosur countries. To achieve a positive and lasting impact, however, concrete commitment from both governments and the private sector will be essential, supported by effective monitoring mechanisms and enforceable sanctions. An innovative aspect of the agreement is the inclusion of clauses that mandate the end of illegal deforestation by 2030, with a monitoring system designed to ensure compliance with these rules. Although this commitment represents an important step forward, doubts remain about its enforcement and effective oversight — particularly regarding Brazil’s compliance, given its central role in deforestation. Additionally, the agreement stipulates that only “deforestation-free” products — such as soy, beef, palm oil, and cocoa — will be allowed to enter the EU market (European Commission, 2022). Concerns related to food safety and public health are equally relevant. The importation of beef from countries where the use of antibiotics and hormones is less regulated could compromise food safety in Europe, as highlighted by an audit conducted by the European Commission. Some critics fear that the agreement may lower product quality standards and increase unfair competition for European farmers. Furthermore, there is concern that the deal could encourage industrial relocation to South America, resulting in job losses in Europe (OECD, 2021). Despite these challenges, the agreement represents a rare opportunity to strengthen interregional relations between the EU and Mercosur in the face of global challenges such as climate change and biodiversity protection. However, the success of the agreement will depend on the ability of both regions to effectively integrate economic interests with the need for social and environmental sustainability. It will be necessary to adopt strict measures to monitor the environmental and social impacts of the agreement, actively involve local communities in policymaking, and promote a development model that balances economic growth with sustainability. To further explore the issues affecting Mercosur and potential solutions for greater regional integration, we interviewed Ramiro Rodríguez Bausero, General Consul of Uruguay in Spain. During the conversation, Bausero shared his perspective on the economic and political challenges that face the bloc, as well as on the opportunities for cooperation with the Pacific Alliance and the policies needed to address emerging global problems such as climate change and food security. Below are some key excerpts from the interview, along with a commentary on how these insights contribute to a deeper understanding of the challenges and opportunities facing Mercosur in a global context. To better understand the issues influencing Mercosur, it is essential to examine the internal challenges and asymmetries among its members. According to Ramiro Rodríguez Bausero, General Consul of Uruguay in Spain, “Mercosur displays significant disparities in terms of size and level of development; there are evident inequalities between countries and regions, and these persist over time.” This observation highlights one of the core difficulties in achieving economic integration within the bloc: the economic disparities between its larger and smaller members. Resources and investments are unevenly distributed, and the inability to effectively manage these asymmetries hinders balanced growth, with larger countries often dominating the economic process. This concept is fundamental to understanding the structural limitations that constrain Mercosur’s development. Another crucial aspect is the influence of ideological orientation on the integration processes. Bausero notes that “within the bloc, different visions coexist, based on internal productive structures, and as governments change, their profiles evolve toward more or less protectionist/open policies, depending on the ideological orientation of each administration.” This phenomenon poses a major obstacle to strengthening Mercosur, as the swings between protectionist and open-market policies make it difficult to establish a coherent and long-term strategy. Ideological differences between governments further complicate the formation of a stable and strategic economic bloc. Nevertheless, despite internal challenges, there are significant opportunities for cooperation with other regional entities such as the Pacific Alliance. Bausero highlights that “strengthening ties between the two blocs presents several areas with the potential for cooperation, such as trade facilitation, reciprocal investment, physical integration, technological innovation, and the movement of people.” Although political divergences may hinder closer cooperation, these mutual areas of interest could reinforce regional integration, especially in fields like trade and technological innovation. On the environmental sustainability and climate change front, Bausero suggested that “Mercosur could implement more ambitious climate policies, promoting a transition to a low-carbon economy with measures that support renewable energy and encourage technological innovation in sustainable industries.” Adopting more advanced climate policies represents an opportunity for Mercosur to address global climate challenges. Given its significant influence over agricultural policies and natural resource management, the bloc could play a crucial role in driving the shift toward a green economy — responding to international pressure and improving its reputation as a responsible global actor. The trade potential of Mercosur, especially in the context of the agreement with the European Union, is another key issue. Bausero emphasized that “the benefits of the trade component of the Agreement show that many of the goods comprising Mercosur countries’ export offerings to the EU will receive preferential treatment in the European market.” This agreement could create new opportunities for economic growth among member countries, reducing their dependence on Asian markets — particularly China. However, internal challenges related to the agreement, especially concerning the agricultural sector, could hinder full implementation and require careful attention. Finally, reforming Mercosur has emerged as a relevant topic, with some countries, like Uruguay, advocating for a more flexible bloc. Bausero stated: “Some countries (such as Uruguay) have argued for the need to make the bloc more flexible, transforming it into a Free Trade Area (FTA), allowing each member to pursue its own international agenda, including negotiating agreements with third countries.” The proposal to transform Mercosur into a more flexible FTA reflects criticism of the bloc's rigidity. If implemented, such a reform could allow member states to adopt more individualized policies — but it also raises questions about the future of regional integration and the political and economic unity of the bloc. Another important area of development is digital cooperation and infrastructure. According to Bausero, “the so-called ‘Digital Mercosur’ is a cooperation project between the EU and Mercosur, aimed at reducing technological asymmetries and promoting common policies and strategies in the fields of the Information Society, e-commerce, and human resource training.” Digital cooperation could be one of the main drivers of growth for Mercosur, enabling member countries to overcome technological inequalities and access global markets. Digitalization and the integration of modern technologies are essential to enhancing regional competitiveness and developing an interconnected digital economy. Conclusions The free trade agreement between Mercosur and the European Union, signed in 2019, represents a significant step toward greater interregional economic integration, with the ambitious goal of creating one of the largest free trade areas in the world. However, its future remains uncertain and depends on a series of interrelated factors, including internal political divergences within the EU, environmental challenges, and economic inequalities among Mercosur members. These elements raise numerous questions and opportunities for critical reflection that could be explored in future research. First and foremost, one of the main issues to address is the environmental impact of the treaty. The "Trade and Sustainable Development Chapter" (TSDC), while establishing a commitment to international climate agreements, does not provide sufficiently binding mechanisms to ensure effective environmental protection. What is the role of trade policy in a context of growing urgency for environmental sustainability? To what extent can the current provisions halt deforestation and guarantee the sustainable use of natural resources, especially in countries like Brazil, where agricultural expansion is directly linked to ecosystem destruction? These questions could pave the way for deeper research into the monitoring and effectiveness of environmental policies within trade agreements. Another relevant issue is the question of economic asymmetries within Mercosur. The disparities among member countries, in terms of size and development level, pose a challenge to genuine economic integration. How can smaller Mercosur