Geopolitics of the Global Energy Transition
Last week the Global Commission on the Geopolitics of Energy Transition at the International Renewable Energy Agency (IRENA) released their report outlining the extent to which renewable energy, storage technology, and increased electrification are likely to disrupt the existing geopolitical world order. In doing so, IRENA demonstrated that there are urgent and credible reasons for the transition to renewable energy, even in the absence of climate change considerations or internalized externalities. This geopolitical and economic case for renewables ought to give pause to even those policymakers who are least receptive to the environmental case for clean energy investment.
The IRENA report puts forth a multi-variable framework for determining which countries are likely to benefit from the energy transition and which countries are likely to experience greater hardship and reduced influence in the coming years. These include social, economic, and political factors that are projected to disrupt the status quo to an extent on par with the industrial revolution.
One of the primary factors in determining a country’s future role in geopolitics is the extent to which the country is currently investing in renewable energy. Early research and implementation of clean energy technologies can secure influential patents, positioning these countries as the next generation of technology and business leaders.
As it stands, China appears in by far the strongest position. Over 45% of global investment in clean energy has occurred in China, and the country holds over 160 thousand renewable energy patents. By comparison, The United States holds just 100 thousand patents, and the entire European Union holds less than 80 thousand. In all, China has added more clean energy manufacturing value than Japan, the United States, Germany, South Korea, Brazil, India, and Canada combined.
Another related factor discussed in this report is the reliance of a country on fossil fuel imports or exports. Just since 2010, the cost of photovoltaics, wind turbines, and lithium ion batteries have dropped by 73%, 22%, and 80% respectively. This phenomenal shift in the market competitiveness of renewable generation will increasingly allow countries such as Japan and members of the European Union to reduce their energy dependency on other nations, lessening their vulnerability to price or supply fluctuations.
Conversely, this new competitive market will likely reduce the global influence of nations such as Saudi Arabia, Indonesia, and Russia where fossil fuel exports represent a significant share of GDP. Reduced demand could ultimately lead to the severing of diplomatic ties. When clean-energy countries lose interest and walk away, today’s fuel-rich countries may become economic vacuums ripe for political and social destabilization. While failure to effectively transition to next-generation energy technology is likely to diminish the social welfare and global standing of a nation, embracing renewables is projected to promote economic stability and increase democratization. Affordable distributed energy and distribution technologies are radically changing energy business models, leading to increased autonomy and empowerment of individuals and communities.
The IRENA report makes one thing abundantly clear: The geopolitical leaders of tomorrow are turning their backs on fossil fuels today.
In the United States, things are moving in a worryingly different direction. Fossil fuel exports are on the rise, standards for clean energy and efficiency are under threat, and our commitment to the Paris Climate Agreement has gone up in smoke. Not only is the United States threatening the health and safety of vulnerable populations and ecosystems with its unrestrained carbon emissions; it is also willfully positioning itself as a late adopter of the clean energy transition.
In doing so, the United States risks losing a considerable share of its existing geopolitical influence and economic strength to countries that demonstrate more adept political and economic foresight. In the long run, being a clean energy leader is a selfish, rather than altruistic, goal for a country to pursue. The current U.S. administration does not seem to grasp this fact and is threatening the country’s future competitiveness as a result. Fortunately, with a new congress at the helm, prospects have never looked better for the Green New Deal, a plan that could set the country back on course.
