That risk is due to a number of factors, but one glaring reason is the limited availability or mining of these minerals in the United States. That is increasingly problematic as demand for these minerals rises, considering the role they play in building a green economy globally.

In contrast, across the Atlantic, Africa is home to over 30 percent of the world’s known reserves of critical minerals. While international interest and investment in the African critical-minerals industry have been lagging, it is rapidly picking up; this is welcome news for resource-rich African nations.

But history shows that mining interest and investment—even if welcome—can have inadvertent negative effects. In recent years, mines in the Democratic Republic of Congo (DRC), Zambia, and South Africa have been found to be polluting waterways, contributing to acid rain, and poisoning residents. Thus, the US public and private sectors should develop strategies surrounding mining projects that ensure African workers’ health is protected, the environment is not damaged, and the opinions of local communities are sought out, heard, and respected.

Acknowledge the checkered history of mining in Africa

It is important for mining companies and foreign governments to be cognizant of the historical context that surrounds the African mining industry.

For example, in South Africa in the nineteenth century, the discovery of diamonds and gold brought Africans and Europeans alike to mining areas such as the Witwatersrand and mining towns such as Kimberley. After the initial boom, the South African government passed the Natives Land Act in 1913, which restricted Black Africans from buying or occupying land outside of specified areas, except as employees. This policy restricted many Africans from benefiting from the proceeds of mining minerals, and for these people, their main access to any financial gain from the mines came only from working as miners.

While the legislation was repealed in 1991—and others like it are firmly in Africa’s past—it created the conditions for a variety of socioeconomic challenges, including poverty, inequality, and landlessness. Thus, as the US public and private sectors look to get more involved on the continent with mining projects, they should integrate into their strategies a plan for increasing economic opportunity for local communities.

The US government seems to be headed in this direction already with its support for and investment in the Lobito Corridor project, which aims to update the infrastructure along an economic route stretching from the DRC and Zambia to an Angolan port in order to improve the flow of mining-related trade and also to create jobs for local communities. Concerns still remain, but this form of holistic engagement is essential to ensuring mutual prosperity in mining projects.

Don’t exacerbate the “resource curse”

Many African countries have been associated with a “resource curse,” a term that refers to the failure of many resource-rich countries to fully benefit from their natural resources.

For example, Cabo Delgado, a small province in Mozambique’s north, is one of the country’s poorest regions, despite the region’s many natural resources. This has led many in Cabo Delgado to feel marginalized and angry at the central government. A 2011 discovery of a massive natural gas field off the northeastern coast of Mozambique further exacerbated this dissatisfaction. Specifically, youth in the region felt sidelined as foreigners and Mozambicans from elsewhere in the country benefited from the jobs and wealth associated with the discovery.

As the government formalized the mining sector and centralized control of it, artisanal miners were displaced. A widely held sense of injustice gave rise to an Islamist militant group, Mozambique’s al-Shabaab, which took advantage of these grievances to gain popularity among youth in the region. The activities of various armed groups in Cabo Delgado have resulted in around five thousand deaths and the displacement of 582,000 people since 2017.  

In conducting mining projects on the continent, the US public and private sector should add to their strategies specific plans to ensure that the benefits of natural-resource endowment reach local communities.

Botswana provides a positive example. In recent years, the country—one of the world’s leading producers of diamonds and also among the least corrupt on the African continent—has developed a “pro-equity based extractive sector strategy,” taking revenues from extractive sectors and investing them in health and education infrastructure and also into long-term savings through an asset fund. There are also various mechanisms and institutions set up to prevent or catch corruption, such as a constitutionally independent body in charge of cases of corruption. Botswana shows that strong business and the fight against corruption are perfectly compatible.

As part of any strategy, US stakeholders should support African countries in their anti-corruption endeavors and empower human-rights organizations that risk much to protect the resources of these countries and ensure benefits from mining reach local communities. Doing so would encourage African countries to take corruption issues seriously and, in the long run, would create a more attractive environment for sustainable investments. That contradicts the naive belief of some people—such as Israeli businessman Dan Gertler, who was sanctioned by the Trump administration for what it called “corrupt mining and oil deals” in the DRC (he has denied wrongdoing)—that lifting sanctions would be a way to bring back foreign investors.

Strategize for stability

Over time, mismanaged mining projects have contributed to instability, violence, and conflict across Africa.

That dynamic can be seen not only in the Mozambique case but also in Kivu, a region in the DRC’s east. The DRC is central to the production of several critical minerals. For example, as much as 70 percent of global cobalt comes from the DRC. A conflict has gripped the region for almost three decades, and armed groups have wrestled control of mining areas to finance their operations. The DRC, Rwanda, Uganda, and China have often put their interests ahead of those of the residents, who are hoping to see their quality of life improve. Currently, six million people are internally displaced within the DRC, and since the start of the conflict in 1996, six million people have been killed.

With this history in mind, US mining companies with projects on the continent must strategize on how to limit the role mining plays in exacerbating conflicts and tensions. They can do that by bringing more of the supply chain—specifically, value-adding stages of critical-mineral processing—to the continent.

Industrializing the mineral sector in Africa

Historically, mining in Africa has been exploited by foreign partners. China, for example, controls 80 percent of the world’s raw mineral refining and owns fifteen of the seventeen cobalt mining operations in the DRC.

But the US public and private sector can change this status quo by bringing more of the value-adding stages of critical-mineral processing to the African continent, rather than extracting the minerals and bringing them immediately overseas for processing. Not only would this appeal to local populations—as it would encourage industrialization—but employing this different strategy would offer the United States a comparative advantage over China.

A strategy that brings value-adding steps of the value chain to the continent should promote local job creation, prioritize environmental protection in areas with high floral and animal biodiversity, and protect workers’ health. It should also prioritize the deployment of cleaner mining techniques (including those mobilizing artificial intelligence) and encourage countries to adopt a tax that allows for a more fair and just distribution of revenues from mining.

Economic communities—such as the Southern African Development Community—should also play a role in promoting regional value chains. Through such groupings, countries should take advantage of opportunities to share information and data, build capacities, and harmonize legal frameworks.

Stakeholders from the United States must remember that this is about more than curbing Chinese and Russian influence on the continent; rather, it is about avoiding past wrongdoings on the continent, by supporting local communities and preventing mining operations from contributing to various forms of instability and conflict.  

But there’s also a bigger picture to keep in mind: By getting mining investment right, the United States can set a new precedent for its collaboration with African countries in other areas, such as in health, security, and technology.

Rama Yade is senior director of the Atlantic Council’s Africa Center and senior fellow for the Europe Center. She is also a professor of African affairs at Mohammed VI Polytechnic University in Morocco and at Sciences Po Paris.

Sibi Nyaoga is a program assistant for the Atlantic Council’s Africa Center where he supports the center’s work on critical minerals and migration. 

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While previous G20 meetings have been noteworthy for their disagreements, Brazil has emphasized substance and consensus over geopolitics during its G20 presidency. Felipe Hees, the Brazilian diplomat and sous-sherpa of this year’s G20 presidency, explained this strategy on July 25 at an Atlantic Council conference on the sidelines of the meeting. Brasília, he said, has sought to acknowledge fundamental disagreements on geopolitics between some members, and then to sidestep them entirely at the ministerial level. The big question now is: How long can this approach last?