countries compete on equal footing with larger ones without compromising their competitiveness? Furthermore, how can it be ensured that the benefits of the agreement are more equitably distributed among the bloc's members? Answering these questions is crucial for implementing policies that promote balanced and inclusive development. The geopolitical context also plays a fundamental role. In a scenario where protectionist trends are on the rise and China's influence continues to grow, how might the agreement between the EU and Mercosur redefine trade and geopolitical relations between the two blocs? Could this agreement represent the beginning of a reorganization in global economic balances, reducing dependence on Asian markets and strengthening ties between Europe and Latin America? These questions invite a deeper analysis of the geopolitical implications of the treaty and its influence on global trade dynamics. Additionally, the proposal to reform Mercosur — advocating for greater flexibility by transforming it into a Free Trade Area (FTA) — raises important questions. How would such a reform affect the bloc’s political and economic cohesion? Would flexibility be the right approach to addressing internal differences, or could it instead lead to the fragmentation of Mercosur and undermine its ability to act as a unified player on the international stage? Finally, digital cooperation, particularly the "Digital Mercosur" project, could become one of the most promising areas of development. How could digitalization and technological cooperation between the EU and Mercosur help reduce technological disparities and promote the competitiveness of the Latin American bloc? Strengthening digital infrastructure could accelerate Mercosur’s economic growth and open new trade opportunities, but what political and technological challenges will arise in this digitalization process? In conclusion, the free trade agreement between the European Union and Mercosur represents a significant opportunity, but it also poses a range of challenges that require ongoing attention. The questions raised by this agreement— from environmental concerns and economic asymmetries to geopolitical dynamics and structural reforms within Mercosur — offer numerous starting points for future research. The ability of both regions to effectively integrate economic interests with the demands of social and environmental sustainability will be key to the long-term success and viability of the agreement. Bibliographic References Agenzia del Brasile. (2017, April 7). El MERCOSUR y la Alianza del Pacífico quieren expandir el comercio en América del Sur. https://www.gob.mx/cms/uploads/attachment/file/349593/DECLARACION_AP_MERCOSUR.pdfAlianza del Pacífico. (n.d.). El poder de la integración. https://alianzapacifico.net/en/Alianza del Pacífico. (n.d.). La Alianza del Pacífico y el Mercosur avanzan en materia de facilitación de comercio. https://alianzapacifico.net/alianza-del-pacifico-y-mercosur-avanzan-en-materia-de-facilitacion-de-comercio/Alianza del Pacífico. (n.d.). Mujeres de la Alianza del Pacífico y el Mercosur son capacitadas para la era digital. https://alianzapacifico.net/alianza-del-pacifico-y-mercosur-avanzan-en-materia-de-facilitacion-de-comercio/Avvenire. (2024, December 6). Acuerdo UE-MERCOSUR: ¿qué prevé? https://www.avvenire.it/economia/pagine/accordo-eu-mercosur-cosa-prevedeBaltensperger, M., & Dadush, U. (2019). The European Union-Mercosur Free Trade Agreement: Prospects and Risks. Bruegel Policy Contribution, No. 11. Brussels: Bruegel.Basco, A., Ramos, P., & Rozemberg, R. (2024). Going Green: A New Trade Agenda for Latin America and the Caribbean. Integration & Trade Journal, No. 49, mayo 2024. Banco Interamericano de Desarrollo.Bressan, R. N., & Luciano, B. T. (2018a). La Comunidad Andina en el siglo XXI: entre bolivarianos y la Alianza del Pacífico*. Revista de Sociología e Política, 26, 62–80.Bressan, R. N., & Luciano, B. T. (2018b). La Alianza del Pacífico como un actor regional. En E. Pastrana Buelvas & A. Ripoll (Eds.), La Alianza del Pacífico: atrapada en el péndulo del regionalismo e interregionalismo? (Vol. 1, 22 ed., pp. 173–186). Fundación Konrad Adenauer México.Bressan, R. N., & Borba Gonçalves, J. D. S. (2023). La convergencia entre la Alianza del Pacífico y el Mercosur: avances, estancamientos y desafíos contemporáneos. Política Latinoamericana, 14, 167–183. https:// doi.org/10.1111/lamp.12291Busso, A., & Zelicovich, J. (2016). El gobierno de Mauricio Macri y la integración regional: ¿del MERCOSUR a la Alianza del Pacífico? Coyuntura Austral, 7(37), 17–24.Clemente Batalla, I., López Burian, C., & Telias, D. (2015). *Uruguay y la Alianza del Pacífico: ¿repensar el modelo de inserción internacional? Cuadernos sobre Relaciones Internacionales, Regionalismo y Desarrollo, 10(19), 23–46.CELAC. (2018). La convergencia entre la Alianza del Pacífico y el MERCOSUR: enfrentar juntos un escenario mundial desafiante. http://hdl.handle. net/11362/43614Comisión Europea. (2019). Acuerdo de asociación entre la Unión Europea y el MERCOSUR. https://ec.europa. eu/info/food-farming-fisheries/sustainability/strategy-eu-2019-2024_enDaniels, C. (2015). The Pacific Alliance and Its Effect on Latin America: Must a Continental Divide be the Cost of a Pacific Alliance Success? Loyola of Los Angeles International and Comparative Law Review, 37(2), 153-189.El País. (2024, 5 de diciembre). Bruselas acelera para cerrar esta semana el acuerdo comercial con Mercosur a pesar del rechazo de Francia. https://elpais.com/ internacional/2024-12-05/la-comision-acelera-para-cerrar-el-acuerdo-comercial-con-mercosur-pese-al-rechazo-de-francia.htmlEuractiv. (2024, 6 de diciembre). Acuerdo UE-Mercosur: entre polémicas, oportunidades y protección del sector agrícola. https://euractiv.it/section/comercio-ed-economia-mondiale/news/accordo-ue-mercosur-tra-polemiche-opportunita-e-tutela-del-settore-agricolo/Euronews. (2024, 19 de noviembre). Acuerdo comercial UE-Mercosur: ¿quién ganaría y quién no? https://it.euronews.com/business/2024/11/19/accordo-commerciale-ue-mercosur-chi-ci-guadagnerebbe-e-chi-noFélix Peña. (2022). Asesor y miembro del grupo de asesoramiento del Programa Hemisférico de Comercio Internacional e Integración Regional en el IICA.Gallegos, J. (2021). Antagonismo, convergencia y letargo: la relación de la Alianza del Pacífico y el Mercosur. En S. C. Negro & L. Klein Vieira (Eds.), Mercosul 30 Años: Pasado, Presente y Futuro (pp. 199–218). https://www.researchgate.net/publication/354132133Gardini, G. L. (2023). La redefinición de la presencia de la UE en América Latina y el Caribe. Peter Lang.Ghiotto, L., & Echaide, J. (2019). Análisis del Acuerdo entre la Unión Europea y el Mercosur. PowerShift e.V., Berlín.Giacalone, R. (2022). Valores en la convergencia de la Unión Europea-Latinoamérica y Mercosur-Alianza del Pacífico: ¿los valores compartidos de Europa promueven la convergencia? De Europa, 5(1), 81-100.Le Monde. (2024, 16 de noviembre). UE-Mercosur: pourquoi les Français s'opposent à l'accord de libre-échangeLlairó, M. D. M. (2019). Los nuevos desafíos y ejes de poder de la integración latinoamericana: la dualidad MERCOSUR-Alianza del Pacífico (2010–2017). Anuario Latinoamericano – Ciencias Políticas y Relaciones Internacionales, 7, 111.Mercosur. (2021). XXVII Reunión Extraordinaria de la comisión administradora del Ace n. 35 Mercosur–Chile. https://documentos.mercosur.int/simfiles/docreuniones/88802_ACE35_2021_ACTA01_ES.pdfNicole Gorton & Elena Ianchovichina. (2021). Economistas en el Banco Mundial que trabajan en la eficiencia espacial de las redes comerciales en América Latina, evaluando el potencial para mejoras infraestructurales dentro de MERCOSUR y la Comunidad Andina.OECD. (2024). Disponible en. https://www.oecd.org.Palmieri, R., Amice, C., Amato, M., & Verneau, F. (2024). Beyond the Finish Line: Sustainability Hurdles in the EU–Mercosur Free Trade Agreement. Social Sciences, 13(362).Sanguinet, E. R., & Alvim, A. M. (2024). The Effects of the EU-MERCOSUR Agreement on Bilateral Trade: The Role of Brexit. International Economics and Economic Policy, 21, 227–249.Sekulić, T. (2020). The European Union and the Paradox of Enlargement: The Complex Accession of the Western Balkans. Berlín y Heidelberg: Springer Nature.Tales Henrique Nascimento Simoes. (2024). Doctorando en Geografía en la Universidad de São Paulo, Brasil, se ocupa de los desafíos geopolíticos y de integración de MERCOSUR, con particular atención a las dinámicas de conflicto y cooperación en Sudamérica. Velasco e Cruz, S. C. (2022). International Order? Inter-American Relations and Political Outlook for Latin America. En Contributions to International Relations. Cham: Springer.Zaldívar, P. M. (2024). La Relación Histórico-Cultural entre España y Latinoamérica: Clave para Potenciar la Política Exterior de la Unión Europea en América Latina. Universidad Autónoma de Madrid.Revista Política Internacional | Volumen VII Nro. 2 abril-junio de 2025. https://doi.org/10.5281/zenodo.15103813This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (CC BY-NC 4.0). The opinions and contents of the published documents are solely the responsibility of their authors.

