Why Biden’s ‘Green New Deal’ won’t Uproot Chinese Dominance of the Renewable Energy Sector
Joseph R. Biden, the 46th President of the United States, recently changed the vocabulary of the White House and federal agencies to include 'environmentalism', 'climate change' and 'renewable energy' after their four-year hiatus under ex-President Trump. With this change comes questions: what will happen with the estimated 900,000 jobs linked to fossil fuels; how to make the potentially tumultuous transition to net zero-emissions; and how to catch up to China's almost hegemonic control of the renewable energy sector.
It is this last question that will be dealt with in this article.
China has had a massive head-start in gaining the technological prowess and domestic production capacity to become the world-leader in the sector, for a few key reasons. Firstly, the political (and thus economic) stability granted by their system of government. Nominally, the Chinese state is a Communist, One-Party state run by the Chinese Communist Party (CCCP). This lack of political flux enables the Chinese state to run their economy from set directives, called Five-Year Plans; these give oversight into new technological trends and ensure that, as with renewable energy, when they come to prominence it is the Chinese rather than the West which can hit the ground running. Thus, China’s national-interest-driven policy has guaranteed a near-shoring of production and development and research of technologies key to green energy. This follows a policy framework within which China aggressively supports its domestic companies and manufacturers with tax cuts and import tariffs, enabling them to develop to internationally competitive levels within the huge Chinese domestic market without the international competition that others are subject to.
So, given this, where is China at the moment? Geography students might be able to help if you're asking that question seriously, but with regards to green technology and renewable energy it is clear that China is a world-leader in the sector; they invest as much in renewable energy as the next 10 nations combined. They hit their Paris Climate Agreement emissions target for 2020 in March 2018, almost a full three years prior to the US (re)joining said agreement.
Five of the six largest solar-panel manufacturing firms are Chinese, along with the largest wind turbine manufacturer and the world’s largest lithium-ion battery manufacturer; if this doesn’t show their current almost-hegemonic levels of control over the sector, not much will. China owns more than 90% of the world’s resources of and processing plants for rare earth minerals including cobalt, lithium and scandium; all three are integral to the production of green technology including batteries and photo-voltaic (PV) panels. Furthermore, Chinese dominance in the renewable energy sector extends overseas; by 2016, China had invested in more than 13 distinct projects worth a combined $32bn.
Biden wants to change this. His $2trn COVID-19 recovery plan and economic stimulus proposal, billed as the ‘American Recovery Plan’, aims to reintroduce the US to the realities of climate change and all the associated forecasting, creative destruction and technological development which comes in tandem. He’s under pressure from the solar industry to reduce tariffs on imported solar cells and other related technology – this would be good for the development of sustainable energy within the US and for CO2 emissions targets, but will give the market advantage to the efficient and established Chinese companies over the newer US players. His push may come too late in trying to establish the US as the preeminent producer of green tech, at least with regards to the energy production area of expertise.
The US is not even ahead in the development of new technologies for electric vehicles and batteries for vehicles despite massive investments into R&D by their domestic automotive companies including Tesla and GM. Tesla in particular has been looking for ways to bypass the Chinese dominance of the minerals necessary for their battery production - they have been making inroads into countries including Bolivia to find other viable suppliers of lithium, amongst others. By 2029, China is forecasted to be producing 66.9% of the world’s lithium-ion batteries and as aforementioned, currently has a monopolistic control over the minerals needed for their production.
I say currently as an important caveat to Biden’s proposals concerning the rare earth minerals mining sector, which is now designated as a key national security priority for the US and its federal agencies. Maybe we’ve finally found a place where Biden and his predecessor agree – the US needs to open some new mines.
In ex-President Trump’s final weeks in office, he signed spending packages including an $800m stimulus for rare earth programs and moving through the Biden-controlled Houses of Congress at the moment are several bills being debated which could increase tax incentives for domestic production, refining and purchase of rare earth metals. Be it from the Pentagon or the White House itself, directives and funding is being thrown around to companies to build rare-earth mineral processing plants in Texas and mines in both Canada and northern reaches of the US. If these policies, along with others intended to create a global rare earth supply chain coalition with Australia, Canada and Japan, succeed, there is potential for the US to secure itself domestic resource security. Creating a domestic market through subsidies will help spur the US renewable energy market to new heights too – more than an estimated 3m people are employed directly by the sector, not accounting for the millions more in related firms for manufacturing, mining or sales. The given figure of $2trn is also an enormous sum, with plans to make the investment available over the four years of Biden’s term.
Against a backdrop of decreasing US global hegemony and an increasingly overt, revisionist Chinese state these measures will be but a minor setback as China haven’t shown any sort of care towards the US’ own national security – they’re much more focused on the global economic influence and reach that they are increasingly able to dominate.
China’s monopolistic dominance of the mining industry in particular will care little about the US removing itself from Chinese-managed supply chains; they’re investing huge amounts into Sub-Saharan African mining operations. Since 2005 they’ve sunk more than $70bn into the energy and mining sectors in the region, giving invaluable political and economic leverage over the governments and citizens who are increasingly reliant on the Chinese state for foreign investment. If the US concentrates on domestic sourcing and production of rare earth elements, largely for their own domestic use anyway, it further removes them from competing over resources abroad. Thus, China remains its growing resource hegemony.
So, it’s clear that the US faces a massive challenge to try and make up the lost ground on the Chinese renewable sector, all the while with the Chinese sector growing further, capitalising on its established position and market share. Biden’s ‘Green New Deal’-esq plan and the $2trn investment will go some way to kickstarting the US down the path to net zero emissions and away from their reliance on fossil fuels for energy and transport, both of which will spur on the US’ own renewable energy sector and related R&D. It is, however, too little and too late to recapture control of the sector – China’s state support for renewable energy will ensure that they retain at the very least a dominant stake in the market. The US, with sustained investment over multiple administrations and advances by US-based companies such as Tesla, has the capacity to become the second great power in this new sphere of influence and economics.