So far, Brazilian officials have chosen to focus on economic development issues that already enjoy widespread support. Last week, this approach resulted in one of the few joint G20 ministerial-level communiqués in the past two years. Released on July 26, this communiqué displays G20 members’ alignment on launching the Global Alliance against Hunger and Poverty under the Brazilian presidency. It’s an important topic for the host country, since Brazil is the world’s leading producer of soybeans, corn, and meat, and Brazilian President Luiz Inácio Lula da Silva has emphasized his country’s role in alleviating global food insecurity. At the same time, the issue has a wider resonance. At the Atlantic Council conference, Cindy McCain, executive director of the World Food Program, emphasized that “food security is a national security issue, and it should be labeled as one.”

Climate finance and the energy transition were at the forefront in Rio last week as well. Discussions focused on how to mobilize the public and private sector in achieving climate goals. At the Atlantic Council’s conference, Renata Amaral, the Brazilian secretary for international affairs and development in the Ministry of Planning and Budget, formally called for technical assistance from multilateral development banks for catastrophic weather events, such as the floods in southern Brazil this May. Immediately following the summit, US Treasury Secretary Janet Yellen headed to Belém, the capital city of the northern Brazilian province Pará. Located near the mouth of the Amazon River, Belém was a symbolic choice for the unveiling of the US Treasury’s Amazon Region Initiative Against Illicit Finance, which is intended to help combat nature crimes.

Another issue that garnered attention last week was wealth inequality, which the Brazilian president spotlighted in his speech on June 24. “The poor have been ignored by governments and by wealthy sectors of society,” he said. Despite disagreements on whether the G20 is the right forum for the issue, it issued the first ever ministerial declaration on taxation. While Brazil’s ambition was to move the needle on a 2 percent global wealth tax, the declaration simply said that ultra-high-net-worth individuals must pay their fair share in taxes. While this fell short of Brazil’s hopes on this issue, the meetings in Rio have done more on building consensus than the past two presidencies, which have been rife with outbursts over geopolitical issues between member states.

In 2022, the then G20 president, Indonesia, saw its plan to build international cooperation for the post-pandemic recovery paralyzed by Russia’s full-scale invasion of Ukraine in February. When finance ministers and foreign ministers met in April and July of the year, officials from Russia and from the United States and Europe walked out of the room when their counterparts spoke. Ministers failed to agree on a communiqué, and negotiations on climate and education also broke down over criticisms of the war. Ahead of the leaders’ summit in November 2022, Western leaders balked at the thought of sharing a table with Russian President Vladimir Putin, who ultimately did not attend the summit. In the end, the leaders could only agree to a declaration that was a broad, noncommittal summary of approaches to addressing global challenges.

Last year, India focused its G20 presidency on depoliticizing the issue of the global supply of food, fertilizers, and fuels, as well as on addressing climate change and restoring the foundations of negotiations at the forum. Its strategy was to move geopolitics off center stage by highlighting perspectives from the “Global South,” including formally adding the African Union as a full member, and thus shaping the platform as an action and communication channel between advanced economies and emerging markets.

This was difficult. Shortly into India’s presidency, Russia and China withdrew their support for the text in the Bali statement on Ukraine. At the technical level, none of the ministerial meetings produced a joint communiqué, and New Delhi was forced to issue chairs’ statements instead. Since the leaders’ summit in New Delhi, the outbreak of war between Israel and Hamas in October 2023 has made the job of navigating geopolitical tensions all the more difficult for Brazil.

While the Russian and Chinese leaders did not attend last year’s leaders’ summit, the New Delhi Declaration was nevertheless bolder and more specific than its Bali predecessor. It set the agenda for the G20 for the years ahead but offered few specifics on how to achieve these goals.

Will Brazil’s strategy of sidestepping geopolitics work at the leaders’ summit scheduled for November 18-19 in Rio? Finance ministers and central bank governors can ignore geopolitics; presidents and prime ministers often cannot. If Brasília concludes technical negotiations on the various proposals ahead of the leaders’ summit, then consensus-building at the gathering will be easier, as geopolitics will remain just an elephant in the room.

If Brazil is successful, it can end the stalemate that the G20 has found itself in and remake it into a relevant economic coordination body—one that can adequately address the goals of its emerging market and advanced economy members. If Brazilian officials are not successful, however, the forum’s relevance may begin to wane.

It has been in the interest of the last few G20 presidencies to keep up the balancing act between the United States, China, and Russia. Moreover, it is likely that South Africa will follow this approach as it takes on its presidency in 2025. As many of the discussions in Rio noted, however, what happens in the US presidential elections this November could determine both the relevance and the tone of the G20 meetings going forward.

Ananya Kumar is the deputy director, future of money at the Atlantic Council’s GeoEconomics Center.

Mrugank Bhusari is assistant director at the Atlantic Council’s GeoEconomics Center.

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A mismatch between supply security, climate ambition, and grid capacity

Upgrading electricity grids to enable decarbonization is a worldwide issue. The International Energy Agency (IEA) estimates that global grid investments must double to reach $600 billion per year by 2030 to meet nationally set climate objectives. In Europe, a recent study by Eurelectric suggests that the EU and Norway must invest €67 billion in grids per year to realize carbon neutrality by 2050.  

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As the EU aims to reach a 42.5 percent—ideally 45 percent—share for renewables in its total energy mix by 2030, grid capacity must keep pace with rapidly growing clean energy generation.

Europe overall, including the UK, is making progress on renewable deployment, but a mismatch in grid capacity is already causing significant challenges. In Britain, for example, the connection queue for generation, storage, or energy-consuming projects waiting to be connected to the grid is projected to reach 800 gigawatts by the end of 2024. Grid congestion is also a major problem in the Netherlands, with industry and households asked to reduce demand at peak times to avoid blackouts. In Romania, a boom in state-backed prosumers without adequate storage facilities is placing significant stress on the grid.

Building the grid of the future

Currently, cross-border interconnections within the EU limit the amount of electricity that can be imported or exported, creating significant price discrepancies between neighboring states. Expected increases in electricity demand due to electrification will only exacerbate these distortions.

Enabling greater cross-border electricity trade is a must for solidifying energy security and solidarity across Europe. New high-voltage transmission lines could convert intermittent renewable generation into more baseload-like output by quickly moving excess clean electricity to regions in deficit.

To this end, debate continues in Brussels over creating an EU-wide supergrid that would enable high volumes of electricity to be transported across the continent. This would help level energy prices across borders, reduce equity concerns, and improve supply security over the short and long term.

Furthermore, the difficulties in predicting renewable energy generation and adapting consumption accordingly requires the digital transformation of energy grids. Digitalization can further integrate renewable generation through smart meters and smart appliances that can accurately forecast output and match it with flexible electricity consumption. This can help minimize grid congestion and enhance resilience in the face of intermittency.

Additionally, new sensor and software platforms can enable predictive maintenance that reduces the time infrastructure is out of service. Digital twins—virtual representations of physical power grids—use data analytics to model various scenarios, leading to higher operational efficiency, increased asset lifespan, and optimized energy flow. While a highly digitalized energy grid may also increase cyber threats, other sectors have demonstrated over decades that these threats can be mitigated through strategies that include rapid incident reporting to limit malware spreading and investment in threats monitoring systems.

