Domestic politics is driving transition to clean energy. Unless you're the US
Clean energy refers to the process of producing electric power using renewable resources such as wind, water, or solar energy. It has been a trendy topic of debate for quite some time now, due to younger generations’ concerns over human and environmental well-being. In order to understand how actions against climate change work (or do not work), we have to acknowledge how states take these decisions.
Different agendas, shared objective Liberal democracies such as the countries in the European Union and North America elect their leaders. Therefore, a leader must represent the ideas of their electorate. In the past twenty to thirty years, climate change and overall deterioration of the environment have captured the attention of the general public and this has put pressure on politicians to promote measures protecting the environment.
In autocratic regimes, the winning coalition’s aim is to always have enough resources to remain in power. Thus, every measure that would prove economically profitable for the government is welcome. Tackling climate change is not only beneficial for the environment, but also for the long-term economic outcomes, as clean energy resources are cheaper than fossil fuels, provided the infrastructure to use them has been already built.
Despite the differences in their background and policy goals, leaders worldwide have acknowledged the need to tackle climate change and global warming, and, as a result, we have come up with the Kyoto protocol (1997) and the Paris climate agreement (2015). These two declarations, signed and ratified by both developed and developing nations, oblige the signatories to substantially reduce the amount of greenhouse-gas emissions. The best way to achieve this goal is the transition to renewable energy. This, however, is not cheap and not easily attainable for everyone.
(Unexpected) champions of clean energy
The European Union, driven mainly by young Europeans’ concerns over the environment, decided to take on the role of a pioneer in renewable energy and indeed, in 2017, it achieved a milestone – for the first time, 17% of its energy came from sun, wind, and biomass. The European Commission has set ambitious goals to produce 50% of Europe’s energy from renewable sources by 2030 and to aim towards completely carbon-free electricity by 2050. The renewables sector in the EU already employs 1.2 million people and in 2013 accounted for €138 billion. Nevertheless, EU investments in the renewable sector are still lower than in China, which held more than 150,000 renewable energy patents as of 2016, followed by the USA and the EU.
As we mentioned, it is not only for the sake of the environment and human well-being that a government may decide to make the switch to renewables. Even without popular demand, high-energy-consumption countries have a strong incentive to substitute fossil fuels with alternative sources. Quickly developing economies like China and India need a lot of energy to fuel their economic progress. Due to the limited amount of fossil fuels available in these countries, they are forced to import both fuel and energy from more resource-rich countries. However, they have plenty of wind, sun, and water, which could prove to be much cheaper alternatives to fossil fuels in the long run and help improve their trade balance. This is why China currently holds a leading position in the production of clean energy. Annually, 24% of Chinese demand for electricity is fueled by renewables. This number may seem relatively small but bearing in mind the enormous amount of power the country consumes, the percentage is quite impressive.
Furthermore, everyone is aware that coal, oil and natural gas reserves aren’t going to last more than a century. Major oil-exporting countries are now investing in renewables to ensure financial stability and sustainable development for generations to follow; the perfect example is Saudi Arabia’s ‘Vision 2030’ – a plan to diversify its economy to not be so heavily dependent on oil. By developing renewable energy sources, oil-exporting countries protect themselves from the volatility of prices and sudden shocks in supply, and the inevitable future when this valuable resource will go extinct.
Trump's politics and the ramifications for China The trend in the past years has been optimistic, but the transition to renewable energy still heavily depends on domestic politics. In January 2017, Donald Trump took office as president of the United States. In his electoral campaign he had promised to protect lower-income Americans by imposing tariffs on foreign goods that have an American alternative and by withdrawing from the Paris climate agreement, which, according to Mr. Trump, had slowed down the development of the US economy. By using cheaper (coal) energy, domestic production would become more affordable and consumers would be more likely to pick American goods over their Asian and European counterparts.
Mr. Trump followed through on his promise to revitalize the American economy and initiated a trade war with China. To make domestic producers more competitive, Mr. Trump artificially increased the price of imported products by imposing high tariffs on Chinese goods with an existing American alternative. China’s economy, dependent on exporting goods to the United States, began to struggle. The country had to find alternative ways of financing and the easiest move was to cut down government subsidies for renewable energy. The Financial Times reports that Chinese investments in clean energy have dropped from $76 billion in the first half of 2017 to $29 billion for the same period of 2019.
A good example to look at is Yingli Solar – one of the pioneers in solar energy. The Chinese company was the biggest producer of solar panels in 2012 and 2013 and exported all over the globe. In China, it was praised as a champion. Last year, the same company was kicked out from the New York Stock Exchange, because its market capitalization had fallen below the minimum $50 million threshold.
As public investments in clean energy dropped, the country's emissions have begun to rise again. And you cannot blame the Chinese – they are simply doing what they are supposed to do to protect their economy. After all, every government looks after its own people first. As Mr. Trump once famously said: “I was elected to represent Pittsburgh, not Paris.”
Europe’s role in the future of clean energy
Due to the ongoing trade war, production has slumped worldwide. This trend has set bearish fears for an upcoming economic recession. As a result, oil prices have been slowly going down during the past year, boosting oil exports worldwide. It goes without saying that no matter how much clean energy resource-rich-countries develop, nothing will replace oil from the throne of profits in the near future. Furthermore, nowadays, it is still cheaper to produce energy from coal and other fossil fuels because they require no further investments in infrastructure - unlike most renewable energy sources.
Therefore, I would say that our generation will claim the initiative of taking on climate change, but the battle will be continued throughout the next decades and Europe’s role in it is crucial. Driven more by ambition rather than profit maximization, the EU is amongst the few that can afford to keep the dream of a green future alive in a setting of economic fear. By setting ambitious goals and working towards achieving them, the Old Continent is setting a good example for everyone else to follow. And when times change and the world economy begins booming again, other big players will rejoin the fight against climate change.