In his first week on the job, as the country’s first Presidential Climate Envoy, John Kerry has moved aggressively to put the U.S. back at the center of global climate discussions, declaring Washington is “proud to be back” at a summit of world leaders.
But the Biden administration’s vow to make “significant investments in climate action” both at home and abroad is likely to create a new friction point with Beijing, even as Washington seeks cooperation with the world’s largest emitter of greenhouse gas.
Speaking to Yahoo Finance, John Morton, former White House senior director for energy and climate change at the National Security Council, said a renewed focus to finance global clean energy projects puts the U.S. in direct competition with Chinese energy investments around the world.
“I think the transition to a global low carbon economy represents the single most predictable and consequential economic transformation in human history,” said Morton, who served under President Barack Obama. “The question is, the speed at which it will occur and who will be the winners and losers from a technology standpoint, a business standpoint, sector standpoint and indeed... national standpoint. So we should see this as a competitive race, and we should adjust our policies accordingly to see this as a race for the future technologies of the world.”
International financing on climate is seen as critical to helping developing countries reach the larger goal of net-zero emissions by the middle of the century, laid out in the Paris Agreement. Many emerging nations have already set ambitious targets, but lack the necessary funding to deliver them. While the U.S. pledged $3 billion to the U.N. Green Climate Fund set up to help vulnerable countries transition to clean energy under former President Obama, it has only delivered a third of that to-date.
Earlier this week, Kerry vowed to “make good” on those pledges, though he didn’t provide specifics.
Meanwhile, China has become the largest financier of global energy projects, largely concentrated on fossil fuels. An analysis by the Brookings Institution found that China’s largest policy banks, the Chinese Development Bank and Chinese Export-Import Bank, financed nearly $200 billion in overseas energy sectors between 2007 and 2016, making China the leading outbound source of funding for electricity generation.
Fossil-fuel power plants developed with Chinese investments account for roughly 3.5% of global annual carbon dioxide emission, according to Boston University’s Global Development Policy Center.
“China has said they are going to do something by 2060, but we don't have a clue really yet how they're going to get there. I hope we can work with China, I hope we'll be able to get China to share a sense of how we can get there sooner than 2060,” Kerry said, at the World Economic Forum earlier this week. “China's done a lot, but they are also funding 70% of the coal-fired power plants around the world in the belt and road initiative.”
‘A critical standalone issue’
Morton, who served as the chief of staff and chief operating officer of the Overseas Private Investment Corporation, now known as the International Development Finance Corporation (DFC), said the agency will be a key vehicle to drive the Biden administration’s climate policy around the world.
“Ninety-five percent of the world's consumers live outside of the borders of the U.S. So, if we want to be competing in the technologies in the markets of the future, we have to be looking outside of our own borders, for growth markets and in areas to sell our hopefully U.S. driven technologies innovations into,” he said. “I expect to see a lot more activity from [the DFC] in these fast-growing, low carbon economies going forward.”
Even as the U.S. looks to counter China, there are concerns that the administration’s ambitions to reach its climate goals will come at the expense of other priorities, including pressuring the Chinese on their trade practices and human rights abuses.
“Those issues will never be traded for anything to do with climate. That’s just not going to happen, but climate is a critical standalone issue,” Kerry said. “China is 30% of the emissions in the world, we are 15% of emissions in the world. You add the EU to that, then you have three entities that are more than 55% or so. So it’s urgent that we find a way to compartmentalize, and move forward.”
Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita