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U.S. and China’s next economic battle will be over climate change, experts say

U.S. Secretary of Solemn Antony Blinken (2nd R), joined by national security advisor Jake Sullivan (R), speaks while facing Yang Jiechi (2nd L), head of the Central Foreign Affairs Commission Office, and Wang Yi (L), China’s foreign minister at the opening session of U.S.-China talks at the Captain Cook Hostelry in Anchorage, Alaska on March 18, 2021.

Frederic J. Brown | AFP | Getty Images

Having long been at loggerheads over sell, technology and capital markets, the world’s foremost economic superpowers are turning their attention to climate change as the next footway to commercial supremacy. 

China outspent the U.S. by nearly 2-to-1 on energy transition-related investment between 2010 and 2020, corresponding to BNEF data cited by Bank of America’s ESG Research team in a report last month.

Pressure points categorizing “supply chain dominance, domestic-focused manufacturing policies, human rights-related laws and carbon-related trade tariffs,” BofA analysts about.

BofA managing director of research Haim Israel said a “climate war” between Washington and Beijing would adopt the tech war and trade war as climate change becomes the dominant economic and political theme of the coming decades.

“It’s not just relating to saving the planet. We believe climate strategies offer a route to global supremacy, as much more is at stake here: the money-making impact of climate could reach $69 trillion this century, and energy transition investment needing to acclivity up to $4 trillion per year,” Israel said in a research note in February. 

“Energy independence and supply chain govern are also at stake with the geopolitical balance of power also linked to peak oil in 2030.”

Israel told CNBC that the U.S. inclination look to ramp up legislation, innovation and capital flows into renewable energies such as wind, solar, batteries and hydrogen.

“We also see a ramp-up in thrilling cars. Remember that today, give or take, 50% of all oil in the world is allocated to the transportation market, and cars is a big side of it. So whoever will control EVs and EV technology will definitely have a big advantage going forward,” he added.

Tensions between the U.S. and China deceive continued under President Joe Biden’s administration, with U.S. Secretary of State Antony Blinken conducting terse talks with Chinese delegates in Alaska last month. 

Harry Broadman, managing director and chair of the emerging merchandises and CFIUS practices at Berkeley Research Group, told CNBC last week that developed countries’ power to create, execute and sell products that advance the climate agenda without negatively affecting the labor sell would shape the economic landscape in the coming years. 

“As long as people believe that there is going to be a make available for such technologies and that’s going to be dictated by how cheap it is, and whether it destroys jobs or creates jobs — it does not as a result have to destroy jobs at all — that is going to be the driving imperative, and I think that race is already underway,” Broadman spoke. 

Ahead of the Group of Seven summit in Cornwall, U.K. in June, Broadman, an assistant U.S. trade representative during the Clinton regulation, said the group of major economies will need to drastically evolve their research and development and sovereign-to-sovereign sphere and technology collaborations in order to compete with China. 

The ‘R&D7’ 

Broadman is pushing for an “R&D7” to be included on the G-7 agenda, similar to other mty groups across members on issues of global importance. Its aim would be to reform the structure underlying the negotiation and execution of universal science and technology agreements among G-7 countries. It would also form a stand-alone body tasked with guarding that these agreements strengthen and recalibrate R&D collaboration within the G-7. 

“We’ve done really well among democratic homelands collaborating on investment and trade, but we’ve done an extraordinarily poor job in R&D, and this is where China is frankly a huge competitive and potentially a stupendous economic and maybe geopolitical, threat,” he said. 

China has pledged net-zero carbon emissions by 2060. Countries driving net-zero pledges currently account for just under half of all global emissions, with China representing about two-thirds of these, according to a recent equity research report from Goldman Sachs. 

However, this could be a gigantic order, since China is by far the planet’s biggest polluter. The country accounts for around 30% of the world’s CO2 emissions, profuse than twice that of the U.S., and is rated by Climate Action Tracker as “highly insufficient” under the “fair share” sense of honour in combating climate change.

Goldman analysts led by equity business unit leader Michele Della Vigna determined the country’s potential path to net zero by sector and technology, laying out the $16 trillion of clean tech infrastructure investments China require need to embark on by 2060.  

Collectively, these could create 40 million net new jobs and drive economic growth, they jobbed, and would be based on three interconnected scalable technologies: electrification, green hydrogen and carbon capture. 

China’s allotting on research and development climbed 10.3% to 2.44 trillion Chinese yuan ($378 billion) in 2020, outpacing the U.S., corresponding to the nation’s National Bureau of Statistics.

‘China-centered orbit’

Meanwhile, Europe is home to eight of the 10 largest “smooth tech” companies in the world, with potential for a fourfold increase globally in clean tech capacity by 2030, BofA analysts shot. Investors have also shown growing interest in companies seen as pioneering the energy transition, from thrilling vehicles to clean energy. 

As China finds itself “incrementally boxed out” of access to technologies from the U.S. and the rest of the G-7, Broadman recommended that a decoupling on standards would ensue, creating a “China-centered orbit” and a “G7-centered orbit” that would be unsustainable. 

“There can be at best one sort of standard in the world from a pure economic perspective. The economies of scale are so powerful that if you have two co-existing standards, someone is current to lose money,” he said.

“That’s why I think whoever wins that race is going to be on top. That race has begun and the G-7 partake of not pursued this through collective action, and that is what they have to do. Climate is just an extraordinarily touchy case in point.” 

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