The Climate Transition in a Deglobalising World

The next phase of decarbonisation may be shaped as much by energy security and industrial policy as by the cost of cutting emissions.

Sir John Templeton was best known as a bottom-up stock-picker, but he also recognised the importance of the broader secular forces that could shape investment opportunities over many years. He referred to these as “Major Forces”. This thinking did not replace detailed company research. Rather, it provided a wider context for assessing how structural changes might affect industries, business models and the long-term prospects of individual companies.

Today, we see three particularly important and interrelated forces: artificial intelligence, deglobalisation and decarbonisation. Artificial intelligence is adding to electricity demand and increasing the need for investment in power generation and grids. Decarbonisation will influence how securely and sustainably that electricity can be supplied. Deglobalisation is changing where the transition’s inputs, from turbines to lithium to gas, can be sourced.

Trade is being rewired

"Slowbalisation" is an apt description of what has happened so far. World trade as a share of gross domestic product rose from around 38% in 1990 to approximately 60% in 2008. It briefly exceeded that level in 2022, but has otherwise fluctuated a little below it, and stood at around 57% in 2024.¹

Nonetheless, these aggregate figures do not tell the whole story. Trade has become more concentrated within political and economic blocs, with companies and governments placing greater emphasis on the security of supply chains. China's share of US imports, for instance, fell from around 22% in 2017 to roughly 13% in 2024, even as US imports overall kept rising.²

That change has important implications for climate investing. Across major economies, industrial policy is placing greater weight on domestic manufacturing, carbon emissions and supply-chain standards. Clean technologies are no longer judged solely on their delivered cost.

Decarbonisation as energy security

Europe provides a clear example of the relationship between energy security and climate policy. Since 2022, the region has sharply reduced its dependence on Russian gas while adding substantial renewable generating capacity.

A wind turbine or solar farm replaces a recurring requirement for internationally traded fuel with an energy resource produced on the domestic power system. Once installed, the wind and sunlight do not need to be imported, transported through vulnerable shipping routes or purchased from a potentially hostile supplier.

Renewable generation also needs the grid around it to change. More renewable electricity, electrification and data-centre demand require networks that can handle intermittent generation, rising peak demand and a more distributed power system. Utilities and renewable developers such as SSE, EDP Renováveis, Eversource and NHPC may benefit from this need for greater energy independence and system resilience.

Solar module prices in the United States have diverged materially from those in the wider global market. The same split has opened up in polysilicon, where prices outside China remain well above domestic Chinese levels.

First Solar is unlikely to be the world’s lowest-cost manufacturer of solar modules, yet it has a large US manufacturing footprint and is vertically integrated within the country. Its products may therefore be more expensive than global alternatives while remaining commercially attractive to customers seeking domestic content, supply-chain traceability and reduced exposure to future trade restrictions.

Vestas, meanwhile, competes against lower-cost manufacturers, including Chinese producers, but turbine selection depends on more than the initial purchase price. Operating history, servicing capability, execution and the long-term bankability of the supplier all matter. Whether governments will formally restrict Chinese turbines, as several European ministries are now debating, is the open question for the next few years.

Critical minerals are subject to the same forces. Albemarle is a globally diversified lithium producer, but its resource base in Nevada and development potential in North Carolina also give it strategic relevance to efforts to establish a more domestic US battery supply chain.

Waste oil, aluminium and the border

A second area of opportunity lies in making better use of the resources already available within an economy. Circularity can reduce environmental damage, substitute for imports and lower strategic dependence. This supports companies involved in recycling, waste management and water efficiency, including Veolia, Waste Management and Veralto.

Waste oils and animal fats can be converted into renewable fuels, turning local waste streams into domestic energy. Until recently, much of that feedstock was imported: China shipped roughly 1.27 million tonnes of used cooking oil to the United States in 2024. Those flows collapsed in 2025. The 45Z clean-fuel credit that replaced the old blenders' credit in January treated imported feedstock less favourably, and legislation passed in July excluded anything sourced outside North America from 2026 onwards. Chinese used cooking oil has largely disappeared from the US market as a result.

Darling Ingredients, which collects and processes waste fats domestically through its rendering network and Diamond Green Diesel joint venture, has gone from competing with cheap imports to holding a protected feedstock base within the space of a year.

Carbon regulation is creating similar differentiation in industrial markets. The European Union's Carbon Border Adjustment Mechanism entered its definitive phase in January 2026 and now charges importers for the emissions embedded in aluminium, steel, cement, fertiliser and a handful of other goods. The charge is small to begin with, because EU producers still receive most of their allowances for free, but those free allowances are being phased out through 2034 and the border cost rises in step. Over that period emissions intensity and traceability will increasingly influence pricing alongside conventional production costs.

That development may benefit companies such as Norsk Hydro, whose renewable-powered aluminium production has a comparatively low carbon footprint.

What resilience costs

Lower prices and greater scale generally accelerate the adoption of new technologies. If the United States could source all its solar equipment from the cheapest global manufacturers, more generating capacity might be installed for the same level of spending. Trade barriers, duplicated supply chains and domestic-content requirements can raise costs, weaken competition and reduce overall economic efficiency.

A more fragmented climate transition may therefore be more resilient and politically durable, but also more expensive. In some areas the higher costs will slow adoption; US utility-scale solar installations, for one, would be higher without the tariff regime, and nobody in the industry disputes it.

A technology that appears cheap but remains exposed to tariffs or supply disruption may not be the most bankable option. Price is no longer the only basis of competition. Where a product was made, and what it emitted in the process, now count alongside it.

The opportunity lies in companies that can help reduce emissions while also meeting the demand for domestic capacity and traceable supply chains. In a deglobalising world, the most successful climate businesses will be those that meet climate and security needs together.