2021-10-26 08:26:59

This article is adapted from a speech given at a panel on China’s Practice and Global Governance hosted by the Shanghai Institutes for International Studies during the 9th World Forum on China Studies. The author is an adjunct professor at the School of Environment of Beijing Normal University and a senior advisor at Agora Energiewende.

During my talk today on the subject of “green leadership,” I would like to first highlight three megatrends. The first is the recent cyclic rebalancing of power. After the end of the Cold War in 1991 and against the backdrop of globalization, a major shift occurred, whereby the power of national governments shifted toward international organizations, businesses, non-governmental organizations (NGOs), and civil society. It was in this context that China joined the WTO in 2001 and further integrated itself into the world economy. However, after the 2008 Financial Crisis, a new round of power rebalancing occurred. What we have witnessed thereafter is the redistribution of power back toward national governments, which has shifted the dynamics between countries, international organizations, businesses, NGOs, and civil society.

The second megatrend is the recent wave of net-zero emissions targets announced by countries around the world. China’s stated commitment to achieving carbon neutrality before 2060 means that, from 2030 onwards, the largest energy consuming country in the world will need to cut carbon dioxide emissions annually by roughly the equivalent of France’s current national emissions, and then maintain that pace of reduction for 30 years. Coupled with China’s recent pledge to stop financing new coal projects abroad, the magnitude of the country’s carbon emissions reduction commitment is unprecedented. Still, the international community is pressing China to do more to combat the global climate crisis.

Third, there is the tremendous impact of these clean energy transitions on global geopolitics. In 2014, The Economist published a cover story about the increasingly delicate relationship between the United States and its traditional ally Saudi Arabia, the downturn in which was largely caused by the success of U.S. shale revolution. Less than four years later, the same magazine ran a special report on energy that explored the potential for geopolitical disruptions as some countries, including China, make great strides on clean energy, while others — especially oil-producers — lag behind. The global trade of energy commodities is currently still dominated by fossil fuels: namely coal, oil, and natural gas. However, the key to achieving net-zero emissions targets lies in critical minerals and hydrogen-based fuels. Consequently, fossil fuels are projected by the International Energy Agency to account for an increasingly diminishing share of global energy trade, a shift with profound geopolitical implications for the world.

A teacher explains the concept of clean energy near a wind power station in rural Fuzhou, Jiangxi province, Sept. 6, 2021. Xu Zheng/People Visual

A teacher explains the concept of clean energy near a wind power station in rural Fuzhou, Jiangxi province, Sept. 6, 2021. Xu Zheng/People Visual

Keeping the aforementioned megatrends in mind, I would next like to talk about the recent shock in the global energy market. While the topic of energy price volatility has already been widely discussed at length in China and abroad, please note that I intentionally avoid using the term “energy crisis” to describe what is going on, as I do not consider the current energy market disruptions severe enough to justify the term “crisis,” despite the alarmist messaging of media outlets. For instance, one recent op-ed published by an international media outlet crowed that the current “energy crisis” should force Europe and China to rethink their green agendas.

When it comes to China, about 20 province-level regions began rationing power in September — a surprising development that was caused by a multitude of factors. In Europe, meanwhile, some have claimed that the continent’s astonishing gas and power price spikes have nothing to do with its green agenda. I strongly disagree with this argument: Those policies were an important contextual factor that contributed to recent European market fluctuations.

The primary driving force behind the current market disruptions in Europe is the continent’s renewables-oriented transition, which, coupled with an early phase-out of coal and nuclear in some countries, has unintentionally strengthened instead of weakened the importance of natural gas in the short-term. The second is that the grid integration of intermittent renewable energy sources can easily jeopardize the stability of power supplies unless it is backed up by proper theory and a far-sighted plan of action. Green agendas have successfully lowered the willingness of many European countries and especially their energy companies to invest in the upstream segments of the fossil fuel industry — a phenomenon that can also be witnessed in some emerging economies. Such a trend is generally compatible with reaching net-zero by mid-century, but has apparently become a problem in the short-term, especially considering that clean energy-related investment has fallen far short of what is needed to quickly transition away from fossil fuels. To make matters worse, geopolitical rivalries, exacerbated by the controversial Nord Stream 2 project, the ongoing COVID-19 pandemic, and resource depletion in the Groningen gas field and the North Sea, have also contributed to market volatility.

In China, the driving forces behind the recent coal price spike and power crunch are likewise complicated. To cut a long story short, coal output in China is failing to meet the rising demand. It is a legitimate question how the world’s largest coal consumer, accounting for about 54% of global consumption, suddenly found itself in short supply of coal, especially considering that overcapacity across the coal value chain had been a headache for the Chinese government during the entire 13th Five-year Plan (FYP) period from 2016 to 2020.