The unavoidable but necessary cost

Upgrading and extending the grid would translate into higher tariffs paid by European end-users, who have already struggled with energy affordability. A spike in network tariffs could lead to negative social, economic, and—eventually—political consequences, as was seen during EU-wide protests in 2022, triggered by increasing energy bills.

Although these investments will impose direct and indirect costs on consumers in the short term, they will unlock over the medium and long term increased electrification and pass decreasing renewable generation costs onto rate payers. Today, onshore wind and solar photovoltaic energy are cheaper than new fossil fuel plants almost everywhere. The average cost of variable renewable energy generation is expected to drop further, from a levelized cost of electricity of $155 per megawatt hour in 2010 to $60 in 2028.

To finance these upgrades while minimizing the negative impacts on rate payers, new earmarked EU funds could complement tariff-based network revenues. While this has not been done before in advanced economies with complex electricity systems, policy innovation is required to keep the EU’s ambitious 2030 targets alive. 

Not investing in transmission and distribution would jeopardize both European energy security and climate ambitions. By stalling deployment of renewable generation and thereby the electrification of heating and transport, failing to invest in the European grid would prolong high levels of fossil fuel imports. This would keep energy bills high, leave Europe exposed to fossil fuel supply insecurity, and place at risk Europe’s social and political fabric.

Bottlenecks to be addressed

Beyond financing challenges, building power infrastructure is notably slow. In Europe in particular, permitting procedures cause significant delays. The IEA highlights that the United States and EU have the longest deployment times for distribution—around three years—and transmission lines—between four and twelve years. The COVID-19 pandemic has made the problem worse, creating high demand while constricting supply for power grid components. 

Regulatory frameworks are also constraining grid development. While the regulation of these natural monopolies has evolved in Europe to liberalize and unbundle the sector, national regulatory authorities need to deal with greater uncertainty; for instance, the rate of electrification and improvements on energy efficiency are difficult to predict. They will need to manage increased investment while encouraging innovation and keeping tariffs in check. Energy regulators must learn from previous experience, respond to current challenges, and anticipate future trends—all at the same time. 

The overlooked factor in European energy security

Energy security in Europe hinges on the state of its power grids. As reliance on renewable energy and electrification grows, existing grid infrastructure is struggling to keep pace, causing congestion and delays. Substantial investments in grid upgrades and modernization are essential for integrating renewables, accelerating the electrification of heating and transportation, building technical redundancies to enhance resilience, combatting cyber threats, and protecting against extreme weather events.

While difficult to sell politically, investments in grid infrastructure will ultimately pay off in lower energy bills for consumers and industry, compared to a business-as-usual scenario. Failing to achieve these objectives will imperil Europe’s security of supply and its capacity to build a resilient energy future.

Andrei Covatariu is a Brussels-based energy expert. He is a senior research associate at Energy Policy Group (EPG) and a research fellow at the Centre on Regulation in Europe (CERRE). This article reflects his personal opinion. 

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What can be expected from a von der Leyen 2.0? Ahead of her confirmation, she laid out a raft of proposals in her political guidelines for the next Commission term—a combined effort to outline her vision and win over votes. The guidelines prioritize:

1. Building a more competitive Europe that balances regulation and innovation that facilitates Europe’s green transition, 
2. Boosting the EU’s defense ambitions, 
3. Pushing social and economic policies such as affordable housing, 
4. Sustaining agriculture and environmental policies, 
5. Protecting Europe’s democracy, and 
6. Standing up for Europe’s global and geopolitical interests.

In practice, this means her next term will mean more of a central and active role for the Commission—and for von der Leyen. But there will also likely be more roadblocks from the European Council and Parliament.

Start with her leadership style. In her first term, von der Leyen turned the Commission into the most important arm inside the EU at a time when crises came new and often. She served as the EU’s chief decision maker and negotiator during the COVID-19 crisis, helped coordinate Europe’s response to Russia’s full-scale invasion of Ukraine, and shaped the EU’s economic de-risking strategy and general hawkishness toward China, serving as Europe’s “bad cop” standing up to Beijing’s coercive and unfair trade practices. The grumblings of an overstepping and power-hungry Commission president from other arms of the EU and national capitals aside, European leaders still looked to the Commission and von der Leyen to take action.

The Commission’s role was boosted by its policy successes too. Her first term oversaw the adoption of major rules on the digital and green transitions. The EU pushed through world-leading digital regulations on artificial intelligence, online content moderation, and platform competition, and it incentivized semiconductor manufacturing. She also prioritized green policies to reduce emissions, including the Carbon Border Adjustment Mechanism and setting new emission reduction targets for cars, shipping, and factories.

For her second term, von der Leyen will seek to pick up where she left off. The Commission will also look to build itself a stronger role in the traditional defense and the economic security agendas, with an eye to boosting Europe’s defense capabilities against Russia and de-risking from China. Von der Leyen’s focus on a competitiveness agenda will push for greater innovation and industrial support while furthering the green transition. On Thursday, von der Leyen promised a “European competitiveness fund” and a “clean industrial deal” within the first hundred days of the Commission’s next mandate, along with greater investment in energy infrastructure and technologies. This will all come with a price tag, and more responsibility for the Commission.

As a consequence of a busy 2019-2024 legislative cycle, von der Leyen and her Commission must now see through a raft of new rules. On digital policy alone, the to-do list is a tall order. The EU is standing up new offices and hiring a new army of competition lawyers, boosting the already massive size and scope of the Commission.

But there will be limits to von der Leyen’s ambition as member states and the parliament will look to exercise their own power.

Europe’s political center is not what it was in 2019, and EU members will want their influence felt. Von der Leyen will have to contend with a growing number of populist leaders around the table at Council meetings. More far-right governments may pop up over the next five years, including in major countries such as France as Marine Le Pen’s National Rally gets ever closer to power. And as the Commission tries to take on a bigger role in traditional member-state driven policies, such as security and defense, von der Leyen will need to deal with more engaged member states looking to exact concessions or carveouts, or to wield their own influence at the EU level.

Far- and hard-right groups in the European Parliament are also on the rise, and they are looking to make a mark. In a shift from her first term, emboldened hard-right politicians are more eager to influence EU policy rather than just play spoiler to it. The growing number and influence of far-right and hard-right groups will likely add extra complexity to the legislative process, and legislation may need to pass with ad hoc coalitions rather than the tradition of grand coalitions of parliaments past.

Greater influence on the right may hamper the Commission’s regulatory ambition. Von der Leyen promised she would continue the green transition, but the EU’s green rules have already become a political target. The platforms of the center-right European People’s Party (EPP), von der Leyen’s own group, and the further right European Conservatives and Reformists, both have peppered in objections to onerous new regulations, especially those associated with the green transition. And the competitiveness debate is in large part spurred on by this backlash to the Commission’s regulatory appetite. This may be difficult for the Commission. Institutionally, the Commission is designed to present new regulations and proposals. It is the only arm inside the EU that can. But that desire will be a point of friction with the aversion among member states and Parliament to new, seemingly onerous, rules.

Von der Leyen will face challenges from beyond Europe, too. “We have entered an age of geostrategic rivalries,” notes the policy guidelines. To the east, Beijing will continue to try to split Europe and poison the EU’s de-risking agenda just as it is starting to take off. And supporting Ukraine against Russia’s full-scale invasion will require sustained attention and funds.

