Energy and Climate policies: sharing knowledge across the Atlantic

For decades, the US and Europe have influenced each other’s energy and climate policies. Looking back, what are some ideas that successfully travelled across the Atlantic?

Across the Atlantic, the United States and Europe often pursue different approaches to energy and climate policy. Yet many of today’s policies have been shaped by decades of exchange, adaptation, and mutual learning.

Ahead of the FSR–MIT CEEPR Annual Conference on Energy and Climate Policy, this series brings together experts from both sides of the Atlantic to explore some of the defining questions facing the energy transition.

In this instalment, experts from MIT CEEPR and the Florence School of Regulation reflect on how ideas have travelled across the Atlantic and influenced energy and climate policymaking on both sides.

From the US: Michael Mehling, Deputy Director, MIT CEEPR

As someone born in Europe who has spent two decades working on climate policy in the United States, I’ve long been fascinated by how policy ideas have travelled across the Atlantic. For instance, Europe is widely regarded as a global climate leader  with ambitious climate policies and some of the most advanced decarbonisation efforts. Yet much of its celebrated policy architecture is, in a sense, borrowed. Nearly every major EU climate policy instrument had an American starting point before crossing the ocean to find the more supportive politics it needed to take root.

Emissions trading is probably the clearest example, dating back to ideas developed by North American economists in the 1960s and 1970s, and first deployed at scale under the US Acid Rain Program. Europe was initially hesitant, but later embraced the concept by launching the EU Emissions Trading System (EU ETS) – long the world’s largest carbon market – while a federal US version never materialised. Likewise, a border carbon adjustment was first advanced and nearly adopted as part of a 1993 US energy tax reform but ironically met with great criticism from Europe at the time. Over thirty years later, Europe is deploying this policy with the EU’s Carbon Border Adjustment (CBAM) and, from next year, a UK counterpart.

Similarly, feed-in tariffs – responsible for much of Europe’s early success with renewable energy, and creating a demand pull for technological innovation and manufacturing at scale initially within and eventually beyond Europe – have their roots in 1978 US energy legislation. More recently, the Inflation Reduction Act (IRA) prompted Europe to respond with the Net-Zero Industry Act, the first time EU legislation adopted the label “Act”. Even concepts such as a “just transition” or the “Green Deal” framing of climate policy first took shape across the Atlantic before finding fertile ground in Europe, where they evolved and gained political traction.

But the lessons flow in both directions. When American initiatives such as California’s Cap-and-Invest program and the Regional Greenhouse Gas Initiative were designed, they learned from Europe’s early missteps with the EU ETS – the windfall profits utilities reaped from free allowances – and chose to auction permits instead. And today, Europe is the clear first-mover with its CBAM and policies on carbon accounting, climate disclosures and supply chain due diligence, all of which is being noticed and debated on the American side.

From Europe: Simone Borghesi, Director, FSR Climate Area

When comparing European to US energy and climate policies, what usually comes to mind are the different policy styles. Historically, both jurisdictions have relied on different policy instruments to achieve emission reductions and energy security. The EU has typically counted on environmental standards, carbon pricing, and legally binding targets, while the US has often made use of tax credits, subsidies, and innovation policies.

Differences persist, rooted in the political and cultural contexts, but both jurisdictions have continuously influenced each other. For example, the EU has played an important role in international climate negotiations, as a leading advocate of the Kyoto Protocol and a key actor in negotiating the Paris Agreement. And, it continues to have a direct impact on US business practices through its CBAM, sustainable finance disclosure rules, corporate climate reporting requirements, and more. Amid climate and energy policy divides, the so-called Brussels effect continues to export certain ideas across the Atlantic.

On the other hand, the US has played a crucial role in clean energy innovation and in the development of market-based environmental policy, including emissions trading, which later informed the design of the EU ETS. More recently, the US has had a visible impact on EU policy with the adoption of the Inflation Reduction Act (IRA) in 2022, reinforcing a shift towards coupling decarbonisation with industrial competitiveness. The EU’s Green Deal Industrial Plan of 2023 and the Net-Zero Industry Act of 2024, which followed the IRA adoption, put greater emphasis on industrial investment and technological innovation.

Lea Heinrich, Project Associate, FSR Climate Area

History shows that in the best cases, the differences between US and EU policy approaches can complement each other or lead to mutual learning. For example, the dramatic decline in solar photovoltaic costs resulted from a combination of technological innovation in the US, large-scale deployment driven by European support schemes, most notably Germany’s Renewable Energy Sources Act (Erneuerbare Energien Gesetz, EEG), and manufacturing expansion in China.[1] Similarly, the successful negotiation of the 2015 Paris Agreement was made possible in part by convergence between the EU and the Obama administration on a more flexible approach to international climate governance, centred on nationally determined contributions rather than legally binding national emissions targets.

The rollback of climate and energy policies under the Trump administration has significantly strained cross-Atlantic cooperation and global climate efforts in recent years. Nonetheless, thanks to the ties formed among researchers, civil society organisations and regional actors, ideas continue to cross the Atlantic. What is needed next in both the US and Europe is renewed political commitment to decarbonisation and international cooperation, alongside the political will to overcome climate change denial and organised opposition from those whose economic interests are tied to highly polluting industries.

Looking ahead to Florence

But the discussion doesn’t end here. These are some of the questions that participants will continue exploring during the FSR–MIT CEEPR Annual Conference on Energy and Climate Policy in Florence this November, where researchers, policymakers, and industry representatives will discuss how cooperation across the Atlantic can continue to shape the future of energy and climate policy.

[1] Nemet, G. F. (2019).