By Boris Ivanov, the founder and CEO of Emiral Resources, a global mining group focused on exploration, mining and production of mineral resources.
To say the transition from fossil fuels to other sources of energy over the past few decades has been slow is an understatement. There has been progress, but the framework of co-operation between nations that supposedly underpins this transition has so far failed to reflect the true complexity of the global problem. Today, we can see the attitude to climate change is changing, and fast. Rather than partnership, instead we see competition. As the material differences between climate action and economic interests continue to melt away, we will enter a new age, one defined by ‘climate superpowers’.
It is a given that when energy systems change, so will energy politics. For most of the last century, fossil fuels strongly dictated the strength on a nation’s hand when it came to the geopolitical arena. An oil shortage would be nothing short of a national emergency, embargoes could crash global markets and in the most extreme cases, conflict over an oil field would spill over into the battlefield. But as the world aims to become greener, this global energy system will alter rapidly before our eyes and one nation is already leading the way. Although China currently accounts for 30% of all global CO2 emissions, it has through a combination of subsidies, policy targets and manufacturing incentives, now spent more on clean energy than America and the EU combined. As it seeks a leading position in the climate change “space race,” it has no plans of slowing down.
China is the world’s largest consumer of coal and the second largest of oil, after America. It has the largest power-generation capacity and produces more carbon dioxide than any other country. In 2020, President Xi Jinping pledged China would target carbon neutrality by 2060 and in March 2021, released a five-year plan to increase the use of renewable energy to deal with its dependence on fossil fuels. “Covid-19 reminds us that humankind should launch a green revolution,” said Xi, but China already produces around three quarters of the world’s solar panels, half the world’s electric vehicles and a third of its wind power. Its previously coal intense Belt and Road initiative, now invests more in clean energy than it does in fossil fuels. The Green revolution is already under way, even if it is not yet being televised.
Rivals, most notably the US and the EU are already beginning to try and challenge China’s dominance. Biden’s arrival to the White House has ushered in a new age for clean energy in the West, and his bold $2.25 trillion infrastructure plan focuses on green energy and decarbonization. In 2019, US consumption of renewable energy sources overtook coal for the first time in more than 130 years, but to progress at this speed favours the Chinese who control large parts of the green energy market. For example, while the USA once had over 30% of the market share in solar photovoltaics manufacturing, it has fallen to 1%. In electric vehicles the reversal has been even faster, the United States had five times as many electric vehicles as China in 2013, but now China has twice as many as the United States. The implications of this are obvious, if the USA does not begin to research, invest, and manufacture more renewable technology, the world will turn more towards China.
Europe will both compete and cooperate with China in climate diplomacy. To safeguard Europeans from the aftershocks of climate change, EU policymakers know they are reliant on China reducing its carbon emissions, but that this will also mean increased competition for resources, market share and technological superiority in the renewable market. Europe, which has made its own commitment to become climate neutral by 2050, already relies more on solar and wind than anywhere else. The European Green Deal is unashamedly a fiscal stimulus, with incentives and restrictions designed to seize on the opportunities of a low-carbon economy. The EU sees itself in the healthy mid-point between the objective driven, but resource-consuming Chinese approach, and altogether different American attitude that is still foregoing opportunities due to the high costs. While Washington still frets over significant state aid, the European Investment Bank is being prepped to become Europe’s fully fledged “Climate Bank”.
And how does the rest of the world react? The situation in Australia lays bare the impact of the Chinese on the world economy. In May last year, China’s government effectively banned the import of Australian coal. The government in Australia has so far refused to adopt climate targets in line with the Paris agreement and maintained its support for the coal industry, but the world is changing and so are Australia’s biggest customers. All the world’s leading economies have carbon neutral targets and there is a growing voice inside the country urging it to become a “renewable superpower.” Its coal will find other markets for now, but an uptake in green hydrogen and renewable energy elsewhere has coal prices on a collision course with zero. If Australia were to reset its course now, a seat at the table of climate superpowers would be assured thanks to its abundant land, wind, and solar resources.
As for Africa, the climate “space race” will redefine its borders entirely. Take Morocco, a country heavily reliant on coal, gas and oil imports. Over 80% of the country’s energy is imported and to this end it is in desperate need of reducing this dependence. It is also a country basked in sunlight. Were Morocco to capitalise on these solar resources it would discover a new economic reality. Not only can electricity trading occur in both directions, but the fundamentals around renewables are different. Unlike oil, all electricity is created equal. The knowhow and skill that was required to separate crude oil into products is no longer as important as access to natural resources. Solar power in Morocco is enabled by the country having one of the highest rates of insolation on the planet. With assistance from the African Development Bank, the nation has launched one of the world’s largest solar energy projects that could cost an estimated $9 billion. From there, the only energy dependence the country would have would be from the skies above.
According to the 2019 influential International Renewable Energy Agency report, there are three clear ways for countries to establish themselves in this new world order. The first is by exporting electricity or other renewable fuels. The second is controlling the raw materials that are needed in clean energy, such as lithium and cobalt. The third, and arguably the most important due to the abundance of renewable resources, is by gaining an edge in technology, such as electric vehicle batteries. It is China who has emerged ahead as the leading superpower in these three areas key to the clean energy transition, but competition for places has already sparked the world into action, and there is still plenty of race left to run.