To the west, von der Leyen cannot ignore the upcoming US elections. A transatlanticist at heart, she pushed the EU closer together with the United States in her first term—in large part benefiting from a new EU-friendly US administration. She will likely face an uphill battle in strengthening transatlantic ties in the event of a second Trump administration. “They treat us very badly,” former President Donald Trump said to Bloomberg News when asked about the European Union on June 25.

Von der Leyen’s confirmation this week goes a long way already to set up the EU for success and avoids an own goal for team Europe. Rejecting her would have forced the European Council back to the drawing board to pick a new—and likely weaker—appointee, wasting more time on internal bickering and politicking when predictability, not chaos, is critical. It’s not hard to picture the jubilee from Beijing, taunts from Moscow, and even snide comments from Washington about EU dysfunction in the face of a no vote. In the words of Greek Commissioner Margaritis Schinas (and von der Leyen ally) on her appointment, “There is no plan B.” It is a good thing plan A worked.

James Batchik is an associate director at the Atlantic Council’s Europe Center.

The post What to expect from Ursula von der Leyen’s second term appeared first on Atlantic Council.

The higher demand for critical minerals is expected to cause a significant expansion in the extraction and production of an array of mineral resources. For example, the World Economic Forum projects that the production of minerals including graphite, cobalt, and lithium could increase by nearly 500 percent by 2050 to meet the growing demand for clean-energy technologies. Estimated to hold approximately 30 percent of the volume of critical-mineral reserves, the African continent is situated at the very center of the energy transition.

A considerable amount of minerals—for example, 25 percent of tin and 26 percent of tantalum production—is sourced by artisanal and small-scale mining (ASM): low-tech, labor-intensive mining operations in which workers (largely unskilled labor) use rudimentary tools and techniques to access mineral ore. ASM is an important source of rural employment in Sub-Saharan Africa, with an estimated ten million people in the region working as artisanal and small-scale miners—sourcing critical minerals but also other minerals such as gold. These workers are often driven to the sector by poverty. At least sixty million other individuals facilitate these informal supply chains.

However, many of these artisanal and small-scale miners work informally and face harsh conditions. Before critical-mineral production ramps up even further, African communities, stakeholders, and governments must take steps to formalize these workers—and the international community, including the United States, should help.

What is the problem?

In contrast with ASM, large-scale mining (LSM) is industrial and long-term, utilizing heavy machinery to extract resources. Furthermore, LSM has more geological information available to it and better access to capital and finance. Most importantly, LSM generally operates within the rules of law and adheres to international standards and regulations. It is accompanied by many challenges, however, including causing ecological and habitat damage; polluting the water, air, and soil; and threatening human health. Even where mining operations are conducted legally and formally, they still pose significant environmental and socioeconomic problems.

Although vastly different types of mining, ASM and LSM often take place in overlapping spaces, with ASM operations appearing on the periphery of larger industrial sites. Artisanal miners frequently live and work in areas earmarked for large-scale mining projects, blurring the line between the two. This is exemplified by the presence of illicit or licit networks of middlemen who transport ore from ASM sites to LSM companies and processing facilities. Middlemen often aggregate minerals from various sources, including both ASM and LSM operations, making it especially difficult to trace the origin of the minerals. The fragmented and opaque nature of the mineral supply chain complicates the traceability of products from upstream suppliers to downstream companies.  

There are many challenges associated with artisanal mining. At least 90 percent of artisanal miners work informally, without the necessary licenses or permits required by law. Securing permits improves miners’ access to services they are unable to access in the informal economy—such as microfinance credit, grants, and government loan facilities, which, in turn, place the miners in a better position to accumulate wealth. In many cases, ASM activities are found in regions that are out of reach of regulators, where the institutional presence of the government is weak. By operating outside of state recognition, it becomes impossible for the government to establish and enforce health and safety standards and regulations.

With informal mining operations flying under the radar of the government, either by the design of mining site owners or willful ignorance on the part of the government, workers are routinely exposed to poor labor conditions and dangerous situations. Artisanal miners often work without proper tools and protective gear in unsupported and poorly ventilated underground shafts where, as Amnesty International points out, temperatures can be extremely high. Exposure to the dust and mineral waste generated from these mines can lead to potentially fatal diseases and health conditions, and the dust and waste also contributes to pollution and environmental degradation in the area surrounding the mine.

Across the African continent, artisanal mining has been linked to human-rights violations, forced labor, crime, and conflict. These issues, compounded with artisanal miners’ lack of legal rights, exacerbates their vulnerability and the cycles of poverty and exploitation they face.

More at stake

The problems in ASM often present a significant barrier to sustainable foreign investment in African critical minerals. The aforementioned problems in the artisanal sector have made Western business interests hesitant to invest in Africa’s critical minerals. Poor labor practices and human rights violations associated with ASM could expose global companies to reputational and regulatory risks. These concerns—combined with pressure from non-governmental and human-rights organizations—make investment in ASM a complicated and risky proposition.

This barrier is present in artisanal cobalt mining in the Democratic Republic of the Congo (DRC). Cobalt is a critical component of many lithium-ion batteries, including ones used to power electric vehicles, produce components for wind and solar energy technologies, and power portable electronic devices such as smartphones. The DRC accounts for more than 74 percent of global cobalt mining, and 20 to 30 percent of that is via ASM.

In some regions of the DRC, artisanal miners are exploited by armed groups that seek to control mining areas and siphon revenue to finance their operations, purchase weapons, and sustain conflicts. Militias have abducted and trafficked children to extract cobalt as well as copper, in a bid to fund their groups. In addition, some ASM cobalt operations employ children. It was once estimated that forty thousand children were mining for cobalt, working in life-threatening conditions and exposed to violence, extortion, and intimidation.

Such problems associated with informality, including the absence of regulatory standards and the occurrence of human-rights violations, make it difficult for potential investors to justify long-term investments. Without clear, enforceable laws, investors face a high-risk business environment and unpredictable changes in mining policies, which undermine investor confidence.

In addition to posing these immediate risks to artisanal miners and their communities, informal mining exacerbates economic and market instability on a macroeconomic level. Informal miners typically earn a meager and unstable income, which is subject to fluctuation based on the market prices and demand for cobalt. Miners’ economic instability translates into broader economic uncertainty for the sector and limits opportunities for community development. The presence of such substantial unregulated economic activity leads to significant tax revenue losses for the government, because these transactions primarily occur outside of official channels. This undermines the state’s capacity to invest money in necessary social programs, build infrastructure, and quell violence in other regions of the DRC. In spite of these challenging economic implications, African governments might resist formalization efforts, unwilling to disrupt the vital role ASM plays in the livelihoods of many individuals and communities across Africa.

While artisanal cobalt mining in the DRC provides a case study, some of these issues associated with informality are also prevalent in the mining of critical minerals in other African nations, such as lithium production in Zimbabwe and Namibia. Across the continent, the volatility of ASM creates a less attractive investment environment, given that investors seek dependable production to ensure stable supply chains and therefore profitability.

What might formalization look like?

Despite the complications associated with the informal production of many critical minerals, the solution is not to disengage from ASM; it employs 90 percent of the mining workforce. Rather, the solution lies in formalizing and legalizing ASM, which will help mitigate the risks inherent to these mining operations while fostering a more regulated and stable environment for international investment in Africa’s critical minerals.

