\n\t\t\t\tChina\u2019s cheap low-carbon tech was already pummeling the competition. The Gulf conflict boosts that dominance.\t\t\t<\/p>\n
BRUSSELS \u2014 America\u2019s allies, stung by soaring energy costs due to Washington\u2019s attacks on Iran, are confronting an uncomfortable truth: The escape route from fossil fuel shocks leads straight into China\u2019s arms.<\/p>\n
From the European Union<\/a> and the United Kingdom to South Korea<\/a> and the Philippines<\/a>, numerous countries have responded to the war-driven spike in oil and gas prices with calls to accelerate electrification and the rollout of clean energy infrastructure.\u00a0<\/p>\n While that doesn\u2019t offer an immediate fix to higher costs, governments see clean, domestic energy sources, such as renewables and nuclear power, as the obvious long-term solution to protect their economies from the ups and downs of global fossil fuel markets.\u00a0<\/p>\n But there’s also an obvious catch: The faster they move to decarbonize, the more they will have to rely on China to supply the necessary materials. After all, Beijing controls the overwhelming majority of the world\u2019s clean technology and critical mineral supply.\u00a0<\/p>\n Governments, uneasy about the idea of swapping one dependence for another, are keenly aware of that fact. The question now is whether they\u2019ll put those reservations aside in favor of bolstering their energy security or continue taking measures to protect their economies from China\u2019s dominance.\u00a0<\/p>\n \u201cHow can we explain to our fellow citizens that decarbonization is an opportunity if our batteries are made in China?\u201d the EU\u2019s industry chief, St\u00e9phane S\u00e9journ\u00e9, asked last month when proposing new legislation that would require the bloc\u2019s 27 governments to spend more taxpayer money on domestically produced green technologies and limit foreign investment by dominant players \u2014\u00a0a move widely interpreted as targeting Beijing<\/a>. \u00a0<\/p>\n The EU has long been cautious about hobbling its domestic industries by allowing in too many Chinese goods: The bloc\u2019s carbon tax<\/a> is aimed at protecting its industries from cheap emissions-intensive imports like those made in China. Meanwhile, the British government last month blocked a Chinese company from building a $2 billion wind turbine factory in Scotland over unspecified national security concerns.\u00a0<\/p>\n At the same time, countries seeking to accelerate their green transition \u2014\u00a0U.S. allies included \u2014\u00a0have been looking to shore up relations with China.\u00a0<\/p>\n Germany\u2019s economy minister will head to Beijing next month, shortly after the country\u2019s chancellor and environment minister visited in an effort to woo Chinese investors and learn from the country\u2019s clean tech boom. Spain\u2019s Prime Minister Pedro S\u00e1nchez went last week for the fourth time in as many years, with an eye on securing access to critical raw materials. The leaders of the U.K., Canada, Finland and Ireland also made the trip in recent months.\u00a0<\/p>\n It\u2019s not just Western countries: An Indian business delegation recently visited<\/a> China to explore green energy partnerships; Emirati Crown \u200bPrince Khaled bin Mohamed \u200cbin Zayed Al Nahyan discussed closer energy ties<\/a> with Beijing last week; and Cuba has leaned on Chinese solar panels amid an effective oil blockade by Washington.\u00a0<\/p>\n Andr\u00e9 Corr\u00eaa do Lago, a senior Brazilian diplomat and president of last year\u2019s United Nations climate talks, said he thinks concerns about dependence on China shouldn\u2019t prevent the widest use of renewables.<\/p>\n \u201cAt this stage, and if you believe in the urgency, we have to work as much as possible with renewables, incorporating the realities of who produces and who has the technology, and at the same time continue to try to develop other things,\u201d he said.\u00a0<\/p>\n For many countries, the war in Iran has served as a painful reminder that as long as their economies run on fossil fuels they will be exposed to uncertainties beyond their control.<\/p>\n Fuel shortages across much of Asia have led to conservation measures, such as four-day work weeks in the Philippines and Bangladesh, or limits on driving. India has capped natural gas use for industry and Cambodia is cutting import taxes<\/a> for green goods.\u00a0<\/p>\n Households and industry in many countries face skyrocketing bills, while governments that subsidise fuel are facing a squeeze on their budgets.\u00a0<\/p>\n \u201cSince the beginning of the conflict 44 days ago, our bill for fossil fuel imports has increased by over \u20ac22 billion,\u201d European Commission President Ursula von der Leyen said on Monday after hosting an emergency discussion on the war in Iran. (Her Commission had originally been scheduled to debate relations with China that day.)<\/p>\n The long-term solution is to speed up the phaseout of fossil fuels, she insisted,\u00a0reiterating a point made by numerous European officials and leaders in recent weeks. \u201cElectrifying Europe means making Europe more independent,\u201d she said.<\/p>\n But there are fears that renewables come with their own dependencies since China is the leading supplier of clean tech and the minerals that go into them.\u00a0<\/p>\n The country produces nearly 80 percent of the world’s solar panels, and an even greater share of their core electronic components such as cells and wafers, according to the International Energy Agency<\/a>. Exports of electric and hybrid vehicles from China hit a record 349,000 in March, more than doubling from a year earlier.