The green energy revolution is redrawing the lines of the global geopolitical map and China is fighting to come out on top. While other energy superpowers such as the United States, Saudi Arabia, and Russia have clung to their prodigious oil and gas industries to varying degrees, China has gone all-in on establishing their own energy security and independence, a large portion of which will soon be sourced from clean energy resources.
Europe has largely pivoted away from oil and gas in the past few years, recasting its Big Oil companies as Big Energy. Indeed, on the other side of the Atlantic Big Oil’s most profitable business is no longer oil as the companies derive more and more of their profits from trading rather than extraction. In the United States, oil supermajors have taken a far different approach to the impending existential threat of climate change and the clean energy transition. “While BP and other European companies invest billions in renewable energy, Exxon and Chevron are committed to fossil fuels and betting on moonshots,” the New York Times reported late last year.
And the U.S. isn’t alone. Russia has taken an even harder line when it comes to petro-loyalty. President Vladimir Putin has been a staunch climate change denier, and the very idea of pivoting away from oil and gas has been anathema to his administration. Someone will sell the world’s last barrels of oil as the age of fossil fuels comes to an end, and Russia intends to be the one. This is a risky business, as Russia’s economy is dangerously reliant on fossil fuels, a market with a limited shelf life. As it stands, oil and gas make up more than 60 percent of Russia's total exports and add up to more than 30 percent of the nation’s gross domestic product (GDP). Indeed, petro-nations and oil-autocracies around the world risk descending into economic chaos and conflict as oil markets offer diminishing returns. What’s more, as Europe has moved away from fossil fuels and toward more climate-friendly and economically promising options, countries like Russia and Saudi Arabia have become increasingly reliant on Asian markets to buy up their wares. This could prove to be their downfall. While China is currently the world’s biggest oil and coal importer, President Xi Jinping is getting serious about a homegrown clean energy revolution in the interest of shoring up Beijing’s geopolitical power and energy independence. “By 2060 the world’s second-largest economy aims to transform its power generation mix from roughly 70% from fossil fuels today to 90% from renewable sources such as wind and solar, as well as hydro and nuclear power,” Bloomberg reports.
While the prognosis is grim for countries that have hedged their bets on Chinese demand for fossil fuels, countries that relied on resource-backed loans from Beijing are in even bigger trouble. One such country, Angola, has already delayed their payments, and “that’s before considering the impact of shifting energy financing priorities,” Bloomberg reports. “In June, China’s largest bank scrapped plans to fund a $3 billion coal-fired plant in Zimbabwe.”
China’s development of its clean energy production capacity not only stands to bolster the energy security of its own markets but also to imperil that of competing nations. China has been investing heavily in supply chains for essential components and rare earth minerals such as cobalt, giving them near-total control of some parts of clean energy technologies such as electric vehicle batteries and solar panels.
What’s more, China is far outstripping the United States in technological investing and cutting-edge research and development. While China invests huge sums of money into positioning itself as a leading global innovator, the United States has struggled to pass spending bills that would give them any chance of catching up and staying competitive. What has passed is simply too little, too late.
By Haley Zaremba for Oilprice.com