Climate & environment, explained.
Competition for technological primacy is a motivating factor in the green energy sector (David Clarke/Flickr)
Trade with China in green technology is essential if the world is to meet its 2050 emission reduction goals. Why is this so hard to do?
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Unhealthy competition in green technologyUnhealthy competition in green technology
Avoiding catastrophic climate change requires far more than the current Paris accord commitments. Even keeping these commitments looks unlikely as governments struggle with the cost of clean energy transformation and push-back from vested interests peddling unwarranted optimism about immature technological solutions. Tried and tested technology is already there to get us at least 70 per cent of the way to net zero, but the transition is costly. Adopting the lowest-cost technology would seem like common sense, but great-power rivalry is standing in the way.
How to meet legitimate security concerns without introducing self-harming restrictions on the global trade in green energy technologies?
China’s massive investment in green technologies over the last decade has made it the dominant and lowest-cost provider of green technology. Much of China’s success comes from being able to attract and then build on foreign know-how to develop it to scale. For example, solar panel technology developed by the University of New South Wales was brought to scale by Chinese investment, bringing down the price by 85 per cent. While China's import dependence on fossil fuels has motivated investment in green technologies, and the large size of its market has provided the scale to push down the unit costs of production, China's massive subsidies for the development of green technology production capacity are regarded by the United States as predatory. Regardless of how fair China’s state subsidies are, China is going to be the source of the lowest-cost technology for some time to come.
China’s dominance makes importing countries vulnerable to supply chain disruptions, and raises security concerns. In response, the United States introduced its Inflation Reduction Act to boost domestic production of green technologies, and other policies restricting US adoption of China’s green energy technologies. The US approach is spilling over into other countries, including Australia. Security is one motivating factor, but so too is competition for technological primacy. This strategic competition is raising the cost of the green energy transition, and slowing every country’s ability to reduce the risk of rising greenhouse gas emissions.
Security concerns are real because energy systems are vulnerable to malign action. The distributed nature of renewable energy has some advantages over concentrated generation in this regard, because large nodes such as nuclear power stations make for bigger and more attractive targets. But the intermittent nature of renewables makes network management a crucial part of the system, and these are potentially vulnerable to cyber attacks. Networked “smart” products, whether motor vehicles or air conditioners, are also more vulnerable as they have to be connected to allow for updates or to respond to fluctuating electricity prices.
To waste scarce resources on replicating mature technologies doesn't help the world to transition to clean energy.
Just how connected everything needs to be, and how exposed infrastructure is to cyber attacks or supply chain disruption, are crucial questions. Yet the types of research relationships needed to understand these vulnerabilities and find solutions are also suffering from the ramifications of great-power rivalry.
How to meet these legitimate security concerns without introducing self-harming restrictions on the global trade in green energy technologies? There seem to be four possible ways forward.
The first option is reversing protectionist policies and supporting free trade, at least in the products required for the energy transition. The World Trade Organisation (WTO) could oversee an agreement for freer trade in green technologies that caps the level of protection for domestic industries. But any such agreement is unlikely to include the United States, given its unwillingness to cooperate with the WTO, which by design does not exclude member countries. The best that can be hoped from the United States is for cooperation that excludes China. So a pure version of this option is unlikely. This is a pity as international research cooperation and healthy competition on developing the technologies needed to go the last 30 per cent to zero emissions would get us there faster.
A second option is agreement on technology sharing, overseen by a representative technocratic multilateral organisation to manage the security risks. Rather than trade in products as a way of access to the cheapest green technologies, this option would see countries able to access the knowledge and support to build the sensitive parts of their green energy system themselves. The wider the “trusted partner” network of countries, the greater the scale that could be achieved in production. This would lower the cost of green technologies and reduce concerns about vulnerabilities being built into the systems. Shared technology would mean not reinventing the wheel, and licensing agreements could ensure that those who developed the technology are compensated for the loss of some of their potential market.
A third option would allow countries to trade in products where “air gaps” allow for isolation for sensitive parts of the system so that they are less vulnerable to cyber interference, and local control for immediate decoupling if they are subject to cyber attack. This option involves less cooperation on technology sharing, but would require research cooperation to fully understand vulnerabilities. Countries with concerns could require design features to allow domestic experts to build in safeguards. Whether this is technically possible is uncertain, but at a minimum, working out what products can be safely used in the green energy system, including consumer appliances, would help to limit any restrictions to products that pose a significant risk.
The fourth option is polarisation, with countries having to choose which bloc they join for their clean energy technology. This is where the protection of domestic producers through bans, tariffs, incompatible standards, or domestic subsidies is taking us. If the first option is utopian, this option is potentially catastrophic, so it is worth considering if options 2 or 3 offer a viable alternative.
There is much to gain from technology rivalry when it is about pushing forward the frontier of technology, which will be essential to go the last mile on the clean energy transition. But to waste scarce resources – money and talent – on replicating mature technologies doesn't help the world to transition to clean energy. To avoid option 4 and raise the capacity to engage in options 2 or 3, we need to restore research cooperation across, and with, the great powers. The threat from rising global temperatures should be all the justification needed to put aside unhealthy competition and compete to solve the biggest security risk of all – climate change.
About the author
Jenny Gordon
Dr Jenny Gordon is a Nonresident Fellow at the Lowy Institute and also a Honorary Professor at the Centre for Social Research and Methods at the Australian National University.
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