Does Decoupling Slow Decarbonization?
Oh yes, and: Welcome back to my relaunched newsletter
What is this? You are receiving this message because you signed up for Here It Comes or, for most, because you were subscribed to my Transpacifica newsletter (originally known as U.S.–China Week). Remember these?
Today I am firing up the old newsletter engine in the form of Here It Comes. Here I will build on my longstanding focus on US-East Asia relations, exploring three interrelated areas of unstoppable change:
The greatest transformation in US-China relations in half a century. The era launched by Nixon and Mao is over, and a new equilibrium is nowhere in sight.
Technology development, use, and governance in China. How will tech in China evolve amidst geopolitical and social pressures and a new cyberspace legal regime?
Climate mitigation and adaptation amidst US-China rivalry. Climate-driven changes are highly uncertain, but they will challenge both countries.
This newsletter will cover these issues both separately and in combination. I hope you’ll read along and share with friends. If you’re not interested, I totally understand. Just hit unsubscribe at the bottom of this message.
Who am I? I’m Graham Webster. My main role is as a research scholar at Stanford University’s Cyber Policy Center, where I lead the DigiChina Project to provide high-quality factual background, analysis, and translations on Chinese technology policy. The opinions expressed here are my own, and I reserve the right to change my mind.
Does Decoupling Slow Decarbonization?
If there’s one question most responsible for the (re)launch of this newsletter, it is how the uncertain but broadly darkening relationship between the United States and China might interact with what I view as the most urgent challenge facing humanity: how to mitigate and adapt to the effects of climate change.
Does surging geopolitical rivalry make things worse—or somehow better? Will “great power competition” thinking channel limited resources away from climate needs and toward an arms race and jockeying for domination?
These are daunting questions, but luckily, while I was scheming about how to approach them, some of the top experts in the several relevant fields published insightful research. In this first edition, I’ll discuss an excellent new paper and introduce some other writing on the topic.
What are the risks of US-China integration, for starters?
Writing in Science, five scholars—Michael Davidson of USCD, Valerie Karplus of Carnegie Mellon, Joanna Lewis of Georgetown, Jonas Nahm of SAIS, and Alex Wang of UCLA—present the first systematic assessment I have seen of the risks to the United States of integration with China in five key low-carbon technology fields.
READ IT: Davidson et al., “Risks of decoupling from China on low-carbon technologies,” Science 337, 1266 (2022) DOI: 10.1126/science.abq5446
The interdisciplinary group, with engineering, policy/legal, and social science expertise, identify solar, wind, batteries, “‘green’ steel,” and carbon capture and sequestration (CCS) as key technologies, and they offer initial estimates for five types of risks associated with integration with China in these fields.
The table below summarizes their risk estimates, conducted in the typical manner of considering both impact and probability of a given risk.
The paper’s supplementary materials are really rich and provide background to the main Science paper. Here are a few take-aways:
National security risks of integration with China for these technologies are generally low. Rising to the “medium” level, the authors find that collaboration on battery technology could hand China knowledge it could use in military applications, and that cybersecurity threats to wind turbines could make integration with China a critical infrastructure security threat. Generally, though, a traditional view of national security should not be a strong justification for untangling or avoiding US-China low-carbon energy collaboration.
The most acute risks are supply chain disruption in solar photovoltaics and batteries. This is largely because China is home to a high share of production, meaning Chinese or US actions or other circumstances could deny the US access to these technologies or key components. Essentially, the paper identifies US reliance on Chinese supplies as a risk in itself.
Solar — Quoting from the paper’s supplementary materials: “Even for the less than 6 percent of solar modules produced in the US, some 61 percent of the value of those modules accrues to Chinese companies due to import of polysilicon, wafers and non-silicon materials (silver paste, glass, back sheets). Supply chain disruptions could limit US module production, cause job losses in solar installation and sales, and raise overall solar costs. Human rights concerns related to allegations of forced labor use in Xinjiang-based polysilicon production (45 percent of global supply) are a key supply chain risk.”
Batteries — Again, from the supplementary materials: “In 2019, China controlled an estimated 23 percent of mining capacity, 80 percent of chemical refining capacity, 66 percent of production capacity of battery components, and 73 percent of production capacity for lithium-ion battery cells. The risk of supply chain disruptions is high due to China’s dominant role in the industry, particularly in refining.” But this could change, they write, since the Inflation Reduction Act established incentives for production in the US.
Integration with China in solar presents the risk of US job losses, but largely due to the risk of tariffs or supply problems. Only 14% of US solar jobs in 2020 were in manufacturing, resulting in a “relatively low risk of US job loss in solar manufacturing.” They cite the Solar Energy Industries Association in estimating that US tariffs could cost tens of thousands of installation jobs over five years, however. Again, if supply chains break down due to Chinese or US policies, it stands to reason installer jobs are at risk as well.
