Decarbonisation in a fraught geopolitical landscape

At the end of 2019, the European Union (EU) announced a ‘Green Deal’ to become the first climate neutral continent by 2050. In September of 2020, China committed to achieving carbon neutrality by 2060; Japan and Korea by 2050.

More recently, the United States has rejoined the 2015 Paris Accord under President Joe Biden and declared its ambition for net-zero emissions, economy-wide, by no later than 2050. India is yet to officially commit, but the government reaffirms that it is working to fulfilling its Paris obligations and making considerable progress.  

The urgency and roadmap to the decarbonisation of the global economy is no longer in question. Nonetheless, celebrations might prove premature. Current geopolitical realignments and the global economic recession because of the novel coronavirus disease (COVID-19) have fuelled friction, uncertainty, distrust and fear.

They have, moreover, given credence and voice to a narrow realist narrative in which global uncertainties will inevitably heighten competition among states in their search to achieve their narrow national interests. The growing influence of this view is today more dangerous than ever. It fails to put the climate crisis at the centre stage even though it constitutes the greatest challenge for the global collective and crowds out new possibilist thinking in which actors, practices, interests and geography are re-imagined in line with the gravity of the situation.

The current global tensions did not arise overnight. In reaction to the drive for greater and deeper globalisation, international institutions and multilateralism have experienced growing opposition. Renationalising narratives have gained momentum. Calls to reconstitute supply chains closer to home have grown louder, fracturing networks of interdependence.

To aggravate matters further, sectors that have vested interests in slowing down the green energy transition (such as the fossil fuel industry and its proponents) have been helping to sow discord questioning the feasibility, timeframe and cost of such an energy shift, especially when countries have taken on more debt to respond to the pandemic. Even while the pace toward decarbonisation, the fourth industrial revolution and the digitalisation of the global economy has massively accelerated, the politics of contention may hamper efforts for a return to growth that is both green and sustainable.

A response to the climate crisis is both complex and multifaceted. Ecosystem degradation, deforestation, ocean acidification, industrial food production, urbanisation, economic growth, pollution, migration, social justice and global health are all important challenges that need to be reckoned with. The energy transition, particularly the electrification of transport, however, constitutes a gamechanger because it will dramatically reduce and gradually eliminate fossil fuel reliance to power our lifestyles and our economies.

The bald eagle and the dragon

The production of the technologies necessary to decarbonise and digitalise the global economy has unfortunately been drawn into the battlefield of geopolitics, the most prominent of which is the US-China rivalry.

It started with a trade war under former US president Donald Trump that transformed China from a competitor and rival to an outright adversary. China’s economic might, its growing military capabilities and its enhanced network of partnerships and global influence preoccupy the American government. This has not changed under the Biden administration. In fact, the US has announced its global comeback embracing the narrative of US-China bipolar competition.

Increasingly, climate goals themselves have become part of this competitive frame, with the US questioning China’s commitment and transparency in how it will achieve carbon neutrality by mid-century. Even while China is looking to dominate these new technologies, it is the US that is flooding global airwaves with announcements of its resolve to outcompete China in the next economic transformation.

Inevitably, because the path to decarbonisation (and digitalisation) has already transcended the realm of run-of-the-mill economic competition to become embroiled in fraught geopolitics, attention has squarely turned onto the indispensable inputs that are required to produce them. Both the global decarbonisation of the economy and the fourth industrial revolution rely on rare earths and a growing number of other critical minerals (CRMs), such as lithium and cobalt, that are all highly geographically concentrated and vulnerable to disruption. Moreover, the amounts needed will skyrocket moving forward.

According to a 2020 World Bank report the production of lithium and cobalt may increase by 500 per cent by 2050 to meet clean energy demand alone. In accessing these resources, China seems to hold the upper hand. It still controls, for instance, the production of rare earths and the supply chains from mine to market. Moreover, other critical minerals mostly originate from developing countries where China has over time consolidated its strong relationships and secured its dominant position.   

In light of China’s advantage, the race for access to rare earths and other indispensable critical minerals has again raised an alarm in capitals of major industrial nations. The worry comes from the realisation that the long era of stable resource competition is ending.

In the past, empires locked in their economic supply chains and managed competition. As the global economic hegemon after World War-II and throughout the period of decolonisation, the US had ensured the rules and norms of world trade, maintaining trade routes open for the transport of energy and goods.