Energy & Economics
Xi Jinping and Vladmir Putin at welcoming ceremony (2024)

Russia and China in the Era of Trade Wars and Sanctions

by Ivan Timofeev

Economic relations between Russia and China remain high. Beijing has become Moscow's most important trading partner, and in the context of Western sanctions, it has also become an alternative source of industrial and consumer goods, as well as the largest market for Russian energy and other raw materials. At the same time, external political factors may have a growing influence on Russian-Chinese economic relations. These include the trade war between China and the United States, a possible escalation of US sanctions against Russia, and the expansion of secondary sanctions by the European Union against Chinese companies. The trade war, in the form of increased import duties on imported goods, has become one of the calling cards of Donald Trump's second term in office. The executive order he issued on April 2, 2025, provided a detailed conceptual justification for such a policy. The main goal is the reindustrialisation of the United States through the return or transfer of industrial production to the territory of the US, as well as an equalization of the trade balance with foreign countries. The basic part of Trump's order concerned all countries throughout the world and assumes a tariff increase of 10%. It goes on to determine individual duties on the goods of more than 70 countries, with its own sets for each. China became one of the few countries which decided to mirror the tariff increases. This led to a short-lived and explosive exchange of increases in duties. While it was suspended by negotiations between the two countries in Geneva, it was not removed from the agenda. In the US trade war “against the whole world”, China remains a key target. This is determined by the high level of the US trade deficit in relations with China, which has persisted for more than 40 years. Apparently, it remained comfortable for the US until China made a noticeable leap in the field of industrial and technological development. Such a leap allowed China to gradually overcome its peripheral place in the global economy, displace American and other foreign goods from the domestic market, and occupy niches in foreign markets. Despite the critically important role of American components, patents and technological solutions in a number of industries, China has managed to reduce its dependence on them. The growing industrial and technological power of the PRC is becoming a a political problem for the US. It was clearly identified during the first term of Trump's presidency. Even then, the US pursued a course toward the technological containment of China. Despite the temporary respite in the trade war, US pressure on China will remain. The tariff policy may be supplemented by restrictive new measures (sanctions) in the field of telecommunications and other industries. During the new term of Donald Trump's presidency, the politicisation of issues that the Biden administration avoided putting at the forefront of US-Chinese relations began again. These include the problem of Hong Kong autonomy and the issue of ethnic minorities in the Xinjiang Uyghur Autonomous Region of China. Both issues received a high level of politicisation during Trump's first term. The US-China trade war has so far had little effect on Russian-Chinese relations. The increase in US tariffs has had virtually no effect on Russia. Russia is already facing a significant number of restrictive measures, and the volume of trade with the United States has been reduced to near zero since the start of Moscow’s Special Military Operation in 2022. However, Russia may feel the effects of the trade war. For example, the United States may require China to purchase American energy resources as a measure to correct the trade balance. Obviously, such a measure is unlikely to solve the imbalance. However, it has the potential to affect the volume of Russian oil supplies to China in one way or another. In addition, the trade war as a whole may affect oil prices downwards, which is also disadvantageous for Russia. On the other hand, Russia is a reliable supplier of energy resources for China, which will not politicise them. Even in the context of new aggravations of the trade war, China is unlikely to refuse Russian supplies. Another factor is US sanctions against Russia. After the start of Russian-American negotiations on Ukraine in 2025, Washington avoided using new sanctions, although all previously adopted restrictive measures and their legal mechanisms are in force. However, Donald Trump failed to carry out a diplomatic blitzkrieg and achieve a quick settlement. The negotiations have dragged on and may continue for a long time. If they fail, the United States is ready to escalate sanctions again. Existing legal mechanisms allow, for example, for an increase in the list of blocked persons, including in relation to Chinese companies cooperating with Russia. This practice was widely used by the Biden administration. It was Chinese companies that became the key target of US secondary sanctions targeting Russia. They fell under blocking financial sanctions for deliveries of industrial goods, electronics and other equipment to Russia. However, there was not a single large company among them. We were talking about small manufacturing companies or intermediary firms. At the same time, the Biden administration managed to significantly complicate payments between Russia and China through the threat of secondary sanctions. US Presidential Executive Order 14114 of December 22, 2023 threatened blocking sanctions against foreign financial institutions carrying out transactions in favour of the Russian military-industrial complex. In practice, such sanctions against Chinese financial institutions were practically not applied, except for the blocking of several Chinese payment agents in January 2025. However, the very threat of secondary sanctions forced Chinese banks to exercise a high level of caution in transactions with Russia. This problem has not yet been fully resolved. New legal mechanisms in the field of sanctions, which are being worked on in the United States, may also affect Russian-Chinese relations. We are talking about the bill introduced by US Senator Lindsey Graham and several other senators and members of congress. Their bill assumes that in the event of failure of negotiations with Russia on Ukraine, the US executive branch will receive the authority to impose 500% duties on countries purchasing Russian raw materials, including oil. China may be among them. This threat should hardly be exaggerated for now. The passage of the bill is not predetermined. Even if it is signed into law, the application of 500% tariffs against China will be an extremely difficult matter. Recent rounds of the trade war have shown that China is ready for retaliatory measures. However, the emergence of such a norm will in any case increase the risks for business and may negatively affect Russian suppliers of raw materials. Another factor is EU sanctions policy. Unlike the US, the EU continues to escalate sanctions against Russia despite the negotiations on Ukraine. Brussels is expanding the practice of secondary sanctions, which also affect Chinese companies. In the context of a deepening economic partnership between China and the EU, this factor seems significant. However, in reality, it will play a peripheral role. The EU's practice of secondary sanctions is still significantly more limited than the American one. It does not affect any significant Chinese companies. Problems may be created by the expansion of EU bans on the provision of financial messaging services for Russian banks—this will affect their relations with Chinese counterparties. But such bans stimulate the acceleration of the use of the Chinese CIPS payment system by Russians, which has the functionality of transmitting financial messages. Compared to the US, the EU policy factor remains secondary. First published in the Valdai Discussion Club.

Energy & Economics
Alternative or renewable energy financing program, financial concept : Green eco-friendly or sustainable energy symbols atop five coin stacks e.g a light bulb, a rechargeable battery, solar cell panel

The Success of Climate Change Performance Index in the Development of Environmental Investments: E-7 Countries

by Başak Özarslan Doğan

Abstract Climate change is considered to be one of the biggest problems acknowledged globally today. Therefore, the causes of climate change and solutions to this problem are frequently investigated. For this reason, the purpose of this study is to empirically examine whether the ‘Climate Change Performance Index’ (CCPI) is successful in increasing environmental investments for E-7 countries with the data for the period of 2008–2023. To achieve this aim, the Parks-Kmenta estimator was used as the econometric method in the study. The study findings provide strong evidence that increases in the climate change performance support environmental investments. High climate change performance directs governments and investors toward investing in this area; therefore, environmental investments tend to increase. The study also examined the effects of population growth, real GDP and inflation on environmental investments. Accordingly, it has been concluded that population growth and inflation negatively affect environmental investments, while GDP positively affects environmental investments. 1. Introduction There is a broad consensus that the main cause of climate change is human-based greenhouse gas emissions from non-renewable (i.e., fossil) fuels and improper land use. Accordingly, climate change may have serious negative consequences as well as significant macroeconomic outcomes. For example, an upward trend of temperatures, the rising sea levels, and extreme weather conditions can seriously disrupt the output and productivity (IMF, 2008a; Eyraud et al., 2013). Due to the global climate change, many countries today see environmental investments, especially renewable energy investments, as an important part of their growth strategies. Until recent years, the most important priority of many countries was an improvement in the economic growth figures. Still, the global climate change and the emergence of many related problems are now directing countries toward implementing policies which would be more sensitive to the environment and would ensure sustainable growth rather than just increase the growth figures. (Baştürk, 2024: 327). The orientation of various countries to these policies has led to an increase in environmental investments on a global scale. A relative rise of the share of environmental investments worldwide is not only a medium-term climate goal. It also brings many new concepts to the agenda, such as an increasing energy security, reduction of the negative impact of air pollution on health, and the possibility of finding new growth resources (Accenture, 2011; McKinsey, 2009; (OECD), 2011; PriceWaterhouseCoopers, 2008; Eyraud et al., 2013). Today, environmental investments have a significant share in energy and electricity production. According to the World Energy Outlook (2023), investments in environmentally friendly energies have increased by approximately 40% since 2020. The effort to reduce emissions is the key reason for this increase, but it is not the only reason. Economic reasons are also quite strong in preferring environmental energy technologies. For example, energy security is also fundamentally important in the increase in environmental investments. Especially in fuel-importing countries, industrial plans and the necessity to spread clean (i.e., renewable) energy jobs throughout the country are important factors (IEA WEO, 2023).  