Use Climate and Trade Policy to Counter Putin’s Playbook

Europe’s energy crisis has reignited U.S. concerns that Russia could use its energy dominance across the continent to prevent a strong response from NATO allies should Russia expand its war in Ukraine. That’s why U.S. presidents, from Ronald Reagan to Donald Trump, have sought to prevent European dependence on Russia by opposing the construction of Russian energy pipelines to Europe, such as the Yamal-Europe pipeline and NordStream 2. But Europe’s thirst for Russian energy, particularly natural gas, has taken priority over geopolitical concerns—and unfortunately, the Biden administration has acquiesced. Russian President Vladimir Putin uses European energy dependence as a trump card in his campaign to subjugate Ukraine and other former Soviet republics, annex parts of their territories, undermine the transatlantic relationship, and restore Russia to greatness.

Instead of complaining about some European allies’ poor choices, the United States should lead in responding to Russian intimidation. We have an opportunity to counter Putin’s playbook with a bold initiative consistent with European priorities: a transatlantic climate and trade initiative that would cut global greenhouse gas emissions, increase energy security, and reduce Russia’s power to coerce Europe. One aspect of that initiative could be a joint trade mechanism between the United States and the European Union that levels a common carbon fee on imported goods. This would not only encourage the domestic production of goods and energy, but also demonstrate a model of clean and efficient production for other nations to emulate.

Free trade proponents on both sides of the Atlantic, who prioritize cheap imports, may oppose this proposal. However, the current global trade regime has tolerated unfair practices that have resulted in a vast transfer of wealth from the West to undemocratic, non-market countries bent on undermining U.S. and European security. It is time to correct the mistakes of the past and prevent state-controlled, mercantilist economies from continuing to ignore environmental, labor, and human rights standards to gain an unfair competitive advantage. Currently, the United States imports more Russian oil than it produces in Alaska, and European reliance on Russian energy is only set to grow. A new strategy could level the playing field by prioritizing cleaner, more ethically produced oil and gas. Such an approach could be an important part of international efforts to cut emissions; it is also consistent with U.S. and European economic and geopolitical interests.

Russia would no longer be able to capitalize on its low environmental and labor standards.

A U.S. initiative to merge climate and trade policy should find support in the EU, which has already introduced a proposal to impose carbon fees on imports of energy-intensive manufactured goods. Current EU plans, however, have a NordStream 2-shaped loophole because Europe wants to buy affordable but dirty Russian natural gas while discouraging the development of its own and the United States’ energy resources. U.S. diplomats have an opportunity to work with European allies to promote cleaner fossil fuels as part of a trade and climate policy that aims to reduce emissions while ensuring energy security and preventing Russia from using energy dependence for coercion.

Russian fossil fuel interests dread a transatlantic merger of climate and trade policy. A U.S.-EU agreement could lead to a deal among the G-7 and the other economies that joined the summit this year—Australia, India, New Zealand, and South Korea—which in turn would account for at least half of the market for Russian exports. Igor Sechin, CEO of Russia’s state-owned oil producer Rosneft, has reportedly warned the Kremlin that carbon border fees could be much more damaging to the Russian economy than sanctions. Sechin’s fears are well grounded: Russia is heavily dependent on exporting fossil fuels and energy-intensive goods like steel and fertilizer. Profits from oil and natural gas exports account for roughly 40 percent of the government’s budget.

A U.S.-EU agreement would allow U.S. energy producers to take advantage of their leadership in cleaner fossil fuel production. Not all fossil fuel production is alike: Lifecycle greenhouse emissions from Russian natural gas piped to Europe, for example, are over 40 percent higher per unit of energy than U.S. shipments of liquefied natural gas. According to a report by the Climate Leadership Council, Russian energy production is on average two times more carbon intensive than U.S. production. In contrast to Russia’s poor record addressing methane, U.S. producers in North Dakota have achieved greater than 90 percent natural gas capture rates. European recognition that U.S. natural gas is cleaner in terms of emissions would give U.S. exporters a competitive advantage relative to more carbon intensive suppliers like Russia, while incentivizing cleaner production globally.

Integrating global emission reduction goals into the NATO 2030 initiative would strengthen transatlantic relations and solidarity. Russia would no longer be able to capitalize on its low environmental and labor standards. NordStream 2 could become a stranded asset—written down, devalued, or converted to a liability. An integrated approach to climate, trade, and energy security would incentivize European companies to forgo investments in Russian energy that undermine transatlantic security interests.

A bold U.S.-EU climate and trade initiative would not only benefit U.S. energy producers, but also recognize U.S. leadership in reducing emissions in a way that does not jeopardize energy security and economic growth. It is a solution that allows free and open societies to counter Russian coercion. Combined with Western innovation in renewable energy, advanced nuclear power, and hydrogen, this initiative could also be a model inspiring dramatic reductions in emissions and new ways to counter bad actors all around the world.