Sanctions are no climate fix

Fighting cold wars and managing global warming do not mix. While the basic clash between Sino-American strategic competition and mitigating a collective environmental challenge is easily grasped, the tools with which a cooperative approach can be pursued are less obvious. What is the appropriate balance between the supply and provision of green technology, on the one hand, and coercion and disciplinary sanctions, on the other? And how can a global green transition be catalyzed when the world economy is reeling from the shock of the coronavirus pandemic?

First, we should grasp a basic truth whose importance for the twenty-first century is hard to overstate: while it is not currently the world’s hegemon, China is the political-economic swing actor in determining the future of the planet. This is not a question of emissions alone. What makes China pivotal is not just its massive carbon footprint but also its leadership in the mass production of renewable energy technology. China concentrates this production in state-owned enterprises as well as private energy and technology firms that enjoy government support. The problem is that in a world economy that is stagnant due to the effects of the coronavirus pandemic layered upon the structural problems of inequality and underinvestment, Chinese regional governments have doubled down on coal. They currently plan to expand coal capacity by the equivalent of all coal plants in the EU. If implemented, these plans would wreck renewable energy advances elsewhere.

However tempting it may be to back green demands with an iron fist, every threat of economic pressure against China will reinforce rather than weaken its addiction to cheap coal.

The United States and its allies can blunt this pollution drive only by embarking on massive green stimulus policies in their own economies. This action will simultaneously reinvigorate global demand and incentivize China, the 21st century’s workshop of the world, to pour more investment into renewable energy. The result could be a virtuous circle. China already occupies a leading global position in the production of solar panels, wind power, and batteries. It is also pioneering a new generation of ultra-high-voltage DC power transmission lines (the use of which in the United States has been estimated to enable a national carbon emissions reduction of 80 percent from 1990 levels) and has developed the world’s most dynamic market and production capacity for electric vehicles.

The energy transition is shaped by more than just economic factors, however. China also has a strategic incentive behind its continued use of coal: its plentiful domestic deposits allow Beijing to reduce the strategic vulnerability of its shipborne oil and gas imports, 80 percent of which are supplied through the Malacca Straits. The Chinese leadership has acknowledged the reality of this “Malacca dilemma” since 2003. Coal, by contrast, enables an inland autarky. Growing geopolitical tensions with the United States in the South China Sea as well as disputes with India further strengthen China’s rationale for “brown stimulus.” Only constructive diplomacy from the United States and its allies to manage and diminish these disputes can create a strategic outlook in Beijing in which the long-term case for renewables defeats the short-term security argument for coal.

However tempting it may be to back green demands with an iron fist, every threat of economic pressure against China will reinforce rather than weaken its addiction to cheap coal. The twentieth century is full of episodes in which external threats not only made illiberal regimes more aggressive but also intensified carbon-intensive development trajectories. Western oil cutoffs, both real and perceived, motivated Mussolini’s Italy, Nazi Germany, militarist Japan, and Franco’s Spain to develop deeply wasteful technology that converted coal to oil in the 1930s and 1940s. Since World War II, UN sanctions stimulated carbon-intensive drives for energy autarky by apartheid South Africa and communist North Korea.

Western countries have behaved similarly when their own access to oil has come under threat. When exposed to supply interruptions during the oil embargo by OPEC in 1973, they shifted policy in directions that were generally detrimental to the environment. Hundreds of new coal plants were built in the United States, which by 1995 obtained 50 percent more of its energy from coal than it had before 1973. Deregulating the oil industry expanded U.S. emissions even more. Only Denmark was prompted by the OPEC embargo to invest in wind turbine technology, in which it is now a global leader.

We must learn from this geopolitical history of unintended consequences as we design global climate strategies. As climate change accelerates, national energy security will be a self-defeating goal: the construction of every new coal plant brings us immediately closer to a crueler, harsher planet for all. While there is a complex relationship among the Chinese Communist Party leadership, the state-owned enterprises in the energy sector, and coal-addicted local governments, external pressure on China is more likely to bring the three actors together in ways that make the climate crisis worse. Any strategy of military competition or full-spectrum containment is thus fated to deepen the environmental pressures that are already causing severe economic, social, and political instability in Africa, the Middle East, the Indian Ocean region, and Central America. Any short-term gains in confronting China are therefore likely to come at a large and growing long-term cost. Instead, the United States should cooperate with China through policies of economic stimulus, coordinated international investment, and incentives to green supply chains.

To achieve the latter goal, the United States should wind down President Donald Trump’s trade war while repurposing its methods into a simpler measure: a tariff on carbon-intensive production. Since such tariffs effectively set entry conditions to the American market instead of hampering Chinese imports, they do not throttle Chinese economic prospects in the same way as offensive sanctions, like those used in the ongoing campaign to destroy the Chinese telecom giant Huawei. By guaranteeing free trade in goods on condition that they are produced sustainably, such tariffs (which the EU is already introducing as “carbon border adjustments”) can promise that a green China will be an open and wealthy China.

As the world’s buyer of last resort, the United States has the potential to exercise a significant influence on the green conversion of supply chains throughout the world, especially once U.S. measures join with the 450-million-strong high-income consumer base of the EU. However, carbon tariffs will not work without the presence of sufficient domestic demand in the United States. That is why the country’s economic policy must be oriented towards boosting demand and redistributing income to the consuming classes. Carbon border adjustments will be resisted by free trade advocates. But their calls for economic openness in all domains do not take into account the welfare losses already being suffered as a result of catastrophic climate change—not to mention the rising cost of further environmental destabilization in decades to come.