JOE BIDEN’S GREEN BATTLEFIELD
Democrats’ carbon border adjustment tax, to shut out Paris violators, is aimed squarely at Xi Jinping
The global arms race in green technology is escalating fast. The Democrats’ $2 trillion (£1.5 trillion) blitz on clean energy is as much a bid for superpower supremacy as it is about climate change. It is aimed directly at China.
The words “Buy America” pepper the text of the Democratic Party platform. The Biden plan may look like the earlier Green New Deal of America’s radical Left, but is nothing of the sort. It is muscular and reeks of Great Power politics, almost a mirror image of Xi Jinping’s nationalist strategy documents.
Should Mr Biden achieve a clean sweep in November – probable, if not assured – the US will commit to net-zero emissions by 2050, and net-zero in the electricity sector by 2035. It will do so as a weapon of trade policy and in order to prevent the US losing its footing in the 21st century market for clean technology.
The US and the EU will again be aligned on the Paris Agreement, already an order of magnitude more achievable today after five years of galloping gains in technology. Both plan a carbon border adjustment tax to shut Paris violators out of their markets, policy that was deemed – revealingly – to be economic warfare by Chinese officials earlier this year.
Mr Biden says his aim is to bring “global economic outlaws” to heel. Almost in the same breath he says the purpose of the border tax is to “hold China accountable”.
“We can no longer separate trade policy from our climate objectives. We must use every tool of American foreign policy to push the rest of the world,” says the Democrat text. The Sino-Western Cold War is about to take on a very different character.
Mr Biden’s original “build back better” manifesto was $1.7 trillion over 10 years. It is now $2 trillion over four years. The sedate waltz is skipping into a fast tarantella.
All talk of a fracking ban has been dropped in the final text, wisely if the Democrats wish to win the battleground states of Ohio and Pennsylvania, where the UticaMarcellus shale basin has fired a rust-bowl revival. Mr Biden’s core advisers are Obama veterans who oversaw America’s transformation from the world’s biggest energy importer into an oil and gas hyperpower. They are proud of it. There will be tougher methane rules and no new permits on federal land but otherwise natural gas will be cosseted as a post-coal “bridge fuel”. Helima Croft, from RBC, says support for gas will be carried out quietly “under the radar”. Exports of US liquefied natural gas (LNG) will remain a foreign policy tool, chiefly to break Gazprom’s pricing power in Europe.
Gas companies have discovered to their delight that they might do nicely under a president Biden after all. “The plan is a masterpiece,” says LNG pioneer Charif Souki.
Oil will fare less well. The Democrats will not attack it. They let it wither on the vine. America will be electrified instead with up to 200,000 miles of high-voltage transmission lines along existing rail and highway routes, with 500,000 charging stations for electric cars by 2030.
A proto-Manhattan Project will seek to drive down the cost of grid-scale energy storage tenfold. There will be a push for fuel cells in trucking, and synthetic green fuel for aviation.
Mr Biden’s new age Gosplan is not to my taste. Should the Democrats be pledging to install 500m solar panels and 60,000 wind turbines over the next four years? Is such dirigiste planning the American way?
The laissez-faire way is to set a carbon price that ratchets up predictably, letting Schumpeterian competition find its own answers. All former chairmen of the Federal Reserve and a cast of economists of all ideological stripes have backed HR 763, a bipartisan House bill for a carbon tax and dividend. It starts at $15 a tonne and ratchets up $10 every year until CO2 emissions are almost eliminated. The money raised is rotated back into people’s pockets. The higher the carbon price, the bigger the cheque, and the poor do best.
Needless to say, Ursula von der Leyen’s variant in Europe aims to siphon off its carbon tax to fund the Commission’s apparatus. The EU seems to have learnt little from the gilets
jaunes and the sociology of revolt. America’s Republicans have only themselves to blame for abandoning the field over the last four years. What could have been set in motion along free market principles will instead be structured with greater clumsiness by the central planners if Biden wins.
What is clear is that global energy order may soon be unrecognisable. Climate denialism in the White House has given political cover to coal burners and tree slashers everywhere, whether Xi’s China or Brazil’s Jair Bolsonaro. “Trump has been holding back the dam. If the US switches sides, it changes everything,” said Kingsmill Bond from Carbon Tracker.
The cost of abusing the global commons will become punitive for a lot of countries but Mr Biden’s howitzer is aimed at Xi Jinping. China released more CO2 and methane last year than the US, the EU and Japan combined, and is adding an extra coal plant every two weeks in breach of promises.
Greenpeace says Beijing has let rip even since the warnings from UN scientists that CO2 danger thresholds are lower than originally thought and that we have just a decade to head off runaway global warming. China currently has 94GW of coal power in development, on top of 30GW added last year.
Mr Biden specifically accuses the Xi regime of using the Silk Road to finance “billions of dollars of dirty fossil fuel energy projects across Asia and beyond”, mostly in places where it would already be cheaper to build renewables.
Bloomberg New Energy Finance says the levelised cost of utility-scale solar has already dropped, in parts of Asia and the Middle East, below the running costs of existing coal plants.
The Silk Road is an ecological dead-end.
The prospect of parallel carbon border taxes in the world’s two biggest markets makes this a dangerous game for China. Xi Jinping must calculate that the economic and commercial costs of pushing an obsolete agenda may soon be much greater than any conceivable gain.
China would surely do better to double down on its own formidable leadership across swathes of green technology. If he does not, the world trading system may soon become a very hostile place.
Joe Biden accuses China of using the Silk Road to finance ‘billions of dollars of dirty fossil fuel projects across Asia and beyond’