<\/p>\n China also has a stranglehold on the critical minerals market, refining about 90 percent of rare earths used in the production of wind turbines and EVs, as well as the majority of lithium, cobalt and other metals used in batteries.\u00a0<\/p>\n That dominance has turned China into the engine of global decarbonization efforts. It has also heightened concerns in some countries that domestic industries could be undercut or that China could use its grip on those materials to its advantage.\u00a0\u00a0<\/p>\n Last year, China imposed sweeping export restrictions on several rare earths in response to U.S. tariffs, threatening supply chains. The growing use of Chinese components has also prompted cybersecurity concerns; the U.S. last year found unexplained communication devices in Chinese solar tech, according to reports<\/a>.\u00a0<\/p>\n Several\u00a0 countries and the European Union have put tariffs on Chinese electric vehicles and steel to prevent them from flooding the market. The U.S. has a 100 percent tariff on Chinese EVs, and some countries in Asia have introduced tariffs on EVs and their components or local content requirements.<\/p>\n The EU already requires that a certain share of demand for green goods and minerals be met through domestic production by 2030, and the new industrial law spearheaded by S\u00e9journ\u00e9 would introduce a cap on foreign investment from countries that control more than 40 percent of global manufacturing in clean technologies.\u00a0<\/p>\n These efforts, however, come with trade-offs: Made-in-Europe goods tend to be more expensive than Chinese products, which risks slowing down the energy transition.\u00a0<\/p>\n \u201cIf you tilt too much towards [domestic production], that might come at the expense of the speed of decarbonization. Because using cheap technologies is just what we need to roll out these alternatives,\u201d said Simone Tagliapietra, a senior fellow at Brussels-based think tank Bruegel.<\/p>\n And countries have found that a speedy green transition is near-impossible without some degree of reliance on China.<\/p>\n Pakistan has been a major recipient of cheap solar panels from China, which have helped cushion it<\/a> from the energy supply crunch stemming from the war in Iran.\u00a0<\/p>\n Spain, whose renewables boom similarly insulated it from soaring fossil fuel prices, has secured large Chinese investments in its energy sector.<\/p>\n And Canada recently reduced its 100 percent tariff on Chinese EVs and agreed to allow a limited number of the cars into its market in return for the removal of tariffs on billions of dollars in agricultural products.\u00a0<\/p>\n \u201cWe thought that was a great trade for Canada,\u201d Tim Hodgson, Canada\u2019s energy minister told POLITICO<\/a> on the sidelines of a major energy conference last month. \u201cIt created an opportunity for us to bring in electric vehicles that are at a price point that no one was serving today. That helps with affordability.\u201d\u00a0<\/p>\n Analysts argue that buying a solar panel made in China that will last multiple years is different from continuously paying a country for its oil.<\/p>\n \u201cThe dependency on oil and gas flows, which can be interrupted with immediate repercussions on the economy, is very different from dependency on predominant suppliers of some key technologies,\u201d said Tagliapietra.\u00a0<\/p>\n The EU\u2019s efforts to build out domestic production, Tagliapietra noted, resemble measures put in place by former U.S. President Joe Biden,\u00a0who similarly sought to loosen China\u2019s grip on batteries, solar panels and EVs during his time in the White House.\u00a0<\/p>\n Then Trump swept into office and abolished those measures \u2014 and any effort to compete with China for a slice of the clean economy.\u00a0<\/p>\n China\u2019s clean technology exports are now overtaking<\/a> sales of U.S. fossil fuels, a trend that\u2019s showing no sign of slowing down.<\/p>\n In contrast, White House spokesperson Taylor Rogers said the conflict in Iran had actually underscored the importance of having access to energy produced domestically or supplied by an ally such as the United States.<\/p>\n \u201cThe Trump Administration is working with several countries on new oil and gas deals that emulate the President\u2019s energy dominance agenda and enhance their energy security,\u201d she said. “The reality is that countries that tried to transition to renewable energy have failed to break their reliance on the oil and gas that flows through a chokehold like the Strait of Hormuz.”<\/p>\n But Europeans, by and large, don\u2019t see it that way. Increasingly, they are coming to view<\/a> the U.S. under Trump as a greater threat to their continent than Beijing, and are rallying around<\/a> a faster transition to clean energy to insulate them from fossil fuel shocks.\u00a0<\/p>\n The predominant view in Brussels now is that the EU must reduce its dependence while remaining an attractive trading partner for China.\u00a0<\/p>\n The Trump administration\u2019s pursuit of fossil fuel dominance and its decision to relinquish renewables to China could have lasting consequences, particularly as the war in Iran pushes countries to rethink their energy strategies.<\/p>\n \u201cI think this whole crisis is driving other countries into China’s hands,\u201d said Sen. Brian Schatz, a Democrat from Hawaii. \u201cOn the question of energy, they’re leading [in] electric cars, they’re leading in renewable energy deployment, and I think America is fighting Iran and China is winning.\u201d\u00a0<\/p>\n