Intellectual property is a concern, but for different reasons. In wind, they write that the risk is related to “market access concerns” in addition to some risk of “trade secret appropriation.” (I confess I do not fully understand the market access issue.) They rate “green” steel risks as medium based on the risk that IP disputes between the US and China could slow diffusion of green steel or green hydrogen technology. And CCS risks appear concentrated in pre-combustion technologies and “novel system design software” where IP misappropriation could be less obvious.
A great deal of the risks to US interests identified in the paper are based on the possibility of decoupling itself advancing. A loss of access to solar or battery supply chains due to one side’s actions or the other side’s retaliation would imperil US efforts to deploy these technologies. Deploying them supports jobs, which are also at risk. A bottom line assessment of this paper is that various forms of decoupling itself constitute a mechanism for realizing risk.
Aside from the granular risk framework, the paper’s central contribution is perhaps to remind policymakers that any move will have plusses and minuses:
“Decoupling of production means higher costs for end users but may lead to concentrated job gains, preservation of technological leadership, and decreased vulnerability to disruption. Too much decoupling will slow technology deployment and the global low-carbon transition; too little will leave major markets exposed to unpredictable geopolitical tensions over which they may have no control. For most technologies, the decoupling ‘cure’ is likely to be worse than the integration ‘disease.’”
The fact is that different forms of industrial, social, financial, research, etc., decoupling are already well under way between the US and China. These specific untanglings will have specific effects. There is really no overall answer to my headline question, does decoupling slow decarbonization.
Let’s try a better question, shall we?
What kinds of decoupling risk forgoing carbon reduction gains?
This sharper question is closer to capturing the preoccupation that brought me here and that I expect to explore in much greater depth in the coming months. For now, I’ll share with you part of my reading list, coincidentally or not including some of the authors of the Science paper. (Do you have other recommended reading? Reply to this message or email me at mail /at/ gwbstr.com!)
First, Jonas Nahm’s new book, Collaborative Advantage: Forging Green Industries in the New Global Economy, provides a detailed and concrete account of how specific technologies moved forward through interaction among teams in China and Germany. Nahm describes a vitality of cross-border innovation that presumably will become more difficult under conditions of increased mutual suspicion and technological separation. I have more to read, but an illustrative quote:
“The [German and Chinese] firms were certainly not locked into the kind of cutthroat competition that some have come to expect from China’s integration into the global economy. Both firms held distinct roles and expertise in a division of labor that allowed the German manufacturer to build on core skills in customization and investment in new, cutting-edge generator technologies, while the Chinese firm concentrated on the design changes required to lower cost and bring products to mass production. … The German firm sent engineers to China to observe the performance of their product under conditions of mass production. Their newly acquired knowledge helped these German engineers design new generator models. Simultaneously, the Chinese firm benefited from new technologies developed in Germany” (Nahm, 54-55).
Second, in the new book The China Questions II (to which I’m also a contributor), Alex Wang proposes the concept of “constructive competition” in arguing that climate action is in both countries’ self-interest and that “some forms of cooperation will still be feasible, even if tensions remain high.” Wang makes a provocative if to me a bit optimistic case for virtuous competition between the two countries, but much of it could come to pass if competition does not evolve into sharper conflict.
Third, in a newly published paper in Nature, John Paul Helveston, Gang He, and Michael Davidson attempt to quantify the cost savings provided by global supply chains over domestic production when it comes to solar photovoltaics (PVs). According to the abstract, they look at the US, Germany, and China and:
“We estimate that the globalized PV module market has saved PV installers US$24 (19–31) billion in the United States, US$7 (5–9) billion in Germany and US$36 (26–45) billion in China from 2008 to 2020 compared with a counterfactual scenario in which domestic manufacturers supply an increasing proportion of installed capacities over a ten-year period. Projecting the same scenario forwards from 2020 results in estimated solar module prices that are approximately 20–25 per cent higher in 2030 compared with a future with globalized supply chains.”
I’m looking forward to digging in. That’s all for now.
Tell me what you think!
It’s been a while, and I’m looking forward to being back in touch with the diverse and wise readers on this list. Don’t hesitate to drop me a line with any feedback, corrections, complaints, or just to say hi. And if you think others would be interested, share it and encourage them to subscribe!
About Here It Comes
Here it Comes is written by me, Graham Webster, a research scholar and editor-in-chief of the DigiChina Project at the Stanford Cyber Policy Center. It is the successor to my earlier newsletter efforts U.S.–China Week and Transpacifica. Here It Comes is an exploration of the onslaught of interactions between US-China relations, technology in China, and climate change. The opinions expressed here are my own, and I reserve the right to change my mind.