In economic literature, environmental investments are generally represented by renewable energy investments. Accordingly, Figure 1 below presents global renewable energy electricity production for 2000–2020. According to the data obtained from IRENA (2024) and Figure 1, the total electricity production has increased by approximately 2.4% since 2011, with renewable energy sources contributing 6.1% to this rate, while non-renewable energy sources contributed 1.3%. In 2022 alone, renewable electricity grew by 7.2% compared to 2021. Solar and wind energy provided the largest growth in renewable electricity since 2010, which reached 11.7% of the global electricity mix in 2022.   Figure 2 below presents renewable energy investments by technology between 2013 and 2022. As shown in Figure 2, photovoltaic solar. and terrestrial wind categories are dominating, accounting for 46% and 32% of the global renewable energy investment, respectively, during 2013–2022.   Economic growth supported by environmental investments is impacted by the type and number of energy used to increase the national output. Thus, both the environmental friendliness of the energy used and the rise in energy efficiency is bound to reduce carbon emissions related to energy use and encourage economic growth (Hussain and Dogan, 2021). In this context, in order to minimize emissions and ensure sustainable economic growth, renewable energy sources should be used instead of fossil resources in energy use. Increasing environmental investments on a global scale, especially a boost in renewable energy investments, is seen as a more comprehensive solution to the current global growth-development and environmental degradation balance. In this context, as a result of the latest Conference of the Parties held in Paris, namely, COP21, it was envisaged to make an agreement covering the processes after 2020, which is accepted as the end year of the Kyoto Protocol. On December 12, 2015, the Paris Agreement was adopted unanimously by the countries that are parties to the UN Framework Convention on Climate Change (Kaya, 2020). As a result of the Paris Agreement and the reports delivered by the Intergovernmental Climate Change Panels, international efforts to adapt to the action to combat climate change and global warming have increased, and awareness has been raised in this area (Irfan et al., 2021; Feng et al., 2022; Anser et al., 2020; Zhang et al., 2021; Huang et al., 2021; Fang, 2023). The rise in the demand for low-carbon energy sources in economies has been caused by environmental investments such as renewable energy investments. The countries that are party to the Paris Agreement, commit to the way to achieve efficient energy systems through the spread of renewable energy technologies throughout the country (Bashir et al., 2021; Fang, 2023). This study empirically examines the impact of the climate change performance on increasing environmental investments for E-7 countries. The climate change performance is expressed by the ‘Climate Change Performance Index’ (CCPI) developed by the German environmental and developmental organization Germanwatch. The index evaluates the climate protection performance of 63 developed and developing countries and the EU annually, and compares the data. Within this framework, CCPI seeks to increase clarity in international climate policies and practices, and enables a comparison of the progress achieved by various countries in their climate protection struggle. CCPI evaluates the performance of each country in four main categories: GHG Emissions (40% overall ranking), Renewable Energy (20%), Energy Use (20%), and Climate Policy (20%). In calculating this index, each category of GHG emissions, renewable energy, and energy use is measured by using four indicators. These are the Current Level, the Past Trend, the Current Level Well Below 2°C Compliance, and the Countries’ Well Below 2°C Compliance with the 2030 Target. The climate policy category is evaluated annually with a comprehensive survey in two ways: as the National Climate Policy and the International Climate Policy (https://ccpi.org/methodology/).  Figure 3 below shows the world map presenting the total results of the countries evaluated in CCPI 2025 and their overall performance, including the four main categories outlined above.   As it can be seen from Figure 3, no country appears strong enough to receive a ‘very high’ score across all categories. Moreover, although Denmark continues to be the highest-ranking country in the index, but it still does not perform well enough to receive a ‘very high’ score overall. On the other hand, India, Germany, the EU, and the G20 countries/regions will be among the highest-performing countries/regions in the 2024 index. When we look at Canada, South Korea, and Saudi Arabia, they are the worst-performing countries in the G20. On the other hand, it can be said that Türkiye, Poland, the USA, and Japan are the worst-performing countries in the overall ranking. The climate change performance index is an important criterion because it indicates whether the change and progress in combating climate change is occurring across all countries at an important level. The index is important in answering various questions for countries under discussion. These questions are expressed below:  • In which stage are the countries in the categories in which the index is calculated?• What policies should countries follow after seeing the stages in which they are in each category? • Which countries are setting an example by truly combating climate change? These questions also constitute the motivation for this study. The sample group for the study was selected as E-7 countries, which are called the Emerging Economies; this list consists of Türkiye, China, India, Russia, Brazil, Mexico, and Indonesia. The reason for selecting these particular countries is that they are undergoing a rapid development and transformation process, and are also believed to be influential in the future with their increasing share in the world trade volume, huge populations, and advances in technology. Besides that, when the relevant literature has been examined, studies that empirically address the relative ranking of the climate change performance appear to be quite limited. In particular, there are almost no studies evaluating the climate change performance index for the sample group considered. Therefore, it is thought that this study will be of great importance in filling this gap in the literature. The following section of the study, which aims to empirically examine whether the climate change performance is effective in developing environmental investments in E-7 countries, includes national and international selected literature review on the subject. Then, the model of the study and the variables chosen in this model are introduced. Then, the findings obtained in the study are shared, and the study ends with discussion and policy proposal. 2. Literature Review 2.1. Studies on environmental investment  The excessive use of fossil-based energy sources, considered non-renewable and dirty energy, along with industrialization, constitutes a large part of carbon emissions and is regarded as the main reason of climate change. Thus, countries have turned to renewable energy investments with the objective to minimize the reaction of climate change and global warming, by introducing technologies which are considered more environmentally friendly and cleaner. Global energy investments are estimated to exceed 3 trillion US dollars by the end of 2024, and 2 trillion US dollars of this amount will go to clean and environmentally friendly energy base technologies and infrastructure. Investment in environmentally friendly energy has been gaining speed since 2020, and the total expense on renewable energy, networks, and storage now represents a higher figure than the total spending on oil, gas, and coal (IEA, 2024). When the energy economics literature is examined, since environmental investments are mostly represented by renewable energy investments, renewable energy investments studies and studies in related fields shall be discussed in this study section. One of the important studies in this field is the work of Eyraud et al. (2013). In the study, the authors analyzed the determinants of environmental and green (clean) investments for 35 developed and developing countries. Accordingly, they stated in the study that environmental investment has become the main driving force of the energy sector, and China has generally driven its rapid growth in recent years. In addition, in terms of the econometric results of the study, it has been found that environmental investments are supported by economic growth, a solid financial system suitable for lower interest rates, and higher fuel prices. Fang (2023) examined the relationship between investments in the renewable energy sector, the economic complexity index, green technological innovation, industrial structure growth, and carbon emissions in 32 provinces in China for the period of 2005–2019 by using the GMM method. Based on the study results, the economic complexity index causes an increase in China’s carbon dioxide levels. On the contrary, all of the following – the square of the economic complexity index, investments in clean energy, green technical innovation, and the industrial structure – were found to help decrease carbon dioxide emissions. Another important study in this field is the work of Masini and Menichetti (2013). The authors examined the non-financial sources of renewable energy investments in their study. Accordingly, the study results show that knowledge and confidence in technological competence positively impact renewable energy investments. In addition, trust in policy measures only impacts PV (Photovoltaic) and hydropower investments, whereas institutional pressure negatively impacts renewable energy investments. Finally, the study stated that experienced investors are more likely to fund innovations in renewable energy. One of the important studies on renewable energy investments is the work of Ozorhon et al. (2018). To support and facilitate the decision-making process in renewable energy investments, the authors determined the main criteria affecting investors’ decisions by reviewing the literature and examining sector-level practices. According to the findings, economic criteria, like policies and regulations, funds availability, and investment costs were the most important factors in the decision-making process for renewable energy investments. Xu et al. (2024) examined the relationship between the renewable energy investments and the renewable energy development with a threshold value analysis for China. According to the results, impact of the clean (renewable) energy investment on renewable energy development has a significant threshold value, and the general relation between them is a ‘V’ type non-linear relation. At this point, the study suggests that the state should keep spending in the segment of investments in clean energy, increase the financial proficiency, and ensure an efficient financial infrastructure for clean energy in China. 