In 2025, the global energy transition is no longer a niche concern of environmentalists or technocrats-it’s a central axis of economic and geopolitical strategy. The urgency to decarbonise is clear, but the journey is increasingly shaped by political recalibration, regulatory innovation, and the hard realities of global power dynamics.
Governments and regulators have stepped into a more active role in shaping the energy transition. By fostering innovation, supporting emerging markets, and aligning industrial policy with climate goals, they are helping build a more resilient and sustainable energy future. With trillions in annual investment needed to meet climate targets, public institutions are increasingly stepping in to de-risk capital, create enabling environments, and accelerate the deployment of clean technologies.
India’s policy changes exemplify this evolution. The government has introduced viability gap funding for battery storage and green hydrogen, eased land acquisition for renewables, and launched a voluntary carbon market. Further, the Production Linked Incentive (PLI) scheme has significantly boosted domestic manufacturing across sectors including solar PV, electronics, and advanced batteries. As of mid-2025, the solar PLI program alone has enabled 18.5 GW of module capacity, 9.7 GW of solar cell capacity, and 2.2 GW of ingot-wafer capacity to be established. These reforms reflect a broader trend: climate policy is now inseparable from industrial strategy. Clean energy is no longer just about environmental stewardship-it is about economic competitiveness, job creation, and geopolitical leverage.
But the global incentive landscape is shifting. The United States, through the 2025 Reconciliation Bill, is proposing rollbacks to key tax credits from the Inflation Reduction Act (IRA) and tightening restrictions on foreign entities. These changes have rattled the renewable sector, with developers warning of stalled projects and diminished investor confidence. The bill’s emphasis on domestic sourcing and ‘foreign entity of concern’ rules signals a pivot toward protectionism. Much like India’s ‘Make in India’ initiative, the U.S.’s ‘Make America Great Again’ (MAGA) ethos reflects a shared political ideology of internally focused development. This shift is reshaping the fabric of globalisation and introducing a new geopolitical trend that is deeply influencing energy and industrial policy.
The Chips and Science Act is undergoing a similar transformation. Initially designed to bolster domestic semiconductor manufacturing through subsidies and tax credits, it is now being retooled under the Trump administration to rely on punitive tariffs-up to 100% on imported chips. This shift has spurred domestic investment from tech giants, but it also risks inflating consumer prices and destabilizing supply chains. The move from cooperative industrial policy to coercive trade tactics underscores the growing entanglement of geopolitics with energy and technology.
Global supply chains are being redesigned in response to these shifts. Regulators will play a pivotal role in this transformation, especially as international frameworks like the Carbon Border Adjustment Mechanism (CBAM) gain traction. These mechanisms aim to level the playing field for domestic industries while ensuring imported goods meet climate standards. As supply chains become more fragmented and geopolitically sensitive, regulatory oversight will be essential to ensure transparency, accountability, and climate alignment.
These tensions are mirrored across the globe. Escalations in Iran and the enduring fallout from the Ukraine war have reshaped energy flows and strategic alliances. Europe has adapted by diversifying gas imports and accelerating renewables. India is balancing domestic coal expansion with solar and hydro investment. Meanwhile, China’s green manufacturing overcapacity continues to depress global prices, prompting calls for trade remedies and strategic decoupling.
In this volatile landscape, regulators must walk a tightrope. Overregulation can stifle innovation; under regulation invites greenwashing and systemic risk. The most effective regimes are adaptive, inclusive, and focused on outcomes-particularly emissions reductions-rather than rigid prescriptions. As technologies mature and climate goals tighten, regulators must evolve from rule-setters to strategic partners.
The energy transition is no longer just a technical challenge-it is a governance challenge. The choices made by governments and regulators today will determine the pace of decarbonisation, the resilience of energy markets, and the stability of global economies. Strategic clarity and regulatory agility are no longer optional-they are imperative.
The world stands at an inflection point. The role of public institutions in shaping a low-carbon future has never been more critical. Their leadership will define not just the energy systems of tomorrow, but the trajectory of global prosperity and planetary health.
A version of this article was published by The Economic Times - Energyworld.com on August 25 2025. The same can be read here
