BPR statement on George Floyd’s death, police violence:

 

George Floyd’s life mattered. Like Ahmaud Arbery, Breonna Taylor, Tony McDade, and too many others whose names we don’t know, Floyd was stolen from friends and family members who loved him and cared about him. His murder cannot be undone, and it is our most recent reminder of the fact that white supremacy, police violence, and racism are dangerously prevalent forces in America today… Read Full Statement

What the Renewable Energy Market Can Tell Us About the Future of Global Geopolitics

Chinese President Xi Jinping announced to the UN’s General Assembly in September that his country would achieve carbon neutrality by 2060. Xi’s promise marks a formidable step in climate policy and opens a crucial phase in energy power dynamics. 

The announcement evinces a drastic transformation for the Chinese economy, which is the world’s largest coal consumer and, consequently, carbon emitter. Yet China is already the world’s leading producer of renewable energy. Its dominance in the solar and wind energy markets will establish the country as a leader in the energy sector in the coming decades. As China and the rest of the world turn away from fossil fuels, the geopolitical benefits for leading renewable energy producers will be significant. Renewables will potentially allow China to further its economic and political influence, and although the European Union (EU) may give up leverage to China, renewables give the Union the vital opportunity to decrease dependence on Russian energy.

" While increased reliance on China could be harmful, the relative difficulty of using renewable energy inputs for political leverage means that the EU stands to benefit from long-term decreased dependence on Russia. "

Over the past 20 years, Chinese companies have moved to the forefront of all stages of the renewable energy supply chain. China now controls 46 percent of global onshore wind capacity, 70 percent of all solar panels, and 77 percent of lithium-ion battery cell capacity. Nearly half of the world’s electric vehicles are in China. The country’s tariffs, subsidies, government mandate, and support from European demand have built its renewable energy sector. Chinese economies of scale have driven down solar photovoltaics and onshore wind costs. They are now price competitive with fossil fuels and are the most affordable form of electricity for two-thirds of the global population. 

Chinese companies also control mining capabilities of rare earth minerals that are crucial to renewable energy production and storage. China has the majority of the world’s lithium refinery capacity and roughly 75 percent of all cobalt capacity. Chinese firms control mines in Chile, Australia, Indonesia, and the Democratic Republic of the Congo, where much of the world’s rare mineral supply exists. Although these materials are not hard to find, they are difficult to bring to market and produce at the scale that the energy transition requires. This means that China will likely benefit more from their commercial advantage as renewable energy demand skyrockets. 

Chinese control of energy supply chains will allow it to shift from being the world’s largest oil importer to the dominant exporter in a rapidly growing sector. Moreover, Xi’s climate commitment allows China to take a leadership position in global politics while many leaders in the United States fail to acknowledge that a climate crisis even exists. The combination of China’s energy production advantages and early commitment to renewables set it up to coordinate climate cooperation, which will be essential to slow global warming. The country’s control over rare earth mineral production could also lead to formidable political leverage as renewable energy becomes the norm. At the very least, China’s ‘clean’ energy dominance can only serve to elevate the country’s status on the world stage. 

While the EU does not have the same dominance over renewable energy supply chains, it would experience significant geopolitical benefits from increasing its energy independence. Europe’s own climate commitment, the European Green Deal, aims to reduce carbon emissions by 55 percent of what they were in 1990 by 2030 and achieve net zero greenhouse gas emissions by 2050. To reach these ambitious targets, the EU has provided generous subsidies which have allowed the Union to become the global frontrunner in wind energy. Technological advances have led to EU companies owning 40 percent of all renewable energy patents. European member states, unlike China, already rely on renewable energy for a significant portion of their energy supply. In the first half of 2020, 40 percent of the Union’s electricity came from wind, hydro, solar, and bioenergy.

European leaders should be concerned about relying more on Chinese renewable components, particularly given existing economic tensions between the two. Ninety-eight percent of the EU’s rare earth minerals are imports from China and the bloc relies heavily on Chinese solar products. However, the nature of renewable energy means that reliance on one exporter is likely less geopolitically hazardous than reliance on an oil or natural gas source. If China restricted battery supply, for example, there might be delays or price increases, but it would not have the same immediate effect as cutting off fuel supplies. Similarly, rare earth minerals are a component of energy production rather than the energy itself. If China cut off lithium supply for geopolitical reasons, the market effects would likely give the EU and others time to find alternative, commercially viable sources of lithium, given its relatively large supply in nature. 

More importantly, the whole EU’s shift towards greater consumption of renewable energy will decrease the geopolitical weight of the bloc’s Russian natural gas supply. Russia controls over 35 percent of the European gas market and is expected to add 55 billion cubic metres of gas exports per year once the Nord Stream 2 pipeline is in operation. The pipeline may extend Russian President Vladimir Putin’s influence from Eastern EU countries to Germany and Western European countries. The Kremlin has notably used natural gas cutoffs and price increases for political leverage over Ukraine, among other Eastern European countries before. While increased reliance on China could be harmful, the relative difficulty of using renewable energy inputs for political leverage means that the EU stands to benefit from long-term decreased dependence on Russia.

Green Deal investments in domestic renewable energy production can offer a potential long-term solution to Russian energy power. Increases in renewable energy use, particularly in heating and cooling, can gradually limit natural gas use. Green hydrogen is the most obvious replacement to natural gas in the utility sector. Hydrogen is not yet price competitive with fossil fuels. Nonetheless, Brown’s Richard Holbrooke Associate Political Science Professor and energy expert, Jeff Colgan, points out: “Lots of countries, particularly in Europe, are trying to take the lead in producing hydrogen, which could be a very important feedstock for clean energy in the future. The race is on to see who is going to be the commercial first mover.” Indeed, the European Commision announced plans to build 40 gigawatts of hydrogen electrolyzers, more than half of current global yearly hydrogen production. Hydrogen is expected to constitute 14 percent of the Union’s energy supply by 2050, creating 1 million jobs. To be sure, the shift from natural gas to green hydrogen has a long time horizon, but along with other renewable sources of energy, the EU can and should gradually wean itself off of Russian natural gas supply over the next 20-30 years. 

Finally, the EU’s implementation of the Green Deal and intra-Union collaboration to lower emissions can strengthen the Union itself. Like China’s climate announcement, the Green Deal allows the EU to help lead global climate collaboration and gives it a head start in transforming into a climate neutral economy. European Commission President Ursula von der Leyen also argues that the climate plan would further tie the Union together and spark economic development. To mobilize the minimum of one trillion euros over the next decade required to achieve the Green Deal and to move forward with climate-friendly policy initiatives at the EU level, collaboration among member states will be essential.

Ultimately, the global shift towards renewable energy will allow China to expand its geopolitical power; and while the EU will become dependent on China, it will benefit from a long-term lower dependency on Russian natural gas. The energy market may be a window into the future of the world order. China and the EU’s investments in clean energy underscore the potential for geopolitical power through renewable energy. Countries that wait risk losing out on the future of the global economy.

Photo: Image via UN Splash (Fré Sonneveld)

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