2.2. Studies on Climate Change and their Impact on Economic Variables  The widespread use of fossil-based energy sources, considered dirty energy, continues to create a negative externality in carbon emissions despite the globally implemented policies like the Kyoto Protocol and the Paris Agreement (Rezai et al., 2021). The economic literature on climate change focuses particularly on the adverse effect of climate change on the economy. One of the important studies in this field is the study of Fan et al. (2019). In their study, the authors focused on the impact of climate change on the energy sector for 30 provinces in China and conducted their research with the help of a fixed-effect regression feedback model. As a result of the study, it was found that hot and low-temperature days positively affected the electricity demand. On the other hand, Singh et al. (2022) examined the effects of climate change on agricultural sustainability in India with data from 1990–2017. On the grounds of the study, it was found that India’s agricultural sector was negatively impacted by the climate change. In this regard, it is stated that India needs to take powerful climate policy action so that to reduce the adverse effect of the climate change and increase its sustainable agricultural development. One of the important studies in this field is the study of Gallego-Alvarez et al. (2013). This study investigated how the climate change affects the financial performance with a sample of 855 international companies operating in sectors with high greenhouse gas/ CO2 emissions from 2006–2009. The results reveal that the relationship between the environmental and financial performance is higher in times of economic crisis triggered by climate crisis. In other words, these results show that companies should continue investing in sustainable projects in order to achieve higher profits. Kahn et al. (2021) examined the long-term macroeconomic impact of the climate change by using a panel data set consisting of 174 countries between 1960 and 2014. According to the findings, the amount of output per capita is negatively affected by temperature changes, but no statistically significant effect is observed for changes in precipitation. In addition, according to the study’s results, the main effects of temperature shocks also vary across income groups. Alagidede et al. (2015) examined the effect of climate change on sustainable economic growth in the Sub-Saharan Africa region in their study. The study stated that the relationship between the real GDP and the climate change is not linear. In addition, Milliner and Dietz (2011) investigated the long-term economic consequences of the climate change. Accordingly, as the economy develops over time, and as progress is achieved, this situation will automatically be less affected by the adverse impact of the climate change. Structural changes made with economic development will make sectors more sensitive to the climate change, such as the agricultural sector, which would become stronger and less dependent. Dell et al. (2008) examined the effect of climate change on economic activity. The study’s main results are as follows: an increase of temperatures significantly decreases economic growth in low-income countries. Furthermore, increasing temperature does not affect economic growth in high-income countries. On the other hand, when examining the effects of climate change on the economy, the study of Zhou et al. (2023) is also fundamentally important. Zhou et al. (2023) examined the literature on the effects of climate change risks on the financial sector. In the studies examined, it is generally understood that natural disasters and climate change reduce bank stability, credit supply, stock and bond market returns, and foreign direct investment inflows. In their study for Sri Lanka, Abeysekara et al. (2023) created a study using the general equilibrium model ORANI-G-SL with the objective to investigate the economic impacts of the climate change on agricultural production. The study findings suggest that reductions in the production of many agricultural products will lead to increases in consumer prices for these agricultural commodities, resulting in a decrease in the overall household consumption. The projected decrease in crop production and increases in food prices will increase the potential for food insecurity Another important document in this field is the study by Caruso et al. (2024) examining the relationship between the climate change and human capital. The study findings reveal a two-way result regarding the effects of the climate change damages and the effects of climate change mitigation and adaptation on the human capital. Accordingly, the climate change has direct effects on health, nutrition and welfare, while changes in markets and damage to the infrastructure are expressed as indirect effects. In addition to these studies, the uncertainty of the climate change policies also exerts an impact on economic factors. Studies conducted in this context in recent years have also enriched the literature on the climate change. For example, Çelik and Özarslan Doğan (2024) examined the effects of uncertainty of the climate change policies on economic growth for the USA by using the ARDL bounds test. Their results confirmed the existence of a positive and statistically significant relationship between the climate policy uncertainty and economic growth in the USA. 3. Model Specification  This study empirically examines whether the climate change performance index successfully develops environmental investments in E-7 countries. For further details related to the mathematical model check https://doi.org/10.15388/Ekon.2025.104.2.6 4. Conclusion and Policy Implications  Today, many national and international initiatives are within the scope of combating global warming and climate change. In addition, many developed and developing countries are differentiating their growth and development policies with the objective to prevent these disasters. Although they vary from country to country, as well as from region to region, these policies mostly represent those policies which reduce carbon emissions and ensure energy efficiency. At this point, the key factor is renewable energy investments, which represent environmentally friendly investments. However, according to Abban and Hasan (2021), the amount of environmentally friendly investments is not the same in every country. This is because the determinants of environmentally friendly investments vary from country to country. While financial and economic factors are more encouraging in increasing these investments in some countries, international sanctions are the driving force in this regard in some other countries as well. This study aims to empirically examine whether CCPI is effective in the success of environmental investments in the E-7 countries in the period of 2008–2023 with the help of the Parks-Kmenta estimator. In this direction, the study’s dependent variable is environmental investments, represented by renewable energy investments. On the other hand, the climate change performance is represented by the ‘Climate Change Performance Index’ calculated by Germanwatch, which constitutes the main independent variable of the study. Other control variables considered in the study are the population growth, the real GDP per capita, and inflation. The study findings provide strong evidence that increases in the climate change performance support environmental investments. High-rate climate change performance drives governments and investors toward investing in this area; thus, environmental investments tend to increase. These results are consistent with the study results of Raza et al. (2021). As a result of their study, Raza et al. (2021) stated that the climate change performance is an important channel for the general environmental change, and that renewable energy has a very important role in this regard.  In addition, the study concludes that population growth and inflation negatively affect environmental investments. These results are consistent with Suhrab et al. (2023), but not with Yang et al. (2016). While Suhrab et al. (2023) obtained results regarding the negative effects of inflation on green investments, Yang et al. (2016) focused on the positive effect of population on renewable energy. Finally, the effect of the real GDP per capita on environmental investments has been found to be positive. These results are also consistent with Tudor and Sova (2021). The authors found that Real GDP encourages green investments. This study offers policymakers a number of policy recommendations. These are presented below. • One of the important factors affecting the climate change performance is the raising of awareness of the populations in these countries at this point, and providing them with the knowledge to demand clean energy. In this way, consumers, would demand environmental energy, and investors would invest more in this area. This is of great importance in increasing environmental investments. • The climate change performance also shows how transparent the energy policies implemented by countries are. Therefore, the more achievable and explanatory are the goals of policy makers in this regard, the more climate change performance will increase, which will strengthen environmental investments. • Moreover, the initial installation costs are the most important obstacles on the way toward developing environmental investments. At this point, the country needs to develop support mechanisms that would encourage investors to invest more. • Environmental investments, similar to other types of physical investments, are greatly affected by the country’s macroeconomic indicators. At this point, a stable and foresighted economic policy will encourage an increase in such investments. The countries in the sample group represent developing countries. Therefore, in many countries in this category, the savings rates within the country are insufficient to make investments. At this point, the financial system that will bring together those who supply funds and those who demand funds in the country; this system needs to be developed further. In addition, more extensive use of new and various financial instruments should be encouraged with the objective to collect the capital required for environmental investments. References Abban, A. R., & Hasan, M. Z. (2021). Revisiting the determinants of renewable energy investment-New evidence from political and government ideology. Energy Policy, 151, 112184. https://doi.org/10.1016/j. enpol.2021.112184 (missing in the following “Access date:dd.mm.20yy”) Abeysekara, W. C. S. M., Siriwardana, M., & Meng, S. (2023). Economic consequences of climate change impacts on the agricultural sector of South Asia: A case study of Sri Lanka. Economic Analysis and Policy, 77, 435-450. https://doi.org/10.1016/j.eap.2022.12.003 (missing in the following “Access date:dd.mm.20yy”) Accenture, 2011, New Waves of Growth: Unlocking Opportunity in the Multi-Polar World, Worldwide, Oxford. McKinsey & Company, 2009. Pathways to a Low-Carbon Economy, New York. Anser, M. K., Iqbal, W., Ahmad, U. S., Fatima, A., & Chaudhry, I. S. (2020). Environmental efficiency and the role of energy innovation in emissions reduction. Environmental Science and Pollution Research, 27, 29451-29463. https://doi.org/10.1007/s11356-020-09129-w (missing in the following “Access date:dd. mm.20yy”) etc .... Bashir, M. F., Ma, B., Bashir, M. A., Radulescu, M., & Shahzad, U. (2022). Investigating the role of environmental taxes and regulations for renewable energy consumption: evidence from developed economies. Economic Research-Ekonomska Istraživanja, 35(1), 1262-1284. https://doi.org/10.1080/1331677X.2021.1962383Baştürk, M. F. (2024) Yeşil Tahviller ve Yenilenebilir Enerji Üretimi İlişkisi: AB Örneği. Verimlilik Dergisi, 58(3), 325-336. https://doi.org/10.51551/verimlilik.1443364 Caruso, G., de Marcos, I., & Noy, I. (2024). Climate changes affect human capital. Economics of Disasters and Climate Change, 8(1), 157-196. https://doi.org/10.1007/s41885-023-00140-2 Climate Change Performance Index, 2024. (https://ccpi.org/wp-content/uploads/CCPI-2024-Results.pdf) Çelik, B. S., & Doğan, B. Ö. (2024). Does Uncertainty in Climate Policy Affect Economic growth? Empirical Evidence from the US. Ekonomika, 103(1), 44-55. https://doi.org/10.15388/Ekon.2024.103.1.3 Dell M, Jones BF, Olken BA (2008) Climate change and economic growth: evidence from the last half century, NBER Working Paper Series, No. 14132 Eyraud, L., Clements, B., & Wane, A. (2013). Green investment: Trends and determinants. Energy policy, 60, 852-865. https://doi.org/10.1016/j.enpol.2013.04.039 Fan, J. L., Hu, J. W., & Zhang, X. (2019). Impacts of climate change on electricity demand in China: An empirical estimation based on panel data. Energy, 170, 880-888. https://doi.org/10.1016/j.energy.2018.12.044 Fang, Z. (2023). Assessing the impact of renewable energy investment, green technology innovation, and industrialization on sustainable