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By invitation only

By YU HONGYUAN/WANG XINYU | China Daily | Updated: 2024-01-08 08:32
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The US is seeking to form an exclusive energy club based on its alliances and partnerships which will impact on the global transition


In the transformation of the United States' energy security strategy, the Joe Biden administration is trying to form a by-invitation-only energy club to reconcile a range of diverse and conflicting policy objectives, including economic growth, national security, low-carbon environmental protection and alliance strengthening. This serves the US' network extension to maintain its energy hegemony, exclude major competitors and achieve standardized leadership. The hegemonic intention and "domestic priority" orientation of the US policy poses multiple risks for global energy governance.

China and the US, as the world's largest carbon-based economies and energy consumers, are well-positioned to lead the global energy transition. But as the competition between China and the US in the field of energy and resources intensifies, the space for climate cooperation between the two sides is being significantly squeezed.

The Biden administration is intent on building a hub-and-spoke energy club, with the US as the hub and the US' allies and partners as the spokes. It is thus committed to forming a set of specific, enforceable, plurilateral and easily modifiable green supply chain normative regimes. The US green industry policy, which focuses on transforming and securing its supply chain, will continue to shape a network of allies and partners.

The US is committed to integrating the North American clean energy supply chain, creating a near-shore club with its own supply chain configuration as the core, promoting friendshoring based on the North American market, and using Canada's resource advantages and Mexico's manufacturing potential to fill the US' domestic production capacity gap. The US Inflation Reduction Act (IRA) specifically mandates the percentage of battery components and critical minerals in North American manufacturing and recycling to strengthen North America's leading position in supporting friendshoring.

Within the G7 framework, the US has promoted synergy between its Build Back Better World initiative and the European Union's Global Gateway strategy, Japan's Partnership for Quality Infrastructure, and the United Kingdom's International Investment Initiative. With the G7 finally establishing the G7 Partnership for Infrastructure and Investment (PII, G7) as a framework for the cooperation of developed countries as a whole with the aim of narrowing the infrastructure investment gap in partner countries, the G7 Environment, Climate and Energy Ministers Meeting in 2022 formally endorsed the Just Energy Transition Partnerships (JETPs) launched at the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change as a new form of national partnership to be adopted by the "PII, G7". France, Germany, the UK, the US, the EU and South Africa formed the International Partners Group and announced the launch of the JETPs. The G7 has also established JETPs with India, Indonesia, Senegal and Vietnam.

Global climate action and clean energy developments are gradually altering the existing geopolitical structure. Club-style energy partnerships are viewed by the US as an important tool for it to regain its strategic dominance. The Biden administration acknowledges that the US cannot produce, mine, or manufacture everything on its own and must collaborate with allies and partners to enhance and strengthen collective supply chain resilience. To secure access to key minerals critical to the clean energy transition, the US must collaborate with allies and partners to ensure sufficient and resilient supplies. In this regard, it is important both to secure supplies from overseas and to work with the companies of allies to expand sustainable mining onshore.

China should be aware of the strategic risks posed by the US energy policy. It is important for China to strengthen its own energy security and prevent the US energy club from undermining the integrity of global energy governance under multilateral frameworks, such as the UN institutions.

In the field of new energy, China has a greater production capacity and market potential than the US, while the US leads in certain technological fields. In the field of governance, developed economies such as the US, the EU and Japan still dominate trade norms, pricing power, industrial standards and information data related to global energy resources. These developed economies have also established pricing mechanisms, production standards and information collection systems centered on New York and London. When it comes to the rules and norms of global energy governance, China has long been at a disadvantage.

China has made significant progress in its energy transition. China's renewable energy market has progressed from the government-supported stage to the market-oriented stage. China is developing a market-oriented green financial system, while also deepening the supply-side structural reform of renewable energy. Additionally, a market-oriented low-carbon technology innovation system with enterprises as the main focus is being established. With nearly one-third of the world's renewable energy patents, China is emerging as a leader in international renewable energy investment and an active promoter of low-carbon technological progress.

The acceleration of China's energy transition will benefit its development and provide opportunities for the green transformation of other developing countries and the reform of the global energy governance system. China's position in the global green economy industry chain, supply and value chains will be enhanced, amplifying its voice in the international energy rule-making process. Additionally, China's technology, infrastructure building capacity, and value chain formed during the energy transformation process will become global public goods. By collaborating with other developing countries to establish international R&D centers and cooperation platforms for renewable energy and low-carbon technologies, China can enhance the economic and social benefits of its overseas investment and assistance.

China's energy transition has the potential to promote a more open, inclusive and stable international order, providing significant opportunities for the recovery of the world economy and the reconstruction of the global governance system.

Yu Hongyuan is a professor and director of the Institute for Public Policy and Innovation at the Shanghai Institutes for International Studies. Wang Xinyu is a research assistant at the Shanghai Institutes for International Studies. The authors contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

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