Get Ready for an Energy Export Battle with China

November 2, 2020 Topic: Security Region: Asia Tags: ChinaTradeEnergyGasCoal

Get Ready for an Energy Export Battle with China

The United States must respond to the Belt and Road Initiative in a manner that emphasizes the program’s weaknesses as well as the affected nations’ energy needs and the global threat of climate change. This is the only way Washington can strengthen its geopolitical position in the region at the expense of Beijing.

In order to sufficiently compete with China’s financial strength, the DFC should increase its efforts to court foreign investors, especially from sovereign wealth funds like those in Norway, United Arab Emirates, and Kuwait, who have an obvious interest in stemming Beijing’s energy ambitions. Sovereign investors with the backing of the state would help to make the scheme truly multilateral, putting it on solid geopolitical footing. The U.S. federal government should also have a vested interest: The State Department should funnel grant money for these projects through the DFC as part of its bilateral economic assistance programs. Grants, rather than low-interest loans, would appeal especially to foreign governments with hopeless finances.

But Xi could do much to hinder U.S. attempts to export green energy projects. China dominates the manufacturing of one of the most promising renewables: solar. China is home to eight of the world’s top ten solar manufacturers, and even companies headquartered in friendly U.S. allies, like Canada Solar, rely heavily on Chinese labor. If Beijing feels its own exports are being weaponized against its geopolitical ambitions, then it could refuse to allow Chinese companies to sell solar materials to firms involved in American-led energy infrastructure projects. And while China would likely not turn away other Western buyers for fear of losing their wealthy consumer base, Washington is cutting off its nose to spite its face with the recent presidential proclamation to increase tariffs on imported solar cells and modules and end the exemption for higher-efficiency bifacial solar panels. 

This sort of protectionism would hamper American company’s efforts to buy from, for instance, European allies like Germany, France, and Italy, who are partnering with other EU states to develop the next generation of solar panels. Like all tariffs, ones on solar materials only serve to hurt the consumer, who will ultimately pay the tariff in the form of higher prices. Instead of fruitlessly attempting to limit healthy competition from allies, Washington should end its draconian support for coal and shift those subsidies to domestic solar and wind manufacturers.

On the other end of the supply chain, China also boasts control of nearly three-quarters of the lithium battery market. Without cutting edge and hyper-efficient storage technology, renewables like solar and wind are less attractive to electricity-hungry emerging economies, and as climate change continues to inject unpredictability into weather patterns, governments may be less willing to sacrifice the certainty that coal and oil offer for greener technologies. If the Chinese lead on lithium batteries is insurmountable (the United States only holds 12 percent share in the lithium market), then America should look to other innovations, such as sodium sulfur, flow, and proton batteries. Indeed, a push to geopolitically counterbalance China’s BRI could also help the United States to corner the market for the next generation of batteries, which would pay geoeconomic and national security dividends for years.

Connor Sutherland is a recent graduate of Rutgers University, New Brunswick and works as a program assistant at the Council on Foreign Relations. He lives in New York.

Image: Reuters