development: A case study of China. Renewable Energy, 205, 772-782. https://doi.org/10.1016/j.renene.2023.01.014 Feng, H., Liu, Z., Wu, J., Iqbal, W., Ahmad, W., & Marie, M. (2022). Nexus between government spending’s and green economic performance: role of green finance and structure effect. Environmental Technology & Innovation, 27, 102461. https://doi.org/10.1016/j.eti.2022.102461 Gallego‐Álvarez, I., García‐Sánchez, I. M., & da Silva Vieira, C. (2014). Climate change and financial performance in times of crisis. Business Strategy and the Environment, 23(6), 361-374. https://doi.org/10.1002/ bse.1786 Germanwatch, 2024 (https://www.germanwatch.org/en/indices?pk_campaign=20733850518&pk_content=155627208696&pk_kwd=climate%20change&pk_source=g&pk_cid=679389546151&mtm_placement=&gad_source=1&gclid=Cj0KCQjwwuG1BhCnARIsAFWBUC2ChKtgVoXt2XG7BKUJ_FRK90m86VeI6oRnpIDCPSnDTpZthsvvaQcaAnmjEALw_wcB) Access date:11.08.2024). Huang, H., Chau, K. Y., Iqbal, W., & Fatima, A. (2022). Assessing the role of financing in sustainable business environment. Environmental Science and Pollution Research, 1-18. https://doi.org/10.1007/s11356-021- 16118-0 IEA, 2024 (https://www.iea.org/reports/world-energy-investment-2024/overview-and-key-findings) . International Energy Agency (IEA, 2023, World Energy Outlook 2023, Paris.https://www.iea.org/reports/ world-energy-outlook-2023/overview-and-key-findings International Monetary Fund, 2008a, Climate Change and the Global Economy, World Economic Outlook, Washington. IRENA (2015), Renewable capacity statistics 2015, International Renewable Energy Agency, Abu Dhabi. IRENA (2024), Renewable capacity statistics 2024, International Renewable Energy Agency, Abu Dhabi. IRENA (2024). https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2024/Jul/Renewable_energy_highlights_FINAL_July_2024.pdf?rev=469292ef67144702b515ecb20575ec7d Irfan, M., Zhao, Z. Y., Li, H., & Rehman, A. (2020). The influence of consumers’ intention factors on willingness to pay for renewable energy: a structural equation modeling approach. Environmental Science and Pollution Research, 27, 21747-21761. https://doi.org/10.1007/s11356-020-08592-9 Kaya, H. E. (2020). Kyoto’dan Paris’e Küresel İklim Politikaları. Meriç Uluslararası Sosyal ve Stratejik Araştırmalar Dergisi, 4(10), 165-191. Kahn, M. E., Mohaddes, K., Ng, R. N., Pesaran, M. H., Raissi, M., & Yang, J. C. (2021). Long-term macroeconomic effects of climate change: A cross-country analysis. Energy Economics, 104, 105624. https:// doi.org/10.1016/j.eneco.2021.105624 Karaçor, Z., Özer, H., Saraç, T.B. (2011). Enflasyon ve ekonomik büyüme ilişkisi: Türkiye ekonomisi üzerine ekonometrik bir uygulama (1988-2007). Niğde Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 4(2), 29-44.Masini, A., & Menichetti, E. (2013). Investment decisions in the renewable energy sector: An analysis of non-financial drivers. Technological Forecasting and Social Change, 80(3), 510-524. https://doi.org/10.1016/j. techfore.2012.08.003 Milliner A, Dietz S (2011) Adaptation to climate change and economic growth in developing countries, Centre for Climate Change Economics and Policy, Working Paper, No. 69 Organization of Economic Cooperation and Development (OECD), 2011. Towards Green Growth, Paris. Ozorhon, B., Batmaz, A., & Caglayan, S. (2018). Generating a framework to facilitate decision making in renewable energy investments. Renewable and Sustainable Energy Reviews, 95, 217-226. https://doi. org/10.1016/j.rser.2018.07.035 PriceWaterhouseCoopers, 2008. Going Green: Sustainable Growth Strategies, New York. Raza, A., Sui, H., Jermsittiparsert, K., Żukiewicz-Sobczak, W., & Sobczak, P. (2021). Trade liberalization and environmental performance index: Mediation role of climate change performance and greenfield investment. Sustainability, 13(17), 9734. https://doi.org/10.3390/su13179734 Rezai, A., Foley, D. K., & Taylor, L. (2012). Global warming and economic externalities. Economic theory, 49, 329-351. https://doi.org/10.1007/s00199-010-0592-4 Shrimali, G., & Kniefel, J. (2011). Are government policies effective in promoting deployment of renewable electricity resources?. Energy Policy, 39(9), 4726-4741. https://doi.org/10.1016/j.enpol.2011.06.055 Singh, A. K., Kumar, S., & Jyoti, B. (2022). Influence of climate change on agricultural sustainability in India: A state-wise panel data analysis. Asian Journal of Agriculture, 6(1). https://doi.org/10.13057/asianjagric/ g060103 Suhrab, M., Ullah, A., Pinglu, C. et al. Boosting green energy: impact of financial development, foreign direct investment, and inflation on sustainable energy productivity in China–Pakistan economic corridor (CPEC) countries. Environ Dev Sustain (2023). https://doi.org/10.1007/s10668-023-04093-0 Tudor, C., & Sova, R. (2021). On the impact of gdp per capita, carbon intensity and innovation for renewable energy consumption: worldwide evidence. Energies, 14(19), 6254. https://doi.org/10.3390/en14196254 Yang, J., Zhang, W., & Zhang, Z. (2016). Impacts of urbanization on renewable energy consumption in China. Journal of Cleaner Production, 114, 443-451. https://doi.org/10.1016/j.jclepro.2015.07.158 Xu, G., Yang, M., Li, S., Jiang, M., & Rehman, H. (2024). Evaluating the effect of renewable energy investment on renewable energy development in China with panel threshold model. Energy Policy, 187, 114029. https://doi.org/10.1016/j.enpol.2024.114029 Zhang, Y., Abbas, M., Koura, Y. H., Su, Y., & Iqbal, W. (2021). The impact trilemma of energy prices, taxation, and population on industrial and residential greenhouse gas emissions in Europe. Environmental Science and Pollution Research, 28, 6913-6928. https://doi.org/10.1007/s11356-020-10618-1 Zhou, F., Endendijk, T., & Botzen, W. W. (2023). A review of the financial sector impacts of risks associated with climate change. Annual Review of Resource Economics, 15(1), 233-256. https://doi.org/10.1146/ annurev-resource-101822-105702 This is an Open Access article distributed under the terms of the Creative Commons Attribution License (CC BY 4.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.Contents lists available at Vilnius University Press

Energy & Economics
 March 28, 2018, the US and Chinese flags and texts at a studio in Seoul, Korea. An illustrative editorial. trade war

International trade war - Spice Road against Silk Road

by Joon Seok Oh

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском AbstractPurpose The purpose of this paper is to analyse the international political economy of Korea and its effects due to geopolitical tension between China and the USA. Design/methodology/approach Economic war between China and the USA has prolonged longer than expected. Aftermath of the COVID-19 pandemic, reforming the supply chain has been the centre of economic tension between China and the USA. Quite recently, with the rapid expansion of Chinese e-commerce platforms, distribution channels come upon a new economic tension between the two. And now is the time to pivot its pattern of conflict from competition into cooperation. In this end, economic diplomacy could be a useful means to give a signal of cooperation. From the view of economic diplomacy, this paper tries to analyse the projected transition of economic war between China and the USA with its implication on the trade policy of Korea. Findings As an implementation of economic diplomacy, China suggested the Belt and Road Initiative (BRI), enhancing trade logistics among related countries to gain competitiveness. In 2023, the Biden administration suggested the India-Middle East and Europe Economic Corridor as a counter to BRI, which will be a threshold for changing trade policy from economic war into economic diplomacy. As a result, it is expected China and the USA will expand their economic diplomacy in a way to promote economic cooperation among allied states, while the distribution channel war would continue to accelerate the economic tension between China and the USA. Korea has to prepare for and provide measures handling this geopolitical location in its trade policy or economic diplomacy. Originality/value This research contributes to the awareness and understanding of trade environments from the perspective of economic diplomacy. 1. Introduction The advent of globalisation has led to widespread economic integration, creating global production networks and markets. However, the COVID-19 pandemic has acted as a significant setback to this trend. In the wake of COVID-19, an economic war has arisen between China and the USA, centred on the restructuring of global supply chains following widespread disruptions. International political economy (IPE) examines the power dynamics between states and the structures of influence within regional economies. Consequently, economic diplomacy has gained unprecedented attention. Economic diplomacy focuses on government actions regarding international economic issues, distinct from political diplomacy through its market-oriented approach in foreign policy. Putnam (1988) categorises economic diplomacy into two levels: unilateralism and bilateralism. Unilateral economic diplomacy (or unilateralism) often relies on hard power, involving decisions on trade liberalisation or market protection without negotiation. Bilateral economic diplomacy (or bilateralism) or multilateral economic diplomacy (or multilateralism), by contrast, involves negotiation among trade partners, resulting in agreements such as regional or global free trade agreements (FTAs). A vast range of state or non-state actors engage in economic diplomacy, navigating the complex interplay between international and domestic factors. Defining economic diplomacy is extremely challenging, but one useful definition is “the broad concept of economic statecraft, where economic measures are taken in the pursuit of political goals, including punitive actions such as sanctions” (Blanchard and Ripsman, 2008).  Figure 1 Recent trend of economic diplomacy To exert influence internationally, ministers and heads of government strive to demonstrate their capacity for national security through two primary approaches, as shown in Figure 1 (above): economic war (or competition) and economic diplomacy (or international cooperation). In the context of global supply chain restructuring, the economic conflict between China and the USA has intensified, marked by threats of supply chain disruptions. This has led to emerging strategies aimed at “crowding out” the USA from global supply chains (去美戰略) or excluding China through alliances such as the Allied Supply Chain and Chip 4. While economic war is inherently “temporary” due to its painstaking nature, economic diplomacy or international cooperation offer a more “long-term” approach because it is gains-taking. This paper analyses the factors contributing to the prolonged nature of this economic war and explores potential outcomes of the supply chain tensions between China and the USA from the perspectives of IPE or geo-economics. In conclusion, it highlights the importance of preparing for trade policy adjustments and strategic economic diplomacy. 2. International trade war and strategic items2.1 Supply chain The supply chain encompasses a network of interconnected suppliers involved in each stage of production, from raw materials and components to the finished goods or services. This network can include vendors, warehouses, retailers, freight stations and distribution centres. Effective supply chain management is a “crucial process because an optimised supply chain results in lower costs and a more efficient production cycle” [1]. Within the supply chain, a leading company typically holds governance power, enabling it to coordinate scheduling and exercise control across the interconnected suppliers, resulting in reduced costs and shorter production times (Gereffi et al., 2005) [2]. Since the 2000s, forward and backward integration have been key strategies for managing time, cost and uncertainty in supply chains. For example, Toyota’s Just-In-Time (JIT) system demonstrated the efficiency of locally concentrated supply chains until disruptions from the 2011 East Japan Earthquake and the Thailand flood. Following supply chain shutdowns in 2020, many businesses shifted from local to global supply chains, utilising advancements of the information technology (IT) and transportation technologies to geographically diversify operations. As the need for a systematically functioning global supply chain has grown, a leading nation, much like a leading company, often assumes governance power in international trade and investment, as illustrated in Figure 2 (below), by aligning with the leadership of a dominant market competitiveness, which makes this leadership valuable.  