US Secretary of State Antony Blinken (2nd R) speaks together with National Security Advisor Jake Sullivan (R) in front of Yang Jiechi (2nd L), director of the office of the Central Commission for Foreign Affairs, and Wang Yi (L), China’s foreigner minister at the US-China talks opening session on March 18, 2021 at the Captain Cook Hotel in Anchorage, Alaska.
Frederic J. Brown | AFP | Getty Images
The world’s leading economic superpowers have long been fighting over trade, technology and capital markets, and are turning their attention to climate change as the next avenue to commercial supremacy.
According to BNEF data, which Bank of America’s ESG research team cited in a report last month, China outperformed the US by nearly 2 to 1 in energy transition investments between 2010 and 2020.
Pressure points such as “dominance of the supply chain, domestically-oriented manufacturing policy, human rights laws and carbon-related trade tariffs,” said BofA analysts.
BofA research director Haim Israel said a “climate war” between Washington and Beijing will follow the technology war and the trade war as climate change becomes the dominant economic and political issue for decades to come.
“It’s not just about saving the planet. We believe that climate strategies provide a path to global supremacy because there is much more at stake here: the economic impact of climate could reach $ 69 trillion this century, and investment in the energy transition must rise to $ 4 trillion a year, “Israel said in a research report in February.
“Energy independence and control of the supply chain are also at stake with the geopolitical balance of power, which will also be linked to oil spikes in 2030.”
Israel told CNBC that the US would try to accelerate legislation, innovation and capital flows in renewable energies like wind, solar, batteries and hydrogen.
“We’re also seeing a surge in electric cars. Remember that today, give or take, 50% of all the oil in the world is going to the transportation market, and cars make up a large part of it. So whoever is going to control EVs and those EV technology will definitely have a huge advantage in the future, “he added.
Tensions between the US and China have continued under President Joe Biden’s administration, and US Secretary of State Antony Blinken held brief talks with Chinese delegates in Alaska last month.
Harry Broadman, executive director and chairman of Emerging Markets and CFIUS Practices at Berkeley Research Group, told CNBC last week that the ability of developed countries to develop, export and sell products that drive the climate agenda without negatively impacting the labor market that would affect the economy landscape in the years to come.
“As long as people believe there will be a market for such technology, and that will depend on how cheap it is, and whether it destroys jobs or creates jobs – it doesn’t necessarily have to destroy jobs at all – that will be the driving force , and I think the race is already underway, “said Broadman.
Ahead of the Group of Seven’s summit in Cornwall, UK, in June, Broadman, a US trade assistant under the Clinton administration, said the group of major economies needs to dramatically advance its research and development, science and technology from state to state Cooperations to compete with China.
The ‘R & E7’
Broadman is pushing for “R&D 7” to be put on the G7 agenda, similar to other all-member working groups on issues of global concern. The aim would be to reform the structure that underlies the negotiation and implementation of international science and technology agreements between G7 countries. It would also set up a stand-alone body to ensure that these agreements strengthen and recalibrate R&D collaboration within the G-7.
“We have done really well among democratic countries that work together on investment and trade, but we have done an extremely poor job in research and development, and here, frankly, China is a huge competitive threat and possibly a huge economic and possibly geopolitical threat. ” he said.
China has pledged net zero carbon emissions by 2060. Countries that make net-zero commitments currently account for nearly half of all global issues, with China accounting for around two-thirds of that, according to a recent Goldman Sachs equity research report.
However, this could be a major challenge as China is by far the largest polluter on the planet. The country causes around 30% of global CO2 emissions, more than twice as much as the United States, and is classified by Climate Action Tracker as “extremely inadequate” in its “fair share” in combating climate change.
Goldman analysts, led by Michele Della Vigna, head of the equities division, mapped the country’s potential path to net zero by sector and technology, pinpointing the $ 16 trillion in clean tech infrastructure investment that China is up to 2060 has to be tackled.
Together, these 40 million could create net new jobs and drive economic growth, they forecast, and would be based on three interconnected scalable technologies: electrification, greener hydrogen and carbon capture.
China’s research and development spending rose 10.3% to 2.44 trillion Chinese yuan ($ 378 billion) in 2020, outperforming the US, according to the country’s National Bureau of Statistics.
Eight of the ten largest “clean tech” companies in the world are now based in Europe. By 2030, clean tech capacities could be increased fourfold worldwide, forecast BofA analysts. Investors have also shown growing interest in companies recognized as pioneers in the energy transition from electric vehicles to clean energy.
With China “progressively barring” access to technology from the US and the rest of the G-7, Broadman suggested that standards decoupling, creating a “China-centered orbit” and a “G7-centered orbit” would arise “that would not be sustainable.
“From a purely economic point of view, there can only be one type of standard in the world. The economies of scale are so strong that if two standards exist at the same time someone will lose money,” he said.
“So I think whoever wins this race will be at the top. This race has started and the G-7 have not pursued this through collective action and that is what they have to do. The climate is just an extraordinary one critical case point. ”