This is from a CFR blog post by Jennifer Hillman and
For the proposed U.S.-EU agreement on green steel and aluminum be successful, however, it will have to avoid several potential pitfalls. First, the deal cannot devolve into a stalking horse for protectionist interests. As currently conceived, the deal appears intended to incentivize reforms abroad by promising largely unrestricted access to U.S. and European markets for countries that meet certain standards. The allure of the European and U.S. markets pushes trade partners to make domestic reforms so they can meet those standards, helping to address overcapacity and reduce carbon emissions along the way. This only works, however, if the standards are clear and genuinely achievable while stringent enough to be impactful.
The United States and the European Union will also have to disentangle improper production or export subsidies from subsidies intended to lower carbon emissions. Greening steel and aluminum production is an expensive endeavor and, in most countries, will likely only occur with state aid. That aid, however, is liable be construed as granting an unfair advantage to recipients. U.S. steel producers, for instance, are already beginning to gripe about subsidies intended to help EU steel producers reduce their carbon footprint. Without clear redlines delineating permissible forms of state action, effort to encourage decarbonization could be derailed by finger-pointing over improper subsidization. At the same time, however, overly onerous restrictions on state action could delay the transition away from carbon-intensive production methods. Developing a shared set of standards for appropriate and inappropriate subsidization should be a priority for U.S. and European negotiators.
Finally, any final deal should include some sort of framework for technology sharing, both between Europe and the United States and between the United States and Europe and those countries working to green their own steel and aluminum industries. Enabling green manufacturing techniques to flow smoothly between the United States and Europe while also demanding ever-cleaner production at home would ensure that a U.S.-EU deal also helps reduce domestic emissions. While U.S. and EU steel producers do emit less than their counterparts overseas, a significant portion of that difference is due to the prevalence of electric arc furnaces in the United States and the EU. Electric arc furnaces are cleaner and smaller than the blast furnaces common in China and elsewhere. Rather than using this quirk of the modern steel market to avoid further modernization efforts, however, the United States and Europe should strive to have even cleaner production at home—with the goal of net-zero steel and aluminum production. At the same time, ensuring these green production technologies are readily available beyond Europe and the United States is essential to ensuring a rapid and equitable transition.
When you combine their concerns with the ones I raised here and here, I'm pretty skeptical this initiative is going anywhere. It's not that something like this couldn't be done. You could definitely have some sort of coordinated international effort to reduce carbon emissions in manufacturing. (I don't think manufacturing should be the only focus, but clearly it's an important aspect). Rather, it's that due to the way the effort is being approached as described so far, there are a number of embedded problem that I don't think can be overcome.
(I should mention that the overall take on this initiative from Jennifer and Alex is more positive than mine is.)