Figure 2 Supply chain The COVID-19 pandemic dealt a severe blow to the global supply chain, causing sudden lockdowns that led to widespread supply chain disruptions. To mitigate the risks of future global disruptions, supply chains have begun restructuring to operate on a more regionally segmented basis. In this shift toward regional supply chains, China and the USA are at the centre, drawing allied countries within their spheres of influence. This alignment helps explain why the economic war between China and the USA has lasted longer than anticipated. 2.2 Strategic items China has restricted exports of two rare metals, gallium and germanium, which are critical to semiconductor production. Kraljic (1983) highlighted the importance of managing “strategic items” within the framework of supply chain management, as shown in Figure 3. Kraljic emphasises the need to strengthen and diversify critical items. The Kraljic matrix provides a valuable tool for identifying essential items that require focused management within the supply chain.  Figure 3 Kraljic matrix Kraljic identified the importance of managing “bottleneck items” in strategic supply chain management – items that present high supply risk but have relatively low business value. Due to the potential costs associated with non-delivery or compromised quality of strategic items, these must be closely monitored and controlled. From a risk management perspective, establishing medium-term business relationships and collaboration with suppliers is essential. For example, South Korea imports over 90% of its urea for agricultural and industrial purposes from China [3]. Heavily dependent on China for urea supplies due to pricing factors, Korea faced challenges when China imposed export controls on urea, underscoring Korea’s vulnerability within China’s sphere of influence. The European Union (EU) also faces challenges with critical raw materials (CRMs). China remains the EU’s sole supplier of processed rare earth elements, while Chile supplies 79% of its lithium. In response, the EU introduced the CRM Act (CRMA) to support projects aimed at increasing “the EU’s capacity to extract, process, and recycle strategic raw materials and diversify supplies from the third countries” [4]. 2.3 Resilient supply chain alliance In contrast to China’s approach of leveraging supply disruptions to strengthen its influence, the Biden administration in the USA has adopted a cooperative approach focused on building resilient supply chains (Pillar 2) through the Indo-Pacific Economic Framework (IPEF), which includes 14 member countries [5]. The need for resilient supply chains has been further underscored by the Russia–Ukraine crisis. The IPEF aims to address supply chain vulnerabilities by fostering global efforts to reduce risks associated with concentrated, fragile supply chains [6].  Figure 4 Resilient supply chain alliance In Figure 4, the EU Commission presented the Single Market Emergency Instrument (SMEI) in September 2022, a crisis governance framework designed to ensure the availability of essential goods and services during future emergencies. The SMEI operates on three levels: contingency planning, vigilance and emergency. The contingency planning phase focuses on collaboration among member states to mitigate supply chain disruption and monitor incidents. The vigilance phase can be activated when a significant disruption is anticipated, enabling specific measures such as mapping and monitoring supply chains and production capacities. Finally, the emergency phase is activated in cases of severe disruption to the functioning of the single market [7]. Establishing a resilient supply chain through international cooperation may be appealing, yet the reality often falls short of the ambition. In South Korea, the IPEF took effect on 17 April 2024, after an extended negotiation process, marking the first multilateral agreement on supply chains. As a result, during non-crisis periods, the 14 member countries will collaborate to strengthen international trade, investment and trade logistics. In times of crisis, member countries will activate a “crisis response network”. Conversely, opportunities for negotiation with China, South Korea’s largest trading partner, are essential for building supply chain resilience [8]. China has pursued an industrial policy focused on enhancing its supply chain management capabilities. In the semiconductor sector, the decoupling between China and the USA has become increasingly evident. Contrary to expectations, China has adopted a policy of internalising its supply chains, returning to the integration strategies of the 2000s rather than furthering globalisation. A promising opportunity for transformation between the two countries has emerged recently. Since 2015, China and South Korea have maintained bilateral FTA, and with the second phase of FTA negotiations currently underway, there is an opportunity to strengthen trade and investment ties, fostering positive progress through international cooperation. 2.4 China manufacturing exodus During the COVID-19 pandemic, China imposed sudden lockdowns without prior notice or preparation, halting production and logistics cycles. This “zero COVID” policy may have triggered a shift towards “de-risking” China from supply chain disruptions. Although China still offers significant advantages as “the factory of the world,” with vast market potential, prolonged trade tensions with the USA, intensified during the Trump administration, have prompted global manufacturers with substantial USA market bases to relocate operations amid rising geopolitical uncertainties. For example, Nike and Adidas have shifted much of their footwear manufacturing to Vietnam, Apple has begun iPhone production at a Foxconn in Chennai, India, and AstraZeneca has contracted production with India’s Serum Institute. In the pre-globalised era, defining the Rule of Origin (ROO) was straightforward, as a product’s components were usually manufactured and assembled within a single country. However, with the complexity of global supply chains, particularly since 2012, determining ROO has become a time-consuming and subjective process. ROO are classified as either non-preferential or preferential. The USA applies non-preferential ROO to restrict imports from countries like Cuba, Iran and North Korea, while offering trade preference programmes for others. Preferential ROO are used to determine duty-free eligibility for imports from approved countries [9], whereas non-preferential ROO play a crucial role in “country of origin labelling, government procurement, enforcement of trade remedy actions, compilation of trade statistics, supply chain security issues.” [10] China manufacturing exodus may negatively impact capital inflows into Hong Kong, traditionally seen as the Gateway to China. In 2023, Hong Kong’s initial public offering volume fell to a 20-year low of $5.9bn [11]. While China-oriented business remains in Hong Kong, which returns fully to Chinese control in 2047, non-China-oriented businesses have migrated to Singapore. As the certainty of contract and ownership rights forms the foundation of capitalism, this capital flight from Hong Kong is likely to persist. 3. Trade logistics and economic corridors Globalisation has allowed supply chains to leverage interdependence and interconnectedness, maximising efficiency. However, while these efficiencies have been beneficial, they have also created a fertile ground for friction between trade partners due to a “survival of the fittest” mindset and the principle of “winner takes all.” This interdependence has also highlighted vulnerabilities; the global supply chain struggled to manage the disruptions caused by COVID-19, prompting a shift towards regional integration initiatives, such as Association of Southeast Asian Nations, Regional Comprehensive Economic Partnership, United States–Mexico–Canada Agreement and Comprehensive and Progressive Agreement for Trans-Pacific Partnership. As the global economy seeks stability, collaboration over competition has become increasingly essential, with economic diplomacy emerging as a priority. The prolonged economic war between China and the USA arguably needs to shift towards economic diplomacy. The global supply chain is restructuring into regional supply chains, building resilience by operating in regional segments that can withstand crises. Michael Porter introduced the concept of value chain as “a set of activities that a firm performs to deliver a valuable product or service to the market.” [12] Complex finished goods often depend on global value chains, traversing multiple countries. As shown in Figure 5, the value chain consists of supply chain and trade channel components. While the focus has traditionally been on which country holds lead status within a regional supply chain, the emphasis is now shifting to how these regional segments can be interconnected and relayed. In this context, the supply chain competition may evolve into a “channel war” in international trade, where trade logistics will centre on the internal flow of goods, standardising channel processes and establishing authority over these channels.  Figure 5 Supply chain v. trade channel 3.1 Trade logistics It is natural for governments to seek environments that enhance competitiveness within in their countries. In terms of trade, effective trade logistics are essential for maintaining competitive advantage. As a prerequisite, a strong IT management infrastructure is indispensable. As shown in Figure 6, trade logistics encompass the internal flow of goods to market, integrating physical infrastructure with operating software – such as transport hubs, warehouses, highways, ports, terminals, trains and shipping vessels. Key areas of conflict in trade logistics involve the standardisation of channel processes and determining who holds governance over operation of these logistics systems. This is equally relevant within the digital economy. Recently, Chinese e-commerce – often referred to as C-commerce – has aggressively sought to gain control over digital distribution channels, interconnected delivery networks and trade logistics via digital platforms. Chinese platforms such as Taobao, Temu and AliExpress are actively working to increase their monthly active users (MAUs), positing themselves as counterweights to USA-based platforms such as Amazon and eBay in digital trade [13].  