By Anders Lorenzen

We know from economists, policy experts and industry experts, that competition is beneficial for ramping up and growing a certain sector. And so, competition is not only helpful for scaling the clean energy sector, it is also essential. 

The way to beat China on cheap solar panels and wind turbines is not through isolation and anti-competition policies such as, for example, the increased tariffs on solar panels and electric cars recently placed on China.

Such a policy starkly contradicts the US President’s statements about wanting a clean energy revolution, and it more resembles an ‘America First’ Trump-style rhetoric. It does more to position the US as a loser rather than a winner in the clean energy race.

Why?

Currently, the US needs China much more than China needs the US. The majority of minerals and materials needed for the clean energy revolution including lithium for lithium-ion batteries, rare earth minerals a key component for solar panels, wind turbines, electric vehicles and so on, are mined outside the US. And China is, these days, seemingly in control of the supply and distribution of many of these materials. 

Clean energy geopolitics 

According to data from the International Energy Agency (IEA), China is the leading global supplier of clean energy technologies as well as being a net exporter for many of them. The world’s largest clean energy producer holds at least 60% of the world’s manufacturing capacity for most mass-manufactured technologies. The list includes solar PV, wind systems, and battery technologies, as well as 40% of electrolyser manufacturing. 

The Geopolitics of the Clean Energy Transition produced by The International Renewable Energy Agency (IRENA), lists critical materials such as Cobalt, Dysprosium, Manganese, Nickel, Graphite, Copper, Iridium, Neodymium, Lithium and Platinum. The latter is the only exception where the US is producing more than China. For several of the other listed materials, the US is not even amongst the top ten producing countries.

Placing tariffs on Chinese imports could end up making the production of these clean energy products in the US even more expensive. It is worth underlining that as the US puts in place these tariffs on other countries, it can also go the other way. 

For instance, China could place US export tariffs on lithium and rare earth minerals meaning US companies would have to pay a premium price higher than other countries. Then we could be facing a likely clean energy trade war, which would be bad news for the global energy transition as well as the global efforts to bring down emissions.

As of last month, the increased tariffs on China came into effect with 100% on electric vehicles, 50% on solar cells and 25% on electrical vehicle batteries, critical minerals, steel and aluminium.

A more productive approach

A far more productive and efficient policy approach would be to concentrate on a policy to make US clean energy products more cheaply and superior to those produced in China. This is after all what is at the heart of historical technological innovation in the US.

The decision bears the hallmark of policies put in place without consulting with industry, as it is likely many US clean energy companies could pay a heavy price. And, more importantly,  the planet will pay a heavy price as it will slow down the speed at which the world transitions to cleaner energy sources.

There is no doubt that the US could do a lot more to produce more clean energy products at home and control more of the supply chain. But the best way to do this is not via trade war rhetoric, but by installing the right policies enabling companies to innovate and the government to make investments in the right places.

If President Biden cares about the climate crisis and advancing clean energy technology, he should be taking a much broader view than that all the solutions have to be done by US companies and innovations. If Kamala Harris becomes the next US President, one can only hope she will reverse these clean energy-killing policies.