Over time, the supply of fossil fuels—the most strategic of resources for the modern economy—became more dispersed because of new geological information and technological innovation that helped loosen the control of the Organization of the Petroleum Exporting Countries (OPEC). Unexpectedly, the shale revolution changed the energy map entirely when it transformed the US into the world’s number one fossil fuel producer.

But today, the situation is different. Critical minerals for the digital and post-carbon economy are highly concentrated geographically, while the end of US unipolarity and increasing global trade uncertainties have triggered a rush to secure them. China’s global rise reinforces the competition-concentration tension. Industrial innovation and production are no longer the exclusive domain of the US, EU member states, Japan and other Organization for Economic Co-operation and Development (OECD) countries.

These major powers that had previously secured critical inputs through colonial expansion and resource carve-ups, must now contend with China’s export ambitions and its control of key supply chains. Moreover, China’s Belt and Road Initiative (BRI) that unites Eurasia and Africa and loops in South America into a seamless space of trade, infrastructure and digital connectivity, introduces further challenges.

Governments in the developing world now have options. As many critical resources are located there, they are able to strike exclusive deals when desirable. They often prefer China’s one-stop-shop financing schemes, increased engagement and narrative of “win-win partnerships” that offer a reliable alternative to Western funding and norm-setting.

Major industrial actors are responding to what they consider a glaring vulnerability, but they have taken different routes to address the challenge. All have updated their critical minerals lists, are attempting to build resilience against possible disruptions and are seeking to re-constitute supply chains closer to home.

Decoupling from Chinese supply chains as much as possible has been touted as a singular priority by the US government. Among other measures, in September of 2020, former president Trump signed an Executive Order that addressed the “Threat to the Domestic Supply Chain from Reliance on Critical Minerals from Foreign Adversaries,” calling it a national emergency. Three years earlier, in December 2017, Trump had also signed Executive Order 13817 (A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals), that required the Secretary of the Interior to identify critical minerals. Moreover, it tasked the Federal government with making policy “to reduce the Nation’s vulnerability to disruptions in the supply of critical minerals”.

Other powers

The EU has chosen a different tack; a policy of carrot and stick. It signed a major trade deal with Beijing in December 2020, even while acknowledging that China has become a systemic rival. Already in 2017, the EU formed the European Battery Alliance (EBA) to address the need for efficient batteries that were essential for transport, power and industrial applications.  Four hundred industrial and innovation actors from mining to recycling have come together under the EBA to help build a strong and competitive European battery industry.

Japan and Australia too are finding China’s global influence a threat to their interests and are taking steps that further their advantage and strengthen their collaborative alliances to avoid becoming consumed by China’s ambitions. Australia in particular finds itself uniquely positioned to supply not only rare earths but also lithium and cobalt. In recent years, it has been exploring possibilities of investing in downstream processing to build its critical minerals advantage in light of growing demand.

Recognising the significance of Australia as a producer of critical minerals and following the 2010 rare earths crisis, in 2011 Japan came to the rescue of Lynas, the major rare earths mine in Australia providing a total of $250 million in loans and equity in order to receive over a period of 10 years 8,500 tonnes of rare earth products. It was a strategic move to ensure Japan’s unfettered access to rare earth supplies without having to exclusively rely on China. Still, the realities of both countries’ geographic location and economic interdependence with China cannot be ignored even as they seek to build resilience and a degree of autonomy.

With so much global friction will decarbonisation prove just a pipe dream? It is not likely that it will. There is both political will to see it through and the economics are making more and more sense every day. Fraught geopolitics, however, may cause unnecessary delays as supply chain replication is both costly, requires many years to achieve and leads to unnecessary redundancy. We are all living on spaceship earth and the exclusive pursuit of one’s national interests will constitute a Pyrrhic victory because the climate crisis is the greatest challenge for the global commons.   

This article was first published in the cover story of the 1-15 April, 2021 edition of Down To Earth

Sophia Kalantzakos is Global Distinguished Professor in Environmental Studies and Public Policy, New York University/ NYU Abu Dhabi, and Senior Fellow in the Research Institute for the History of Science and Technology at Caltech and the Huntington. She is the author of China and the Geopolitics of Rare Earths 

Views expressed by the authors do not necessarily reflect those of Down To Earth