Figure 6 Trade logistics When the agenda of establishing international trade logistics is introduced to relevant trade members across various countries, initial progress and effective responses are often achieved. However, efforts soon encounter obstacles related to standardising logistics processes and establishing operational governance. Greater reliance on international institutions could help resolve these issues (Bayne, 2017). Yet governments frequently prioritise domestic interests, and after prolonged negotiations, the risk of international agreements failing increases. Amid the economic war between China and the USA, China launched a trade logistics initiative known as the Belt and Road Initiative (BRI), or One Belt One Road, in 2013. Often referred to as the New Silk Road, the BRI aims to establish economic corridors for trade logistics. The World Bank estimates that the BRI could boost trade flows by 4.1% and reduce trade costs by 1.1% [14]. In response, the Biden administration proposed the India-Middle East and Europe Economic Corridor (IMEC) in September 2023 to strengthen transport and communication links between Europe and Asia as a countermeasure to China’s BRI. IMEC has been well received by participating countries, with expectations of fostering economic growth, enhancing connectivity and potentially rebalancing trade and economic relations between the EU and China [15]. Both BRI and IMEC are ambitious projects aimed at boosting international trade through substantial investments in trade logistics infrastructure. Each seeks to assert governance over international trade channels, signalling that the supply chain war may soon evolve into a trade channel war between China and the USA. 3.2 Economic corridors Economic corridors are transport networks designed to support and facilitate the movement of goods, services, people and information. These corridors often include integrated infrastructure, such as highways, railways and ports, linking cities or even countries (Octaviano and Trishia, 2014). They are typically established to connect manufacturing hubs, high-supply and high-demand areas, and producers of value-added goods. Economic corridors comprise both hard infrastructure – such as trade facilities – and soft infrastructure, including trade facilitation and capacity-building measures. The Asian Development Bank introduced the term “economic corridor” in 1998 to describe networks connecting various economic agents within a region [16]. Economic corridors are integrated trade logistics networks, providing essential infrastructure for connecting regional segments of supply chains. As supply chains increasingly operate in regional “chunks,” linking these segments becomes ever more important. Economic corridors typically include a network of transport infrastructure, such as highways, railways, terminals and ports. Initiatives like the BRI and IMEC use economic corridors as instruments of economic diplomacy, shifting strategies from hard power to soft power, as shown in Figure 7. Because less-developed or developing countries often lack sufficient funding to invest in trade logistics, they tend to welcome these initiatives from developed countries, which offer international collaboration and support. However, these initiatives usually come with the condition that participating countries must accept standardised trade processes and governance led by the sponsoring developed country.  Figure 7 Economic corridor initiatives as economic diplomacy To succeed, economic corridors must meet three key conditions [17]. First, government intervention is essential, as economic corridor initiatives primarily involve public infrastructure investments beyond the scope of the private sector. In realising these projects, governments must reconcile three tensions to ensure their policies are mutually supportive: tensions between politics and economics, between international and domestic pressures and between governments and other stakeholders. Second, intermediate outcomes should be measured and demonstrated as results of economic corridors, allowing participants to experience tangible benefits throughout these longer-term projects. Finally, economic corridors should deliver broader benefits. Participants need incentives to utilise the infrastructure sustainably. These benefits may extend beyond economic welfare, such as wages and income, to include social inclusion, equity and environmental gains, which support the long-term viability of the infrastructure. 4. BRI vs IMEC4.1 Belt and Road Initiative (BRI) - Silk Road The BRI can be a modern-day realisation of the Silk Road concept, connecting Europe as a market base with China as a production base. Unlike the ancient Silk Road, which connected trade routes across Eurasia, the BRI poses potential challenges due to its extensive connectivity. Firstly, there are social and environmental externalities, such as increased congestion and accidents from concentrating traffic flows through limited links and nodes within trade networks. Secondly, while the connectivity may benefit the production and market bases at either end, regions situated between these hubs, through which highways and railways pass, may gain minimal advantage. Thirdly, there is often a mismatch between where costs and benefits are realised. Transit regions that facilitate network traffic often see fewer direct benefits compared to high-density nodes within the network. 4.2 India-Middle East and Europe Economic Corridor (IMEC) - The Spice Road The ancient Spice Roads once connected the Middle East and Northeast Africa with Europe, facilitating the exchange of goods such as cinnamon, ginger, pepper and cassia, which, like silk, served as a form of currency. The IMEC proposes a modern route from India to Europe through the United Arab Emirates (UAE), Saudi Arabia, Israel and Greece. Since its announcement in September 2023, some regional experts have expressed reservations about its feasibility, particularly regarding the connection between the Middle East and Israel. The project has faced delays due to the Israel–Hamas war. Despite these challenges, IMEC holds potential to drive economic growth and strengthen connectivity, especially as countries like Vietnam and India emerge as alternative manufacturing bases for companies relocating from China. For Saudi Arabia and the UAE, IMEC is not viewed as a challenge to China but rather as an opportunity to diversify their economies and solidify their roles within the Middle East region [18]. 5. Conclusion A new trade war between China and the USA has begun, with the Biden Administration’s introduction of IMEC as a counter to China’s BRI. This shift could soon transform the nature of economic war from a focus on supply chains to one on trade channels. The China manufacturing exodus was further accelerated by supply disruptions during the COVID-19 pandemic. Amidst the economic tensions between China and the USA, the restructuring of global supply chains into regional networks has made significant progress. With China maintaining its stance on export controls for strategic items, South Korea must prepare for resilient supply chain management. In relation to China–Korea FTA, which is currently undergoing its second phase of negotiation, South Korea should seek clarity on the transparency of China’s strategic item controls. The Committee on Foreign Investment in the United States (CFIUS) plays a key role in monitoring the quality of inbound investments; similarly, South Korea is experiencing increased inbound investment due to the manufacturing shift from China and should apply similar standards to evaluate investment quality. This emerging economic war between China and the USA is now marked by the competing initiatives of the BRI and IMEC. The BRI can be viewed as a modern Silk Road, linking China with Europe, while the IMEC seeks to establish a trade logistics corridor connecting Saudi Arabia, the UAE, Israel and Greece. The South Korean Government should take proactive steps to prepare for the evolving dynamics of the trade war between China and the USA. CitationOh, J.S. (2025), "International trade war - Spice Road against Silk Road", International Trade, Politics and Development, Vol. 9 No. 1, pp. 2-11. https://doi.org/10.1108/ITPD-06-2024-0031  Notes 1. https://www.investopedia.com/terms/s/supplychain.asp2. According to Gary Gereffi et al, 5 governance types of a lead company could be categorised as market, modular, relational, captive and hierarchy.3. Korea imports urea from 12 countries including Qatar, Vietnam, Indonesia and Saudi Arabia, in addition to China.4. https://single-market-economy.ec.europa.eu/sectors/raw-materials/areas-specific-interest/critical-raw-materials/strategic-projects-under-crma_en5. IPEF was launched on May 23,2022 at Tokyo. 14 member countries are Australia, Brunei, Fiji, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, Vietnam and the USA. 4 Pillar of IPEF are Trade (Pillar 1), Supply Chain (Pillar 2),Clean Economy (Pillar 3) and Fair Economy (Pillar 4).6. Critics say “lack of substantive actions and binding commitments, instead focusing on process-driven framework building.” https://www.piie.com/blogs/realtime-economics/its-time-ipef-countries-take-action-supply-chain-resilience7. https://ec.europa.eu/commission/presscorner/detail/en/ip_22_54438. As of 2023, the first-largest trade partner of Korea is China (Trade volume of $267.66bn), the second is the US ($186.96bn) and the third is Vietnam ($79.43bn)9. As preferential ROO contain the labour value content requirement in the USMCA, it could increase compliance costs for importers. https://crsreports.congress.gov/product/pdf/RL/RL3452410. USITC(1996), Country of Origin Marking: Review of Laws, Regulations and Practices, USITC Publication 2975, July, pp. 2–411. https://www.barrons.com/articles/hong-kong-financial-center-china-46ba5d3612. Porter identifies a value chain broken in five primary activities: inbound logistics, operations, outbound logistics, marketing and sales and post-sale services. https://www.usitc.gov/publications/332/journals/concepts_approaches_in_gvc_research_final_april_18.pdf13. MAU is a metric commonly used to identify the number of unique users who engage with apps and website. MAU is an important measurement to the level of platform competitiveness in the digital trade logistics or e-commerce industry.14. https://home.kpmg/xx/en/home/insights/2019/12/china-belt-and-road-initiative-and-the-global-chemical-industry.html15. https://www.bradley.com/insights/publications/2023/10/the-india-middle-east-europe-economic-corridor-prospects-and-challenges-for-us-businesses16. The Asian Development Bank (ADB), which first used the term in 1998, defines economic corridors as important networks or connections between economic agents along a defined geography, which link the supply and demand sides of markets. http://research.bworldonline.com/popular-economics/story.php?id=350&title=Economic-corridors-boost-markets,-living-conditions17. Legovini et al. (2020) comments traditional cross border agreements of transport investment focuses only on a narrow set of direct benefits and cost. However, economic corridors can entail much wider economic benefits and costs such as trade and economic activity, structural change, poverty reduction, pollution and deforestation.18. Arab Centre Washington D.C. https://arabcenterdc.org/resource/the-geopolitics-of-the-india-middle-east-europe-economic-corridor/ References Bayne, N. (2017), Challenge and Response in the New Economic Diplomacy, 4th ed., The New Economic Diplomacy, Routledge, London, p. 19.Blanchard, J.M.F. and Ripsman, N.M. (2008), “A political theory of economic statecraft”, Foreign Policy Analysis, Vol. 4, pp. 371-398, doi: 10.1111/j.1743-8594.2008.00076.x.Gereffi, G., Humphrey, J. and Sturgeon, T. (2005), “The governance of value chain”, Review of International Political Economy, Vol. 12 No. 1, pp. 78-104, doi: 10.1080/09692290500049805.Kraljic, P. (1983), “Purchasing must be supply management”, Harvard Business Review, Vol. 61 No. 5, September.Legovini, A., Duhaut, A. and Bougna, T. (2020), “Economic corridors-transforming the growth potential of transport investments”, p. 10.Octaviano, B.Y. and Trishia, P. (2014), Economic Corridors Boost Markets, Living Conditions, Business World Research, Islamabad, October.United States International Trade Commission (USITC) (1996), “Country of origin marking: Review of Laws, Regulations, and Practices”, USITC Publication, Vol. 2975, July, pp. 2-4.Further readingPorter, M. (1985), Competitive Advantage: Creating and Sustaining Superior Performance, Free Press.Putman, R.D. (1988), “Diplomacy and domestic politics; the logic of two-level games”, International Organization, Vol. 42 No. 4, pp. 427-600.USITC (2019), “Global value chain analysis: concepts and approaches”, Journal of International Commerce and Economics, April, pp. 1-29.