The annual UN climate conference is taking place in Egypt, and the world’s two largest emitters – the United States and China – have barely spoken. Last summer, House Speaker Nancy Pelosi (D-Calif.) angered Chinese leaders after visiting Taiwan, retaliating by cutting off dialogue with the U.S. on key issues such as climate change. At last year’s climate conference, the U.S. and China came together amid deteriorating relations to announce a list of shared climate priorities; but any coordinated effort appears to be off the table for now.
It’s bad enough that the U.S. and China aren’t cooperating on a key issue, which many experts hope may provide some common ground in an increasingly strained relationship. Now, another geopolitical and climate issue is emerging outside the negotiating halls.
For the United States and other Western countries, national security concerns — a potential overreliance on Chinese technology — are complemented by economic concerns about missing out on the windfall of the green energy transition. Taken together, these concerns have prompted a rethinking of global supply chains. The U.S. rolled out a slew of policies — including the Biden administration’s landmark climate law — the Reducing Inflation Act — to reduce China’s reliance on green technology and build more solar, wind and batteries at home factory.
“I think this reliance on China’s key industries makes Americans very uncomfortable,” said Jonas Nahm, an assistant professor of energy and the environment at Johns Hopkins University. Nahm said that this This discomfort led to a push to “diversify from China and localize as much of this production as possible”.
As the U.S. pursues its looming climate goals—such as ensuring half of all cars sold in the U.S. are electric by 2030 and 100 percent zero-carbon electricity by 2035—policy makers expect a flood of green technology Achieving this goal is a matter of course. Made in the USA.
But building new supply chains at home at a critical time when the U.S. must accelerate the pace of emissions reductions could lead to significant delays. Globalized green technology supply chains, many of which originated in China, have played an important role in helping countries move away from fossil fuels by reducing costs. Future trade disruptions could cause further damage to the planet.
“Many countries have introduced or started to introduce trade barriers to prevent the free flow of goods, capital or talent, so we have potentially raised the cost of renewable energy,” said Gang He, an assistant professor at Stony Brook University who focuses on energy policy. “This Presents a conundrum. To protect the climate, we need cheap renewable energy, but countries are doing the opposite.”
Climate cost label for closing U.S. trade borders
As countries face this “dilemma,” a new study published in the journal Nature warns. The study looked at a more plausible hypothetical scenario: If the US and Germany decided over the past decade to produce all their own solar panels domestically, the price of those panels would skyrocket — 107% higher in the US and 107% higher in Germany 83%. This question goes both ways. For China, isolation from the outside world means solar panel prices will soar by around 50%. By keeping access to global markets relatively open, the three countries together have saved an estimated $67 billion, allowing solar companies to learn from each other and reduce costs.
The three countries are among the largest solar panel installers in the world, and the same momentum will apply if they aim to install solar rapidly in the next few years. The researchers found that if all three countries decided to start closing their borders and switch to domestic production in 2020, the costs would be 25% higher by 2030.
For American wallets, there is a clear conclusion. “Think about if you want to put a solar system on your roof, you already benefit greatly from the cost reductions associated with global supply chains,” said Michael Davidson, assistant professor of engineering and energy policy at the University of California, San Diego, who co-authored the paper. articles. “If we try to go it alone, it’s not clear how we can continue to reduce costs for those types of systems that many American consumers benefit from.”
Beyond the impact on U.S. consumers, global thermostats also have important stakes. “If you’re concerned about reducing emissions as quickly as possible to meet our climate goals, we need to have very low-cost, clean energy, and it needs to get cheaper to do that,” Davidson said. “But there are many policies now that can fundamentally Change that learning curve. These are very problematic to achieve our long-term goals.”
Is the US trying to go it alone on green tech?
in nature In the scenario studied, the U.S. decides to completely shut down solar imports and produce all the solar panels it needs domestically. The U.S. does not currently have such a policy, but cumulatively, several measures are moving the U.S. away from global supply chains and toward an American-made future.
This trend is not entirely new. Beginning a decade ago, the U.S. has imposed tariffs on imports of Chinese solar panels on the grounds that the panels are produced using unfair subsidies and dumped on the U.S. market at lower prices than U.S. companies. The Trump administration added additional solar tariffs, which President Joe Biden weakened, but not eliminated entirely. The policy worked somewhat: It helped First Solar (the only U.S. company in the world at the top level) to remain competitive and brought more manufacturing to the U.S., but tariffs alone didn’t bring about a huge solar renaissance in the U.S. .