Integrating the ASM sector into the formal economy would help improve local security, stabilize incomes, and ensure that safer and more environmentally sustainable practices are implemented. It would also help create national regulations and international standards, pressuring the ASM sector to improve practices to become compliant.

Formalization means that miners are registered with proper mining titles. Even in some countries where ASM is recognized by law, governments have not made it possible for miners to obtain the necessary permits and licenses. But in addition to these permits and licenses, formalization also includes—according to the Washington-based nonprofit Pact—efforts by the mining industry to enact chain of custody and supply chain transparency measures; health, safety, and environmental protections; security and human-rights protections; measures that improve access to finance; and requirements to use proper mining techniques. In addition, formalization includes sound industry policies, procedures, and due diligence systems, which should be in place throughout the life cycle of a mine. These components of formalization create a framework within which artisanal miners can operate safely and legally, contributing positively to community-wide and country-wide development goals and global supply chains.

Given the complexity of the informal economy, there is no simple, one-size-fits-all approach to formalization. We can, however, look for strategies that have been effective in other countries or industries and use them to guide the approach towards formalizing ASM. For example, Rwanda’s 2010 Land Tenure Reform Programme initiated a systematic registration effort to promote land access and address tenure insecurity. This program registered over ten million land parcels in less than five years and enabled landowners to use their property as collateral for loans, facilitating access to credit. The program has been widely regarded as successful in integrating the informal economy, particularly due to its simple registration process and involvement of community members and stakeholders in the reform. Transitioning ASM to the formal economy must also use an integrated whole-of-society approach, centering African communities, stakeholders, and governments. This might mean starting small at a grassroots level by engaging local communities in social dialogue, allowing informal miners to express their views and defend their interests. Their inclusion at an early stage of the formalization process will ensure that policies address informality efficiently and enhance the effectiveness of such measures.

There have been some efforts in recent years to support the formalization of ASM workers and improve social and environmental practices in the sector. For example, as the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) explains, international Fairtrade and Fairmined standards set minimum standards for responsible mining, which support formalization. Furthermore, chain of custody initiatives trace supply chains from mine to market to ensure that supply chains are not associated with any conflicts or human rights abuses and that they meet international regulations. These are certainly steps in the right direction but, as the IGF explains, there are concerns about the long-term sustainability of these initiatives and whether they are reaching the most marginalized communities.

Formalization is a very complex but necessary process that can improve the lives of miners and address issues in the critical-mineral supply chain—and therefore attract more sustainable investment to the sector, contributing to the broader development goals of African countries.

How the international community can help

As mineral extraction in Africa is only expected to increase in the foreseeable future, it would be strategically unwise for the international community, and in particular the United States, to sit idly by on the issue of formalizing artisanal mining.

Going forward, the United States can focus on capacity building and simplifying trade processes and market access to help formalize artisanal mining in Africa, which could lead to increased global investment in critical minerals. To build the foundation for policies and programs that provide legal protection for ASM miners, the United States could fund and support training programs for artisanal miners, local authorities, and government officials on sustainable mining practices, health and safety standards, regulatory compliance, and business skills. By strengthening local and national institutions responsible for overseeing the ASM sector, governments would be better able to enforce regulations, protect the rights of artisanal miners, and formalize the sector.

The United States could also work with African governments and international organizations—such as the African Union and the United Nations Conference on Trade and Development—to simplify trade procedures, enabling miners to participate legally and more fully in global supply chains. In December 2022, the United States signed a memorandum of understanding with the DRC and Zambia to develop a productive electric-battery supply chain—from the extraction of minerals to the assembly line. The agreement also serves as a commitment to respect international standards and to prevent, detect, and fight corruption and build a sustainable industry in Africa that benefits workers and local communities, as well as the US private sector. At this time, it is more political than actionable, although it creates a framework for future negotiations and strengthened partnerships. Deepening ties with African nations and collaborating with international organizations can help leverage the resources, expertise, and global networks to ensure a more conducive environment for investment and sustainable growth. Increasing institutional capacity would also allow governments to strengthen tenure security and clarify property rights for ASM, particularly reducing the incidence of ASM-LSM conflict.

The creation of more legal channels for miners to sell their products could enhance supply chain transparency and promote more sustainable market practices. Implementing an international certification mechanism, similar to the Kimberley Process Certification Scheme (KPCS), offers the ASM sector an opportunity for empowerment and a pathway towards legitimacy. Originally established to remove conflict diamonds from the global supply chain, the KPCS mandates that member countries adhere to strict certification requirements, import and export controls, regular audits, and controlled trade. The principles of the Kimberly Process might be adapted to the extraction of critical minerals so as to increase the security of artisanal miners and their access to legal markets.

Not only would these policy actions benefit African countries in the context of the critical-minerals boom and improve the livelihoods of miners, but they would allow the United States to strengthen its economic and strategic partnerships with African countries. As critical minerals will continue to advance the clean-energy transition, decisive action is essential to make the future of mining a pathway for inclusive, sustainable development for the countries that supply minerals to the world.

Sarah Way is a graduate of the University of Colorado Boulder’s International Affairs Program with a specialization in Africa and the Middle East. Her research centers on the intersection of natural resources and development, with a specific focus on extractive minerals in Africa.

The post Integrating artisanal mining into the formal economy would benefit African miners and economies alike appeared first on Atlantic Council.

The ruling creates deep complications for the Joe Biden administration’s energy and climate agenda. But it also highlights their significance for the upcoming presidential election.

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The death of deference

The landmark 1984 ruling in Chevron U.S.A., Inc. v. Natural Resources Defense Council centered on the prerogatives of federal agencies to interpret existing—and potentially decades-old—federal laws. Under the precedent enshrined as “Chevron deference,” agencies were allowed a wide berth to interpret federal laws where they were unclear or ambiguous on a specific issue. Chevron deference has proven valuable to administrations of every political inclination for forty years.

The end of deference represents a monumental shift in regulatory authority away from agencies and their technical experts—now merely accorded “respectful consideration”—and toward the hundreds of federal judges seated throughout the country.

Judges are empowered as arbiters if and when a given statute is ambiguous. They thus determine whether an agency’s interpretation of its authorities—as expressed in agency-delivered regulations—is valid. This outcome creates a more complex legal system surrounding every regulatory intervention, potentially creating a patchwork of interpretations across the ninety-four US federal judicial districts.

This development has implications for any future administration. Regardless of the outcome of the November election, both candidates must contend with the new realities of enacting their respective energy and climate visions without Chevron deference.

Overruling net zero?

For the Biden administration, the ruling undermines its sweeping regulatory efforts toward economy-wide decarbonization. Already, key agencies such as the Environmental Protection Agency (EPA) and the Securities Exchange Commission have likely anticipated this court could end the Chevron deference, tailoring their recently finalized regulations accordingly.

But the Biden administration’s marquee regulations could now be challenged in whole or in part for straying too far from the letter of their foundational laws. If so, any federal judge could rule against that perceived overextension of an agency’s statutory authority.

The fate of the EPA’s regulation for fossil-fueled power plants will be a litmus test. Finalized last April, it’s expected to be extensively litigated and eventually reach the Supreme Court. Democratic leaders have anticipated this, confirming within the 2022 Inflation Reduction Act (IRA) that greenhouse gases, including carbon dioxide, are air pollutants, giving the EPA the explicit authority to regulate it.

