changes in technology access. Figure 2 presents the general framework for analyzing these impact channels.

# **Figure 2 Main impacts and affected agents of the EU, US, and China climate policies**

<!-- Start of picture text --> Impacts Affected agents Description Regulations<br>Supply/ demand in traditional FF & related tech & components, high (-) Low environmental (+) technology, high emission intensity, deforestation-related and negative environmental-impact outputs; Lower demand for fossil fuels, components and related<br>sectors environmental Higher demand for products with low environmental<br>impact sectors impact sectors impacts (e.g., low emission intensity, deforestation-free)<br>(-) (+)<br>Major CM Minor & potential Lower demand for critical minerals from China and non-<br>Supply/ exporters (China) CM exporters FTA partners of the US, opportunities to expand and<br>demand in (-) (+) establish production for other exporters; non-America EV. North<br>green transition Non- North Green tech, EV Higher demand for green technology and components, EV<br>sectors America EV components; components exporters; EV exports from North American<br>North America countries.<br>exporters<br>EV exporters<br>(+)<br>Prices FF price (-) Price of CM US dollar (+) Downward pressure of CMs and US dollar on FF price; upward pressure on price<br>(+) Better access to technology; positive macro and<br>Technology Green technology developmental impacts; More green investment abroad<br>EU RED EU CO2 standards EU CRM<br>Legend: EU ETS (incl. CBAM)China ETS US IRA (RE)China RE plan US fuel standardsChina fuel standards US IRA (EV) China EV US IRA (CM)China Belt & Road EU DeforestationEU CS3D<br><!-- End of picture text --> _Source:_ Authors. _Notes:_ CM stands for critical minerals, EV for electrical vehicles, RE for renewable energy, and FF for fossil fuels.

**The analysis of supply and demand changes in trading goods sectors focuses on the sectors most affected, which are traditional sectors and green transition sectors.** Traditional sectors include energyintensive and trade-exposed (EITE) sectors, such as manufacturing, as well as other trade-exposed sectors that have important environmental impacts, such as agriculture. Green transition sectors are those related to the green transition, such as EV manufacturing, critical minerals, and renewable energy. Sectors that are not traditional nor green transition sectors, such as low-energy-intensive manufacturing and lowimpact agriculture, are not discussed as they are less influenced by the select climate policies.

**These climate policies are expected to reshape supply and demand in traditional sectors, particularly in fossil fuels, energy-intensive production, and environmentally harmful processes.** Overall, outputs from these sectors will likely decline, offset by increasing demand for eco-friendly products and goods with low environmental impact. This shift is expected to directly affect countries' trade.

**Green transition sectors, such as those linked to EVs, batteries, and critical minerals, are also expected to be impacted by these climate policies.** Dominant exporters of critical minerals, such as Chile (lithium), China (heavy rare earth elements), South Africa (platinum) and Türkiye (boron), will likely not benefit that much from the increased demand and will lose market share because the EU and US are diversifying away from dominant players. Conversely, non-dominant exporters and new exporters could find opportunities to expand or start extracting and processing key minerals for the green transition, provided they meet eligibility requirements. Developing country exporters can also gain from the rising demand for green products and components resulting from these climate policies.  In 2022, the exports from developing countries of critical minerals and green products and components (such as EV, EV components like batteries, solar panels, wind turbines, and components for renewable energy) to China, the EU, and the US stand at $157.6 billion and $ 185.6 billion, respectively.

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