Biden took office with a new focus on tackling climate change, and his administration has expanded beyond tariffs to increase domestic production of green technologies. The cornerstone of the effort so far has been the Inflation Reduction Act, which passed by the narrowest margin this summer.The law provides economic incentives for companies producing solar, wind, batteries and other green technologies in the U.S.
Climate policy experts told Grid that of the law’s goals, the domestic battery production target may be the most difficult to achieve. The law provides a generous $7,500 tax credit for consumers looking to buy an electric vehicle — but conditions apply. That is, starting in 2025, no battery minerals can come from China or Russia. This will be a very difficult requirement to meet; China dominates the refining of battery minerals. For example, nearly all of the world’s graphite — one of the main components of these batteries — is refined in China. The law means that all graphite will be banned if U.S. EV makers want their cars to qualify for tax credits.
The law goes further. Starting in 2023, 40% of minerals must be mined in North America or a country with a free trade agreement with the U.S. in order for cars to qualify for tax credits The U.S. mines and refines very little of these minerals domestically, as Grid previously reported . Additionally, at least half of the battery components must be manufactured in North America. Again, none of these components can be sourced from China. These requirements increase by 10% each year.
U.S. companies may be able to ramp up battery-making capacity relatively quickly, compared with mining and refining, Nahm said.General Motors, Ford and other U.S. auto giants have announced plans to build new U.S. factories to make batteries and their components
But it will take some time for U.S. auto companies to meet all of these requirements — meaning consumers may not be able to take advantage of these tax credits anytime soon. “If everyone is sitting at home right now, like, ‘Okay, maybe in three years I can get $7,500, but I’m not going to buy a car right now.’ …I mean, we Three years are being lost, during which time people may buy petrol cars to replace their existing cars,” Nahm said. “So it does delay everything when we don’t have a lot of time.” In other words, if few models qualify for the tax credit, the tax credit may not be very useful as a climate policy — at least Not in the short term.
Joanna Lewis, an associate professor of energy and the environment at Georgetown University, agrees that the emphasis on domestic production of green technologies could make it difficult to meet the nation’s climate goals. “I don’t think it’s easy for them to meet anyway,” she told Grid. “And I think companies are already sending those signals.” Another risk is retaliation. This week, the European Union issued a formal complaint to the United States, saying the subsidies violate World Trade Organization rules, and China is likely to follow suit.
The Biden administration has rolled out other policies aimed at strengthening U.S. green technology production. In June, Biden authorized the Department of Energy to use the Defense Production Act to promote domestic production of solar energy, heat pumps and other green technology products — essentially demonstrating that these products are essential to U.S. national security. The bill allows the White House to direct companies to produce certain goods, as has been the case during the pandemic.
The Uyghur Forced Labor Prevention Law, passed earlier this year, is among them. The law ostensibly has nothing to do with climate change; it bans imports of Xinjiang-made goods and raw materials, assuming they are made using forced labor. But most of the world’s polysilicon, a key raw material used in solar panels, is made in Xinjiang, a policy that has led border agents to seize more than 1,000 solar shipments at U.S. ports in the past five months, Reuters reported.This is causing severe delays in US solar installations
Taken together, these human rights, trade and climate policies are a powerful movement to reduce ties to China and promote domestic green technology production. But from a climate perspective, these policies undoubtedly complicate the task of decarbonizing the U.S. economy.
balancing act
Despite all the challenges, there are clear benefits to bringing certain supply chains back to the U.S.
In the long run, building a domestic clean energy industry can help lay the groundwork for climate action. The theory goes that as clean energy companies become more powerful, so will their lobbying powers to help pass future climate legislation. This could even extend to red and purple states; many announced battery and solar plants are under construction, including Georgia and Ohio, which have so far been slow to embrace climate-friendly policies.
There is also a clear economic rationale. For the U.S. cleantech supply chains that are most heavily dependent on China—such as solar panels and batteries, U.S. companies face a real risk of supply shocks in the event of a natural disaster or conflict. A recent scientific study concluded that the risk of relying on China for much of the supply chain is fairly low when it comes to national security, but military applications such as drones require batteries, so strengthening domestic supply lines is worth the extra investment.
Ultimately, America faces a difficult balance, and the climate crisis is relentless. “I think competition with China can motivate us to do something very positively,” Nam said. But, he added, “we have to walk the tightrope here with a system that’s not very good at walking the tightrope, because in the process, there’s a big chance of … getting a shot in the foot.”
Thanks to Alicia Benjamin for copy-editing this article.