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Decoupling the US and Chinese economies could stop the world from meeting climate goals

Decoupling the U.S. and Chinese economies could negatively impact the world's ability to meet global targets for reducing greenhouse gas emissions and staving off catastrophic global warming.

That's the word from a series of reports examining how the interdependence between both countries benefits the global economy.

As seen in recent legislation like the Inflation Reduction Act and CHIPS Act, crucial environmental goals and economic impact are intertwined.

The economic impact aims to increase investment spending, drive down the cost of new technologies, and give productivity a needed boost. Amid the lofty goals of the IRA (as well as the CHIPS Act) is a consistent goal of domestic spending and productivity, the latest move to decouple the U.S. from China.

"Tackling climate change in the U.S. and especially in the developing world is heavily dependent on having affordable and available low-carbon technologies," said the study's lead author Michael Davidson, an assistant professor at UC San Diego's School of Global Policy and Strategy and at the UC San Diego Jacobs School of Engineering.

"A major benefit of integration is making these technologies more affordable, in addition to increased innovation,” Davidson says. “Therefore, when throwing up barriers to integration, we need to be objective about the specific policy goals and how they might influence our ability to address the threat of climate change."

The study, published in the journal Science on September 15, uses both qualitative and quantitative data to breakdown the risks of U.S./Chinese collaboration in these five key sectors needed to reduce CO2 emissions: wind, solar, carbon capture and sequestration (CCS), batteries and "green" steel.

Results of the study highlight the indispensable role of research, development, demonstration, and manufacturing that China will likely continue to play in the deployment of low-carbon technologies needed to reduce greenhouse gas emissions.

In looking at each of these five sectors, the researchers conclude that national security is a “muted” threat across the board. The threat they point to, however, is supply chain issues that have had profound effects on solar PV panels and battery production because of the concentration in China. Current federal solutions, they worry, will only worsen the problem.

In terms of batteries, open research and development “has been cited as a security concern because batteries can be used for military purposes, but these are not the same batteries that are needed to deal with climate change on a very large scale,” Davidson said. Domestic solar, on the other hand, has increased due to Biden’s Defense Production Act. However, the authors write that it “will privately benefit the companies, localities, and workers tapped to produce them.”

This type of legislation is vexatious. While job creation is posed as the rationale, it could lead to increased cost solar panel costs and slower deployment, while limiting the jobs it tries to create. This in turn increases emissions – a butterfly effect from lower manufacturing.

Their solution of integration calibrates responses based on circumstances specific to sectors and technologies.

Writing that, “for most technologies, the decoupling 'cure' is likely to be worse than the 'integration' disease,” the authors argue we can exist outside of the open-versus-domestic binary and instead, diversify policy goals.

Aside from the affordability of renewable energy technologies, the authors write that “the level of integration is so great that true decoupling would be nearly impossible and potentially counterproductive to national interests.”

The study uses in-depth case studies, assigning risk levels to each clean energy category, such as job losses, intellectual property violations, supply chain disruptions, and critical infrastructure. Determining that the risks are manageable, they offer a framework for reorganizing the supply chains.

Despite all of these factors, the decoupling of the US and China is already well underway, according to Jon Bateman, a senior fellow in the Technology and International Affairs Program at the Carnegie Endowment for International Peace.

The decoupling strategy aligns with the current trajectory of the Biden Administration, as well as the goals of the two prior presidencies. Despite positive cooperation on climate change between the two superpowers in recent years, the U.S. and other Western nations are rethinking their reliance on Chinese supply chains due to national security concerns.

These supply chains, however, determine the fate of renewable energy. Thus, a study by researchers at the University of California San Diego reveals that the planned divorce might not be such a good idea, as it may strike a blow to the main focus of clean tech policy: climate mitigation.

While the authors note that some national security and economic concerns have merit, “the cure is likely worse than the disease,” they write.

China is a global leader in renewable energy capacity and the largest domestic and outbound investor in the sector. That’s not a surprise when China represents a third of global solar installations, leading the industry on Earth (and maybe soon, space.) As a leader in wind as well and the world’s largest carbon emitter, China aims to generate a third of its energy from renewable sources by 2025.

China’s status as a renewable energy leader doesn’t seem to be changing any time soon. Nevertheless, it’s led to clean energy supply chains being dominated by the country.

In addition to worrying Western nations, the International Energy Agency’s special report on solar panels specifically confirms that the diversification of supply chains is necessary for our transition to net zero.

“There are enormous benefits to having open supply chains and research environments, “ the authors of the Science study write. “Policies that aim to disrupt that or decouple should be grounded on solid, objective assessment of the risks and rewards."

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