As COP26 approaches, the green rivalry between the US and China comes into the picture – Community News
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As COP26 approaches, the green rivalry between the US and China comes into the picture

As the world gears up for the UN summit on climate change, the 26e Conference of the Parties (COP26) all eyes are on the world’s two largest economies. Indeed, the United States and China will send delegations to the COP26 host city of Glasgow from October 31 to November 12 to discuss their national strategies to “keep 1.5C alive”. The reference is to the Paris Agreement commitment to limit global warming to 1.5 degrees Celsius.

As outlined in the 2015 Paris Agreement, the world needs a way to reduce emissions enough to keep global warming within 1.5°C – 2.0°C of pre-industrial levels. Scientific advice is that this will require a global emissions reduction of around 45% by 2030, compared to 2010 levels. This ambitious target cannot be achieved without the support of the world’s largest emitters. While the Obama administration joined the Paris Agreement, the Trump administration withdrew and the Biden administration rejoined. Currently, the agreement is not legally binding, as the ratification threshold needed to be implemented has not yet been reached.

Both countries are participating in the so-called “energy transition” in their own way, adjusting government policies and spending to eventually decouple their economies from hydrocarbons and move towards green electrification. How these countries navigate the energy transition at home and abroad will have major geoeconomic and geostrategic implications. So while the United States and China around the world should work together to meet global climate goals, at the same time there is a race to achieve green supremacy.

Who will win?

The United States and China are very different countries when it comes to the unfolding green rivalry. China is the world’s most productive energy consumer and largest emitter of carbon – accounting for 27% of global greenhouse gas (GHG) emissions – more than the United States and the developed world combined. The United States remains in second place in both, responsible for 11% of greenhouse gases (but is the largest consumer of oil).

China is enjoying the ability to implement sweeping national policies at breakneck speed thanks to its one-party government and the consolidated power of the Chinese Communist Party (CCP) under Xi Jinping. The executive branch of the United States is controlled and balanced by the legislature and judiciary. Just as its founders designed, big changes come slowly and only with consensus. However, America’s federalized organizational structure, coupled with its free-market economy, means that progress often begins first with the states and the private sector rather than at the will of the federal government.

This difference allowed China to build 20 nuclear reactors between 2016 and 2020 (doubling its nuclear power generation capacity from 23.4 GW to 47 GW), with plans to reach 70 GW by 2025. The Southern Company’s Vogtle Units 3 and 4 reactors, on the other hand, will be the first new nuclear units to be built in the United States in more than three decades.

In the US, however, state standards for renewable portfolios (RPS), stricter environmental protections, and sustainable investors are pushing back hydrocarbon generation in favor of green alternatives. According to the EIA, 70 percent of new electricity generation capacity will be decarbonised this year. Solar energy provides the largest new capacity with 39 percent, wind follows with 31 percent. Battery storage will grow to 11 percent of new capacity. Natural gas additions will make up 16 percent, with coal close to zero.

Compare that to China, which is about to build hundreds of new coal-fired power stations below 14e 5-year plan. The industry group for China’s energy sector giants, China Electricity Council, has argued that coal power capacity will reach 1,300 GW by 2030, compared to 1,050 GW today.

The United States federal government is trying to put resources into green growth. President Biden’s “shredded” infrastructure bill (down from $3.5 trillion to $2.0 trillion) includes hundreds of billions of dollars earmarked for green incentives and projects. The government last week announced a plan to develop seven major offshore wind farms, suggesting an unabashedly dirigist approach. While the United States is stepping up its domestic efforts to transition to a green economy, it is lagging behind in its efforts to compete with China abroad in the green energy sector. That could be very bad news for the United States. With uncertainty over President Xi’s decision to attend COP26 at the end of this month, the world’s biggest emitter may be in position to become the new green superpower.

The continued growth of renewable energy will strengthen China’s power worldwide. As the world’s largest producer and exporter of solar panels, wind turbines and electric vehicles, it is a leading figure in sustainable investment abroad. China holds 150,000 renewable energy patents as of 2016, 29% of the global total (the US has about 100,000). Argentina’s Cauchari, the world’s highest solar farm, and Scotland’s Moray East, the country’s largest offshore wind farm, both shared one key characteristic: Chinese finances.

Beijing recently made progress in greening its investment portfolio by pledging to stop financing foreign coal-fired power plants at the UN General Assembly last month. President Xi’s pledge would cancel plans to build dozens of coal-fired power plants in 20 countries — we’ll see if he pushes through. However, China is certainly not pumping the pauses on its nuclear energy exports. According to the “Build, Own Operate” (BOO) model, China plans to build at least thirty nuclear reactors in BRI countries by 2030. By contrast, US nuclear technology exports are virtually nil.

Back on the mainland, the picture is less rosy. Even before the last energy crisis, China was by far the largest consumer of coal in the world with 54.3 percent of global consumption. As winter approaches, Beijing has ordered more than 100 mines to expand coal production. In just under two weeks, major mining companies increased their daily production by 4.5 percent compared to last month. China’s ambitious plan to peak and then reduce emissions by 2030, with the goal of achieving carbon neutrality by 2060, has clearly hit a stumbling block.

Nevertheless, China continues to dominate the clean energy industry even within America’s borders: Chinese companies supply 80 percent of the solar panels installed in the United States. Perhaps most importantly, China has a monopoly over the value chains of rare earth elements and many critical minerals. These essential ingredients of the high-tech manufacturing of everything from solar panels and batteries to missiles and advanced radar systems are the building blocks of the 21NS century economics. The United States is 100% dependent on imports of 14 types of rare earth elements, while China controls 90% of the global REE processing. When it comes to the green rivalry between the US and China, crucial mineral supply chains could be China’s biggest asset.

The upcoming COP26 is an opportunity for countries to come together in the global joint fight against climate change. However, the reality is that there is much more competition for the green transition than cooperation. And to the victor goes the spoils.

With help from James Grant and Sarah Shinton