**Figure 14 Top 10 developing countries largest importers of environmental goods from China**

<!-- Start of picture text --> 7<br> 6<br> 5<br> 4<br> 3<br> 2<br> 1<br> -<br>India Brazil Vietnam Indonesia Thailand Malaysia Mexico Türkiye Pakistan Philippines<br>USD billion<br><!-- End of picture text --> _Source:_ Authors’ calculation based on 2022 data from the World Bank’s WITS. Note: Data is collected based on the APEC list of environmental goods.

# **4. Conclusion and policy recommendations**

**The select climate policies of the EU, US, and China bode well for the environment but present challenges and opportunities to developing countries** . These policies aim to cut carbon emissions, encourage renewable energy, and enhance environmental and social governance, which are commendable goals. However, these policies will also likely reshape trade, pricing, investment, and access to technology in developing countries, with mixed possible consequences.

**The policies are likely to reduce demand for fossil fuels, energy-intensive manufactured goods, and commodities that contribute to environmental degradation** . Specifically, the EU ETS, EU EED, EU RED, US IRA, and China's renewable targets and ETS will lower fossil fuel demand, negatively affecting countries whose exports heavily depend on these markets. The EU CBAM and CS3D policies will add costs to carbonintensive exports to the EU, reducing in the case of the EU CBAM competitiveness for nations like Zimbabwe, Ukraine, Georgia, and Mozambique, while improving it for places like Albania, Colombia, Jordan, and Morocco. Additionally, the exporters of EUDR-impacted products will likely see increased compliance and due diligence costs or loss of market access to the EU.

**Conversely, these climate policies are expected to create new opportunities in sectors critical to the green transition, such as critical minerals, EV manufacturing, and renewable energy** . The US IRA and EU CMRA will boost their need for critical minerals and change their sourcing patterns. In the short term, non-dominant mineral-exporting countries will benefit from increased EU mineral demand, while countries with a US FTA will profit from heightened US mineral needs for batteries. For the medium to long term, countries rich in mineral reserves are anticipated to see export growth as new mines enter operation. EU CO2 standards, the US IRA, and China's EV policies will increase the demand for EVs and components from developing countries. However, US tax credit preferences favoring North American manufacturing may reduce battery demand from countries like Brazil while benefiting Mexico. The EU's 2035 zero-emission regulation will transform the automotive industry, likely positioning Morocco, Türkiye, and Viet Nam as key players due to their compatible industrial policies.

**Several measures can be taken to lessen the possible adverse effects of the select climate policies on developing countries and to capitalize on the potential benefits.** These actions should be undertaken by developing nations, the countries enacting the select climate policies, and the wider international community, as outlined below.

## **4.1 Recommendations for developing countries**

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