Democrats’ car­bon bor­der ad­just­ment tax, to shut out Paris vi­o­la­tors, is aimed squarely at Xi Jin­ping

The Daily Telegraph - Business - - Front Page - Am­brose evanspritc­hard

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’

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