Climate Change, Energy Transition, and Great Power Competition: Examining the Future of Global Environmental Governance in an Era of Geopolitical Rivalry

Abstract

The global energy transition is increasingly entangled with great power competition, shifting global environmental governance from multilateral cooperation to fragmented "climate statecraft" and green protectionism. This study investigates how macro-level geopolitical rivalry impacts micro-level corporate resilience, specifically examining the moderating role of Sustainable Development Goal (SDG) integration in navigating this volatility. Utilizing a quantitative panel data design, we analyze 450 firm-year observations of non-financial firms across China (n=250) and Pakistan (n=200) from 2015 to 2025. Employing Two-Way Fixed Effects (TWFE) and System GMM estimators to address endogeneity, the findings reveal that heightened Geopolitical Risk (GPR) significantly erodes corporate resilience. However, robust SDG integration acts as a critical "conditional crisis insurance," significantly mitigating the adverse financial and operational shocks induced by geopolitical rivalry. This buffering effect is highly context-dependent: Chinese firms leverage SDG alignment to synchronize with state-directed "Dual Carbon" mandates, secure policy-backed green financing, and insulate themselves against Western decoupling and export controls, while Pakistani firms utilize it as a strategic hedge against acute macroeconomic instability, debt vulnerabilities, and regional security shocks. Ultimately, this paper demonstrates that the future of global environmental governance relies heavily on corporate sustainability strategies serving as the frontline defense against geopolitical fragmentation, particularly for firms navigating the crossfire of great power rivalry. We recommend future research expand to broader BRICS+ economies, utilize supply chain network analysis, and examine the distinct dynamics of State-Owned Enterprises in the geopolitics of green industrial policy.