However, this legislative amendment does not necessarily insulate the EPA from scrutiny of how it regulates the newly labeled air pollutant—for example, by encouraging changes in generation mix, implementing power plant-level regulations not explicit within the original Clean Air Act, or, most recently, mandating the adoption of carbon capture.

This Supreme Court’s string of recent rulings, from West Virginia v. EPA and the stay of the “good neighbor rule” to extending the timeline for a federal rule to be challenged, suggests that the bench views the EPA’s authority as far more limited than the Biden administration does.

Crucially, the Loper ruling has limitations of its own. Per the majority opinion, it will not apply retroactively, meaning that previously decided cases where agency deference was at play cannot be reopened. Perhaps even more importantly, the ruling applies specifically to the federal government and not to local, state, or regional administrations.

Even if the EPA and other agencies find themselves confined to strict readings of their statutory authorizations, state regulations—including clean energy and renewable portfolio standards—cannot be challenged on this basis. On the contrary, a state attorney general could instead leverage the end of Chevron deference as a new opportunity to litigate regulations from the federal government not aligned with their state’s climate and energy goals.

Beyond November, the end of agency deference could destabilize the Biden administration’s climate agenda in a re-election scenario. Implementation of the IRA is likely to be hampered by lawsuits, and agencies may see newly issued regulations and guidelines—such as the controversial hydrogen guidance pertaining to Section 45V—become fodder for litigation. The same could be true for federal permitting and siting procedures.

Federal agencies may find it less cumbersome to simply issue broad, performance-based regulations that set a widely applicable standard, such as to power plants. These could allow for a wide range of approaches to meet a given standard rather than prescriptive rules mandating specific technologies or fuels. Programmatic approaches that concern major statutes, such as the Endangered Species Act, Clean Water Act, and others, may also become the preferred means to simplify environmental reviews and preclude challenges.

Not so clear a victory

The extensive media coverage of the Loper decision has framed the outcome as an unequivocal boon to Donald Trump’s agenda, particularly in the energy and climate landscape. To some extent, this perspective is justified; a new Trump administration will leverage this ruling as justification to back away from addressing environmental or climate challenges beyond the bare minimum mandated by existing statutes.

However, agencies have long been criticized by stakeholder and environmental organizations for hiding behind Chevron deference for inadequate enforcement of environmental laws. A Trump administration, which aims for the floor, but can no longer rely on Chevron deference for protection, may discover that such lawsuits have become more numerous and disruptive.

Moreover, not every congressional statute on energy and environmental matters is ambiguous. A new Trump administration attorney general would struggle to argue that the IRA’s methane fee cannot or should not be enforced, as this requirement is explicit in the law.

There are other, more subtle, pathways to undermine the IRA and other major Biden-era climate achievements if a Trump administration were set on doing so—namely, by doing as little as possible.

The 45V credits are instructive. If a given Internal Revenue Service regulation for this section of the IRA were challenged in court as being outside the letter of the original law, it could be thrown out in a post-Loper world where agency deference is no longer assumed. A Trump administration, gifted this development, could simply refuse or delay issuing new guidance if it were uninterested in abetting the emergence of a US clean hydrogen industry.

This tactic would undermine investment certainty for large, expensive projects across technologies and fuel types while technically keeping the IRA on the books. This approach, however, assumes that federal courts will agree with sharply limited interpretations of ambiguity and not rule against thin regulations or force a Trump administration to issue guidance whether it wants to or not.

If agency deference is no longer axiomatic, then a conservative administration risks similar pushback in interpreting laws to suit ideological preference and policy goals. In a post-deference world, such an administration might face legal challenges in, for example, attempting to extend the lifetimes of operating coal plants, as much as a more liberal administration might face challenges for creative attempts to phase coal out of the US generation mix.

A volatile patchwork lies ahead

Fundamentally, the end of Chevron deference implies a new era of volatility in the legal and regulatory landscape for US energy and climate policy. Everyone from project developers and operators to investors and local stakeholders should prepare accordingly.

While federal judges are newly empowered to intervene, the Supreme Court cannot adjudicate every potential dispute in the handful of cases it reviews in a given year. As a result, it will take any suit years of litigation to reach that level—if at all—making the rulings of lower federal courts more important than ever before. Judicial opinions are likely to vary widely, making the location and timing of a suit paramount to its outcome.

For project developers, this uncertainty compounds an already serpentine US permitting landscape. Depending on which administration is in control after 2024, it is conceivable that environmental and social justice considerations around projects are given less weight than had Chevron deference been maintained. Going forward, an agency may be less inclined to propagate criteria or guidelines that would allow refusal of a permit on the basis of considerations not explicitly prescribed in existing laws. Confined to their statutory foundations, agencies may therefore be inclined to decide on leases and permits more quickly. But with fewer creative tools to mitigate project impacts authorized in their foundational statutes, agencies may simply lean toward faster denials.

Ultimately, however, the Supreme Court is the likely final stop for all major regulations going forward, implying greater uncertainty, circuitous timelines for judicial review, and whiplash aligned to the winds of political change in the executive branch. This could foster a scenario where climate action is largely blocked by the courts, and Congress is unable to meaningfully amend or write new laws to clarify the exact role of the federal government in addressing the climate crisis.

That prospect, and its implications, could exacerbate societal tensions at a time of deepening alarm over our global climate future.

David L. Goldwyn is chairman of the Atlantic Council’s energy advisory group and a nonresident senior fellow at the Atlantic Council Global Energy Center and the Adrienne Arsht Latin America Center.

Andrea Clabough is a nonresident fellow at the Atlantic Council Global Energy Center and a senior associate at Goldwyn Global Strategies, LLC.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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David L. Goldwyn

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Adrienne Arsht Latin America Center Global Energy Center

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Andrea Clabough

Nonresident Fellow

Global Energy Center

Climate Change & Climate Action Energy & Environment

EnergySource Sep 11, 2023

The IRA’s best kept climate secret: Moving oil and gas toward operational net zero 

By William Tobin

The IRA contains a suite of provisions to help oil and gas move toward scope one and two climate neutrality, potentially comprising some of the law’s most impactful climate measures.

Energy & Environment Energy Transitions

EnergySource Dec 5, 2023

The Oil and Gas Decarbonization Charter is a start, but more work remains

By David L. Goldwyn, Andrea Clabough

Although the Oil and Gas Decarbonization Charter is laudable, the pace of change for this industry (as represented in this charter) is not fast enough, deep enough, or broad enough to materially address the yawning gap between the Paris commitments and the present Dubai reality.

Energy & Environment Energy Markets & Governance

EnergySource Oct 4, 2023

What’s next in the two-front war against climate change and energy insecurity?

By Robert F. Ichord, Jr.

Electrification is a powerful weapon in the battles against climate change and the weaponization of energy supply. To improve overall system reliability and resilience, the United States and European Union must decarbonize, meet new consumer and industrial demands, and expand transmission capacity.

Climate Change & Climate Action Energy & Environment

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Chevron deference is dead—and US climate action hangs in the balance appeared first on Atlantic Council.

