How Trump's COP21 Promise Became China's Opportunity

How Trump's COP21 Promise Became China's Opportunity
AP Photo/Rich Pedroncelli, file

The world was waiting with baited breath to see what Donald Trump would do with the Paris climate agreement, but the reasons that ultimately drove him to abandon it are overwhelmingly domestic. As a candidate, his energy platform centered on the ideas that emissions reductions efforts hurt the American economy, “kill jobs”, and weaken the country’s energy security. After months of deliberation, the now-president decided there is no way to reconcile those “America First” policies with climate commitments that dictate terms to the US energy industry.

It must have come as a surprise, then, when fossil fuel companies came together to lobby the Trump White House not to tear up the pact. A pro-Paris alliance that included Cheniere Energy, Exxon Mobil, and even coal companies like Cloud Peak and Peabody pleaded with the Trump administration in support of the agreement before he decided to withdraw.

Was this a sudden outburst of environmentalist altruism? Not quite.

Those companies, and especially America’s struggling coal industry, are painfully aware that new emissions reductions technologies are the only way to remain competitive in the global marketplace. The Paris agreement carves out an important place for these, especially carbon capture and storage (CCS) and utilization (CCU). According to the International Energy Agency, at least 14% of the emissions reductions required to meet the COP21’s benchmarks must come from carbon capture, meaning the market for it is worth billions.

With the US out of the Paris Accords, developing nations are set to lose the billions Washington would have contributed to the Green Climate Fund. With that windfall now off the table, these countries will probably expand their reliance on their natural resources (such as coal), hoping to obtain the Western technology to develop it – currently, only the U.S., Canada and Norway have large-scale CCS projects in operation.

Much of the demand for such technology is in Asia, where coal remains the cornerstone of energy grids and development efforts even as the industry struggles in the United States. Both China and India have decided the best way to balance their energy needs with COP21 climate commitments is to reduce emissions while maintaining coal-fired plants as part of a balanced energy mix. Many of their neighbors will almost certainly follow suit.

That is why American coal companies see developing and exporting carbon capture to Asia’s emerging markets as their last, best hope to remain competitive and expand. Key political figures from coal states, like Senator Joe Manchin of West Virginia, have pushed this view as well. Trump himself promised to support developing carbon capture when he was a candidate campaigning on a “clean coal” platform. His Secretary of Energy, Rick Perry, helped inaugurate the government-backed Petra Nova carbon capture project in Texas less than two months ago.

But Beijing is also pressing ahead with its own clean coal research, sparking fears that American companies will be left completely behind. If this narrative sounds familiar, it is because it happened before. Over the past ten years, China surpassed both the United States and the rest of the world in manufacturing wind and solar energy equipment, crowding out American and European competitors. With carbon capture technologies added to that mix, China could soon be positioned as the world’s indispensable clean energy broker, at the direct expense of replacing the United States.

For all the COP21’s insistence on international cooperation, competition in the energy sector continues in true zero-sum fashion. When the U.S. wanes, China waxes. Beijing is already set to outpace North America in large-scale CCS projects with a projected 330 GW of CCS-compatible coal capacity online by 2020. The two countries have thus far been working together to make carbon-capture technology feasible and economically viable on a large scale, with the Obama administration creating the U.S.-China Clean Energy Research Center to that end. American research may take a step back under Trump, but the growing middle-class environmentalist movement and Communist Party fears of grassroots backlash over pollution are keeping “clean coal” at the heart of Chinese energy policy.

As a result, it’s Chinese and not American companies that are primed to dominate the global market for carbon capture. The largest of those is likely India, which is striving to cut carbon emissions without having to stomach cuts to energy production. A major component of India’s answer has been to take old, inefficient coal plants and upgrade them with “supercritical” plants that promise greater efficiency and lower emissions; 40 GW worth of coal plants are currently undergoing this upgrade.

Energy minister Piyush Goyal has repeatedly stressed that India needs a stable baseload of coal-fired energy to make up for the sporadic nature of renewables, and that Indian consumers cannot be expected to forgo coal power when Western economies used it to develop for centuries. Those policies make India a natural customer for carbon capture technologies, and disagreement between India and China over investment reciprocity would further make it an excellent market for American coal companies as the technology progresses.

Then again, that ball isn’t entirely in America’s court. With its One Belt, One Road (OBOR) project, Xi Jinping and his economic planners are proactively creating captive markets for Chinese energy companies in both Asia and Africa. Key cogs of OBOR, like Pakistan, are already partnering with China on major coal energy projects. American companies will have to work overtime to grab a slice of the cake. If Donald Trump wants to keep that from happening, he should remember that withdrawing from the COP21 won’t undo the market forces it has helped unleash.

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