Climate change: a strategic weapon in China’s armory of competitiveness

Beijing is undergoing an unprecedented change in its energy mix. This is a major gamble that can be explained by the coming together of three concomitant factors.

This column was previously published in L’Opinion on 9th February 2021

Whereas the 2015 COP21 has unfortunately fallen to the wayside, China’s surprise announcement in September 2020 that it was targeting carbon neutrality by 2060 marked a real turning point in global environmental policy. This unprecedented gamble on changing the energy mix — with the aim of replacing almost 60% of China’s coal-fueled production by renewable energy in only 40 years — seems even crazier in that half of it, according to an analysis by the International Energy Agency, is based on technologies that have yet to be developed in any profitable way. The timing of this amazing risk-taking can only be explained by the coming together of three concomitant factors.

The first is the profound psychological effect left on society by the Covid crisis. It has affected the whole population — notably young people — and the government largely depends on them in order to fulfil its ambition of speeding up the increase in domestic consumption. Consumers in post-Covid China are turning out to be far more concerned by their needs than their desires, and more preoccupied by environmental concerns that are being raised every day on social media. Hence the need for Xi Jiping to waste no time in making a frontal attack on the pollution problem if he wants to recover credibility after the initial errors committed in Wuhan.

China has understood that control over new forms of energy will provide the same crucial geopolitical advantage in the 21st century as control of fossil fuels did in the 20th century.

Secondly, from the economic standpoint, the cost of wind and solar energy reached parity with alternative sources in 2020, meaning that a massive speed-up is now guaranteed: of the 200 extra Gigawatts of wind and solar new capacity deployed in the world in 2020, 120 GW — i.e. 60% — were done in China. Thus China has won its 2009 gamble that it would reduce the cost of solar energy by 90% in the space of a decade, making it the cheapest energy source. And China now has control over between two-thirds and 90% of the two main bottlenecks, polycrystalline silicon and photovoltaic glass. It is no surprise that Goldman Sachs, in a recent report entitled “China Net Zero”, anticipates attractive opportunities relating to the $400 billion in annual investment that China will need over the next 40 years!

Threefold hegemony. Thirdly, and last but not least, China seems to have understood, ahead of Europe and the USA, that control over new forms of energy will give the same crucial geopolitical advantage in the 21st century as control over fossil fuels did in the 20th century. Its central idea is therefore to construct a threefold hegemony, so as to dethrone American supremacy in energy: firstly, by control over the necessary raw materials such as lithium and cobalt; secondly, by organizing the global trading in future excess capacity, by means of its vision of a global network of the Internet of electricity by 2050 via the giant State Grid of China; and, thirdly, by control of key technologies, such as batteries, a field in which the Chinese intend to catch up, having lagged behind their competitors — Samsung and LG in Korea and Panasonic in Japan.

KAK | L’Opinion

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All this makes it easier to understand how difficult it is for the Biden administration to produce a Green Deal — such as the one patiently put together by the Chinese throughout the 2010 decade — that will not make Chinese leadership in renewable energy any stronger. And it is easier to understand the principal Chinese demand, during recent negotiations over the Global Agreement on Investments (AGI), for European national markets in renewable energy to open up to Chinese investors to the tune of up to 5%. We have come full circle.

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Business angel / demon. Based in Hong Kong since 2011. Columnist, author of “Paris-PekinExpress”, “Beijing Express” and “Génération Tonique”.

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David Baverez

David Baverez

Business angel / demon. Based in Hong Kong since 2011. Columnist, author of “Paris-PekinExpress”, “Beijing Express” and “Génération Tonique”.

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