Introduction
The geopolitics of infrastructure
The economic realities
Coordination of project identification and implementation
Recommendations
Conclusion

Introduction

Infrastructure development is a central component of the West’s global engagement strategy. This effort, if done effectively, could be a strategic, economic, and geopolitical feat. The development of sustainable and secure infrastructure carries the potential to create economic prosperity for countries aspiring to move up the global value chain, support the world’s green transition, provide an alternative to China’s exploitative investments, and strengthen the Western-led order.

The Group of Seven (G7) countries have varying plans for infrastructure development in cooperation with various partners around the globe, with particular focus on the Global South. Launched in 2022, the G7’s Partnership for Global Infrastructure and Investment (PGII) aims to mobilize $600 billion in capital for development projects by 2027.¹ In Europe, the European Union’s (EU) Global Gateway will invest 300 billion euros by 2027 in global infrastructure projects on behalf of the bloc.² Italy’s Mattei Plan, launched in January 2024, brings a direct focus on infrastructure development in Africa.³ Further abroad, the Group of Twenty (G20) partners signed the India-Middle East-Europe Economic Corridor (IMEC) memorandum in 2023, which aims to directly counter China’s Belt and Road Initiative (BRI) and cut down transit time between India and Europe.⁴

These initiatives are a good start. However, all G7 members face various challenges that could ultimately hamper progress on these initiatives, most notably: geopolitical challenges, limited funds, skittishness from private sector investors, and lack of coordination. For these initiatives to have a lasting impact, the G7 and likeminded partners must closely coordinate to both avoid and overcome these pitfalls.

Some efforts to better coordinate development projects have already begun. Along with its investments and focus on leveraging private capital, the United States led in the creation of the Blue Dot Network, “a multilateral initiative aimed at advancing robust standards for global infrastructure and mobilizing investment for projects in developing countries.”⁵ In addition, the US-EU Trade and Technology Council (TTC) has launched coordinated connectivity projects between the United States and the EU in third countries including Kenya, Costa Rica, Jamaica, the Philippines, and Tunisia.⁶

Holding the G7 presidency for 2024, Italy has made infrastructure development and strengthening relations with the Global South, and in particular Africa, central to its priorities. The 2024 G7 Leaders’ Summit in Apulia, Italy, in June 2024 again reaffirmed the group’s commitment to PGII and investments across Africa, with announcements including the creation of a secretariat to coordinate investments and aid information sharing and a greater shared focus on unlocking investment for green infrastructure projects.⁷

Now, G7 countries must focus on transforming the summit’s conclusions into reality and making real progress on development coordination. This issue brief provides an actionable set of recommendations to advance the G7’s ambitions.⁸ It examines the geopolitical impetus for infrastructure development, the economic realities of infrastructure, and the state of coordination on project implementation before providing recommendations to take forward for the rest of Italy’s G7 presidency and beyond.

The geopolitics of infrastructure

The G7’s focus on development is rooted in the shared understanding that G7 countries must fundamentally reset relations with the Global South. Historically, countries in the Global South, particularly in Africa, have been on the receiving end of unfair and extractive relationships with the West.

The result has been growing mistrust and disillusionment, and many countries now view China as a better partner than Europe or the United States. A 2022 study conducted by the University of Cambridge noted that around seventy percent of people not living in liberal democracies held positive views of China, and those in the developing world held more favorable views of China than of the United States.⁹ Another 2023 survey saw China’s approval rating in Africa rise to its highest levels in a decade, with ten-point increases in some countries.¹⁰

On infrastructure development specifically, China has outcompeted the West for years. China’s outreach to the Global South has been generally successful, and the BRI has evolved into an established brand. For example, in 2021 China pledged $40 billion over three years to Africa (though this was a reduction from an earlier pledge of $60 billion), and Beijing has out-invested the United States in Africa every year since 2013.¹¹ Though Chinese investments have yet to surpass their pre-pandemic heights, China’s rate of investment is again rising, and Africa was the largest recipient of BRI investment in 2023.¹² In part, as a result, Beijing is also poised to overtake Europe’s total trade with Africa by 2030.¹³

There are downsides to partnering with China, however. Its values-ambivalent approach is not built for sustainability and comes with a well-documented debt trap. For example, Zambia, which had more than 50 percent of its foreign loans from China, went into default and was unable to afford interest payments on loans financing construction projects in the country including ports, mines, and power plants (though China and Zambia have agreed to a restructuring of Zambia’s debt).¹⁴ Similarly, in Kenya, the government held back paychecks to its civil-service workforce to save cash to pay foreign loans.¹⁵

G7 countries are making progress on closing this partnership gap with China. Leaders at the Apulia Summit reaffirmed their ambition to meet the spending target of $600 billion by 2027, and the summit’s conclusions have a clear focus on infrastructure development, including with an announcement of a secretariat to facilitate the coordination of development projects.¹⁶ Leaders made further announcements at a side event where Italy joined the US- and EU-led consortium on projects in the Lobito Corridor in southern Africa, and Western companies like Microsoft and Blackrock pledged more investments across Africa and beyond.¹⁷

The summit also saw the participation of countries including Algeria, Brazil, Kenya, and Tunisia, among others—something Prime Minister Georgia Meloni lauded as delivering on a pledge to make outreach to the Global South a cornerstone of Italy’s G7 presidency.¹⁸

The summit also highlighted that the West’s values-based approach can be a strategic asset to building sustainable global partnerships. A focus on good governance and environmental and labor standards allows for long-term success and, in turn, economic growth. The G7 recognizes the importance of engaging with Africa specifically, with the 2024 Communiqué positioning the PGII, the Global Gateway, and the Mattei Plan as frameworks to “promote [the West’s] vision of sustainable, resilient, and economically viable infrastructure in Africa underpinned by transparent project selection, procurement, and finance.”¹⁹

This is a good start, but there is still room for improvements. Some of the West’s recent outreach has received similar criticisms to previous efforts, for example, failing to consult the very countries these efforts are meant to engage. In particular, African leaders noted Italy failed to consult them before announcing the Mattei Plan.²⁰ Moreover, the West’s tedious approach to infrastructure development can be perceived as an obstacle, not an asset, especially if it is not applied consistently.²¹

G7 countries should make greater efforts to convene with PGII partners in the region including the private sector, civil society, and government—to sustain debate and discussion about the West’s ambitions and the reasoning behind its values. At the same time, more regular and targeted engagements can, in turn, expose Western public and private financial institutions to the realities of partner markets and address the misconceptions of perceived risks. It’s a win-win for both sides. Where possible, the framing should be adapted to showcase the importance of the long-term sustainability of projects, especially compared to the non-durability of Chinese infrastructure. This engagement will also be a useful tool to address criticisms that Western initiatives are organized without the feedback and involvement of partner countries.

Finally, while competition with China will be a defining element of Western global infrastructure projects, geopolitics cannot eclipse all else. Recipient countries are looking for projects for their benefit to move up the global value chain and to spur domestic growth—not to be a pawn in other parties’ geopolitical rivalries. States can and have the option to accept projects from different sources, including from China. In response, policymakers should be cognizant that countries might be interested in partnering with both China and the West, and should not be forced into a binary, mutually exclusive choice of one or the other.

It will be important, then, for transatlantic policymakers to work out how to both compete against and partner with China. This will be critical specifically in the area of information and communications technology (ICT) development, where using “untrustworthy” vendors has been an area of focus. Policymakers should be clear about where and when non-G7 countries are involved in projects, and in what respects that will not preclude partnership.

