Goldman Sachs: Carbonomics – Tariffs, deglobalization and the cost of decarbonization

This report finds that while innovation continues to reduce the cost of decarbonization, global trade tensions and localization policies are raising overall costs. Since 2019, the lower half of the global decarbonization cost curve has dropped by 45%, largely due to cheaper batteries, solar, and biofuels, but hard-to-abate sectors like heavy industry have become more expensive, especially those dependent on green hydrogen. The report warns that deglobalization could add about 30% to total decarbonization costs, as local production in the US and EU remains significantly pricier—solar panels and batteries from China are up to 60% cheaper, implying that Western economies would need 115% (solar) and 55% (battery) tariffs to compete. Meanwhile, lower gas prices could reduce power-sector decarbonization costs by 20%, as coal-to-gas switching becomes more economical. Overall, the study highlights a “two-speed” energy transition—fast progress in clean power and transport, but lagging momentum in industrial decarbonization due to cost and supply-chain pressures.