With help from Jesse Naranjo and Lorraine Woellert
THE GEOPOLITICS OF RENEWABLES—It’s a dirty truth. The U.S path to clean energy goes straight through China.
President Joe Biden’s plan to green the economy by 2035 will require cooperation from America’s largest trading partner, which controls a vast share of the minerals used in electric batteries, the cheap materials that make up solar panels and the guts of wind turbines.
China has locked up resources even beyond its borders, buying mining rights in Africa and South America and solar manufacturers in Malaysia. Subsidies and social incentives — including free parking and other privileges for electric vehicle owners — have made it the world’s largest EV market. And while the U.S. fracking boom played out, China was investing in solar.
“China has really put a clear flag in the ground that clean energy is going to be their version of natural gas,” Miranda Ballentine, CEO of the Renewable Energy Buyers Alliance, said in an interview.
But China’s green-tech leapfrogging has come at a heavy price: rampant forced labor, unchecked pollution and great geopolitical risk. Biden needs China, but his green future can’t afford the social and environmental price that China demands.
“Solar panels are the next crude oil, and allowing China to dominate solar manufacturing is the equivalent of establishing an electro-state on the lines of OPEC,” said Samantha Sloan, a vice president with First Solar, a U.S.-based manufacturer with limited exposure to China. “It’s time that conversations about solar go beyond just cost, because the real cost of buying solar from Chinese companies may include needing to look the other way on social and environmental issues.”
Biden has moved quickly to harden the U.S. line on China’s human rights abuses and trade and technology policy, in part by seeking to mount a pressure campaign with other world leaders. Chinese leader Xi Jinping has been equally aggressive, warning that any attempt to freeze China out of global networks risks igniting a cold war.
But Xi on Monday also offered an olive branch on climate policy, calling for multilateral cooperation during a speech at the World Economic Forum.
“When the interests of the entire humanity are at stake, China must step forward, take action and get the job done,” Xi said.
The U.S. solar industry has an uncomfortable dependency on China and is linked to forced labor in the Xinjiang region. To boost U.S. production, it wants Biden to leverage new tax credits and federal purchasing power. The unions that helped Biden win election want these benefits, too, but with labor standards attached.
“We want a diverse solar supply chain,” said John Smirnow, general counsel of the Solar Energy Industries Association. “One solution would be to grow different aspects of the supply chain here in the United States.”
But in a hypercompetitive global economy, the U.S. can’t go it alone on renewable energy without a big, expensive industrial plan to bring solar, wind and battery manufacturing home. Or Biden can look to politically risky technologies to meet his 2035 clean power goals, including nuclear energy carbon capture.
“There are trade-offs on all this,” said Tom Duesterberg, a senior fellow at the Hudson Institute and a former Commerce Department assistant secretary under President George H.W. Bush. “It will cost us more than the Chinese to produce solar cells. We could agree to pay that price, but it will be more expensive and take a long time. If tensions get bad with China, they’ve proven in the past that they are willing to cut off supplies.”
Easier said than done. The Biden administration on Monday brought the purchasing power of the federal government and the military to bear, ordering agencies to boost their use of domestically sourced goods and materials. The order also calls for replacing the federal fleet with electric vehicles.
It’s something, but buy-American policies haven’t been manufacturing game changers in the past.
“Ultimately, bringing manufacturing back to the U.S. would require a rethink of economic policy,” said Martijn Rasser, a senior fellow at the bipartisan Center for a New American Security. “It’s difficult to do in a free-market approach, and I question whether there’s appetite on Capitol Hill.”
In the meantime: SEIA is building a way to track its supply chain. By the end of June, most products the U.S. imports will be free of components from Xinjiang, Smirnow said.
Biden is pulling no punches on China. Treasury Secretary Janet Yellen told the Senate Finance Committee that the administration will “use a full array of tools to counter China’s abusive economic practices and hold Beijing accountable.”
And incoming Secretary of State Tony Blinken told senators that President Donald Trump had it right on China. The Trump administration’s declaration that Beijing’s campaign of imprisonment, indoctrination, forced education and labor, and forced sterilization of Muslims in Xinjiang constituted genocide.
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DAVOS—Well, not really. More like faux Davos. The World Economic Forum is meeting virtually this week, but that hasn’t slowed the flood of feel-good announcements.