To start, Chinese authorities closed about 1 billion tons per year of coal production capacity during those five years, all while keeping a tight lid on new greenfield coal mining permits. This has led to a much tighter supply. To further control the sprawling and unruly Chinese coal industry, the country made overproducing coal a criminal offense in its new Criminal Law, which caused a sharp drop in price elasticity of coal production across the country. I personally consider the above development to be the most fundamental driver underlying recent market volatility in China.

An aerial view of the Baihetan Hydropower Station in Liangshan, Sichuan province, June 27, 2021. People Visual

An aerial view of the Baihetan Hydropower Station in Liangshan, Sichuan province, June 27, 2021. People Visual

Ahead of the COP26 United Nations climate change conference in Glasgow, there has been much discussion pertaining to the subject of “green leadership.” As China accounts for about 30% of global carbon dioxide emissions, it inevitably faces tremendous international pressure to do more in this regard. Given its unique development status, China sits between advanced economies and the developing country bloc. This status comes with both strengths and weaknesses when exercising green leadership turns out to be the focus.

On the one hand, China has enormous potential for contributing to global climate mitigation, as can be seen from the shockwaves sent rippling out by the country’s carbon neutral pledge and recent announcement that it would stop financing new overseas coal projects. On the other hand, China is not yet a developed country. It is arguably the first ever “hybrid” superpower in the modern era. Not surprisingly, its role in the international community at times reflects the mentality of a so-called “developing country.” In particular, the current generation of Chinese leadership grew up in a much poorer and more backward country compared with today. This helps to explain why China did not commit to reaching peak national carbon emissions until 2030, giving itself a ten-year buffer. From 2030 onward, as a younger generation of Chinese in possession of a superpower mentality assume leadership positions, China’s energy and climate policies are expected to close the gap with those of advanced economies. For the moment, however, although China is interested in exercising global green leadership, its capacity is nevertheless constrained by both its unique development status and geopolitical rivalry with the United States.

Now let us take stock of the second largest emitter, the United States. Although the Bill Clinton administration signed the Kyoto Protocol in 1998, George W. Bush quickly stated his opposition upon taking office in 2001. In 2015, the Barack Obama administration teamed with China to conclude Paris Agreement, only for President Donald Trump to pull the U.S. out of the deal in 2017. Then, on his first day in office this January, President Joe Biden took steps to put the U.S. back in the Paris Agreement. It is thus legitimate for the international community to have questions about the political credibility of any major climate commitment made by the U.S. government. While the Biden administration has made strong climate pledges, the devil, as always, is in the details of the supporting policies and their political sustainability. Ultimately, the United States’ potential for exercising global green leadership is also limited. Both prospective green leaders have their crosses to bear.

Kevin Jianjun Tu. Courtsey of the author

Kevin Jianjun Tu. Courtsey of the author

In the meantime, it’s worth asking what really matters when it comes to the transition to green energy. The key to clean energy lies in access to critical mineral resources. As no individual country controls all the critical minerals that are the prerequisite of a new energy economy, both Western countries and China are becoming increasingly anxious about how to secure supplies of these strategically important minerals. A recent Institut français des relations internationales webinar made the case for the creation of an International Minerals Agency tasked with regulating these strategic resources, facilitating dialogue between producers and consumers, nations, industrialists, multilateral institutions, and NGOs. However, there are still many open-ended questions that need to be answered before any such body can be set up — for instance, whether or not such a proposal would be politically viable and whether it would serve to promote international collaboration, or rather act as a catalyst for more geopolitical tension.

Every energy crisis or instance of market volatility in history has been the product of both inevitability and happenstance. Although we are currently experiencing dramatic market fluctuations, I see no reason to panic. Fluctuations in the energy market are cyclical. The key to overcoming them lies in developing comprehensive and balanced approaches to advancing long-term strategic objectives without sacrificing short-term goals, something that will truly put the political wisdom of national leaders to the test.

In conclusion, I would like to emphasize that green leadership requires international cooperation, rather than confrontation. Although I personally remain cautiously optimistic, I have spent the past 22 months painfully watching the major nations of the world fail to put aside their prejudices and unite to resolve the challenges posed by the COVID-19 pandemic. So, for as full of hope as I am about the prospects for international cooperation on climate change in the future, I also continue to have a lot of concerns.

Kevin Jianjun Tu is an adjunct professor at the School of Environment of Beijing Normal University and a senior advisor at Agora Energiewende, leading projects on China’s energy and climate policies. He is also a non-resident fellow at the Center on Global Energy Policy of Columbia University, the Institut français des relations internationales (Ifri), and the Institute of Energy at Peking University.

Translator: Lewis Wright.

(Header image: An aerial view of a panda-shaped photovoltaic plant in Datong, Shanxi province, Aug. 14, 2017. People Visual)