On Monday, the group announced an effort to eradicate racism from the workplace. The coalition counts Bank of America, BlackRock, Deutsche Bank, Mastercard, McKinsey, LinkedIn, Google, PayPal, Microsoft, Procter & Gamble and Uber among its 48 founding members. Companies will put racial and ethnic equity on their board agendas and put in place a long-term strategy for becoming “an anti-racist organization.”
One focus is combating anti-Blackness, which the forum calls one of the most pervasive forms of racism in the workplace.
Astonishing fact: In the Fortune 500’s 62 years, there have been only 15 Black CEOs.
China, the U.S. and India could be big winners in job training. A report from WEF and PwC found that investing in skills training could boost global GDP by $6.5 trillion and create 5.3 million jobs by 2030. Economies with the biggest skills gaps and most potential to improve productivity would see the biggest upside. China GDP would get an almost $2 trillion boost over the next decade and the U.S. would clock in as the highest job-creator.
FOSSIL FUELS LOSE AGAIN—Three of New York City’s five pension funds will shed $4 billion worth of fossil fuel investments, in what Mayor Bill de Blasio and Comptroller Scott Stringer called one of the world’s largest divestments.
Pensions for teachers, school administrators and city employees, the largest funds in the nearly $240 billion system, approved the divestments. Police and fire department pension officials have yet to vote.
One firm hired to study New York City’s fossil fuel investments found that the bets weren’t moneymakers. Meketa Investment Group recommended divesting, setting the stage for this week’s vote, POLITICO’s New York Playbook reports.
NYC in 2018 was the first major U.S. city to pledge to shift pension funds away from fossil fuels, including coal, oil and gas. Hundreds of other governments and institutions have since made similar promises, including the California Public Employees’ Retirement System and pension funds in the U.K., Ireland, Sweden and Australia.
AND AGAIN—S&P Global Ratings downgraded oil and gas producers, including Chevron Corp., Exxon Mobil Corp. and Total SE, putting nine companies on watch with negative implications.
LARRY FINK SPEAKS—BlackRock, the world’s largest asset manager, is aiming for a net-zero portfolio by 2050 and threatened to divest from firms that failed to act.
In his annual letter to clients, CEO Larry Fink said the firm would impose “heightened scrutiny” on companies that fall short, including flagging holdings “for potential exit in our discretionary active portfolios.” Translation: Sell!
The bulk of BlackRock’s investments, however, are passive, meaning the investment giant has little say over climate pledges for a large swath of its portfolio.
BlackRock also will begin tracking Scope 3 emissions — pollution caused by end users of a product — of its entire investment portfolio.
The reviews are in: “This doesn’t rise to the visionary leadership we need from the world’s largest investor in coal, oil and gas and deforestation-linked commodities,” Gaurav Madan, senior forests and lands campaigner at Friends of the Earth, told POLITICO’s Zack Colman.
GENTLE REMINDER—After the deadly assault on the U.S. Capitol, the Center for Political Accountability sent S&P 500 companies a copy of its model code of corporate conduct, a framework it developed in partnership with the Wharton School’s Zicklin Center for Business Ethics Research. The watchdog group wants companies to disclose their funding to nonprofit advocacy groups, trade associations and political dark money outfits. “We’re pressing this hard,” said CPA’s Bruce Freed.
ESG JOINS THE CLOUD—Salesforce has added a carbon emissions tracking function to its software platform. Sustainability Cloud eventually will expand into other ESG data including water use, waste, and diversity and inclusion. Accenture will help its C-suite clients use the Salesforce platform. The goal is to make it easier for companies to track progress toward ESG goals, said Suzanne DiBianca, chief impact officer at Salesforce.
— Billionaire bonanza. The pandemic has minted 46 new billionaires and increased the collective wealth of all of America’s billionaires by $1.1 trillion in just 10 months — enough to pay for all the aid for working families Biden proposed in his Covid-19 relief package. Americans for Tax Fairness and the Institute for Policy Studies did the math, though it started with the market bottom in March 2020.
— U.S. emergency management officials want to free up $10 billion for climate adaptation, The New York Times reports. The FEMA plan would boost climate resiliency funding sixfold, but requires approval from the White House budget office.
— Tax carbon, boost revenue. Carbon pricing and fossil fuel subsidy reform can be powerful tools to spur economic recovery in countries like Nigeria, Uganda, the Philippines and Guatemala, according to a report from OECD.