The economic realities

Geopolitics may be a key impetus for development initiatives, but policymakers must also contend with economic realities that have long-plagued development projects. Economic stability in recipient countries is important for investments, but that stability is not always a luxury the West can expect. The International Monetary Fund’s regional economic outlook from spring 2024 for sub-Saharan Africa, for example, notes “the fiscal position of many sub-Saharan African countries has deteriorated, a trend exacerbated by repeated shocks and the ensuing demand for fiscal support,” which adds to political and economic uncertainty.²² The cost of borrowing for African states is also four to eight times higher than for Western countries, making raising capital prohibitive.²³

The reality is that currencies can collapse and interest rates can rise, but the need and opportunities for investments will remain. The West, therefore, cannot wait to invest in projects until after implementing structural reforms to partner states’ finances and economies.

G7 countries, the United States in particular, have stressed the importance of the private sector to achieve its financing goals. The Apulia Summit placed additional emphasis on the necessity of private-sector capital for the success of PGII. Side events on the PGII have taken place at every G7 summit since the PGII was announced, and since 2023, have prominently featured participation from major investors and companies including Citi, Nokia, Global Infrastructure Partners, Blackrock, and Microsoft—usually with investment announcements in tow.²⁴ Policymakers should appreciate and foster a bottom-up approach to project identification from the private sector and its appetite to invest.

However, leveraging private capital to help fund infrastructure projects comes with its own challenges. Investments into large-scale infrastructure projects are inherently risky, and shaky local markets only add to the unease felt by private-sector investors as currency devaluations risk erasing investments.

G7 members will therefore need to play a greater role, in some form, as guarantors of investments to help reduce the cost of borrowing and alleviate some of the risk. This comes with its own difficulties, as unlocking government-backed funds is not a straightforward process. Certain firms may not be eligible for funding depending on where they are located. And while it makes sense for European taxpayer funds to go to European firms, for instance, multinational firms can become caught up in the bureaucratic web, impeding their involvement with investment projects. Nevertheless, governments must figure out how to play a role here. The European Union, for instance, has a AAA credit rating, and can take on the role of a guarantor for private-sector investment.²⁵ The US International Development Finance Corporation (DFC) has provided political-risk insurance up to $25 million for investments in Ukraine.²⁶ The case of Ukraine is not a one-to-one comparison to investments in the Global South, but offers a useful example to consider. This is not meant to provide a blank check to the private sector for risky investments. However, investment projects cannot wait for long-term structural reforms that will impact geoeconomic changes like foreign-exchange rates. Instead, investors need to work within current economic realities.

Greater efforts are also needed to address change Western misconceptions of African markets and perceived risks that may not truly reflect realities on the ground. The metrics used by the West to measure projects, specifically environmental, social, and governance (ESG) standards, do not always have as strong a foothold in recipient countries, making investment look riskier or undesirable. Balancing the focus to communicate the impetus for these metrics—while maintaining a degree of flexibility and not completely sacrificing all ESG baselines—will be an important needle for policymakers and investors to thread.

Coordination of project identification and implementation 

Shared project standards are an opportunity for greater coordination. The 2023 Hiroshima G7 summit provided a starting point, highlighting forty projects of common interest.²⁷ Italy’s G7 presidency looked to further this effort. As Meloni outlined at the G7 summit side event focusing on the PGII, Italy’s ambition was to create “structured synergies and coordinated activities to maximize efforts and investments” between G7 members’ various projects.²⁸

The 2024 Apulia Summit specifically pledged greater effort at coordination through three prongs: establishing a secretariat “for effective implementation and investment coordination with partners,” supporting investment platforms to “enhance information sharing, transparency, and public policies on investments in Africa,” and working in particular on green investments in Africa.²⁹ These efforts are all good starts, but they remain wide in their ambition and vague in actual substance.

Coordination on project identification should be an early priority for the PGII secretariat. As G7 countries and the private sector will necessarily look to identify more of these projects, it will be useful to have shared criteria for projects to meet quality and sustainability standards. A shared understanding of what projects G7 members are looking to support, and metrics to assess projects, would also help the private sector in more easily identifying projects in which to invest. The Blue Dot Network is a good starting point for this effort, but so far only a few European G7 countries are on its steering committee.

Additionally, coordination between the United States and the EU through the TTC to support connectivity projects provides another useful starting point for this effort. Established in 2021, the TTC has become the backbone of this US administration’s efforts to strengthen its relationship with Brussels. Despite its initially limited scope, it has morphed into a clearinghouse for discussions not only on transatlantic trade and technology coordination, but also on sanctions against Russia and support for projects in third countries to support internet connectivity.³⁰ Supporting connectivity projects at the TTC is useful, but it is limited to smaller projects. Taking coordination from the TTC to the G7 level would allow participation and coordination with countries like the United Kingdom and Japan.

In terms of project selection and implementation, the G7 must also ensure money is available for maintenance, and enough staff is available to follow-up and to make projects sustainable. Ongoing efforts must leverage available funding not just to start projects, but to fund them through their full cycle, and staff them at a level that supports medium- to long-term maintenance. Often, this will include building relationships with on-the-ground in-country partners, and then training and subsequently employing local civilians to shoulder these responsibilities. It is simply not feasible for European, US, Japanese, British, or Canadian project managers to shoulder this burden. In this respect, it is equally important to get buy-in from national and local governments in recipient countries. Locals with knowledge about projects, communities, and factors on the ground will be critical to the maintenance and durability of such projects. The G7 conclusions rightly noted the importance of working with local partners. Now, a secretariat should take forward that effort in earnest.

Maintenance also means investing in skills. This is just as important for implementation and maintenance as investing in technology or brick-and-mortar buildings. Project identification must not look past the funds and time needed to train partners on the ground. For G7 members it will be important, especially on projects in which the United States and EU are involved, to standardize, de-duplicate, or divide training efforts.

Recommendations

At the 2024 Apulia summit, G7 countries made some progress on global infrastructure development in the context of the PGII. Implementation must now follow pronouncements. Italy should lead through the rest of its G7 presidency to see that real progress is made and to ensure this remains a priority in forthcoming summits (much like the role Japan played on artificial intelligence), and each G7 member must also work to meet its national commitments. To make greater coordination a reality, the G7 should undertake the following recommendations.

• Expand the Blue Dot Network Steering Committee. The European Union and/or all EU member states that are part of the G7—Italy, Germany, and France—should join the Blue Dot Network. The Blue Dot Network’s steering committee is currently composed of Australia, Japan, Spain, Switzerland, Turkey, the United Kingdom, and the United States (Canada, Czechia, and Peru are network members and do not contribute funds).³¹ All G7 members, and the EU, should become members of the steering committee. European membership in the Blue Dot Network should not be limited just to G7 EU members, and the EU could take on a role representing all EU member states.

• Invest in the PGII secretariat and commit to the adequate staffing of development institutions. A PGII secretariat can serve as an important hub for coordination, but it must be staffed adequately. G7 countries should assign national-level envoys to the secretariat, or at least fold them into the offices responsible, such as IMEC. Much of the work to take forward the agreements at the G7 will also fall to domestic institutions and development finance institutions. However, staffing and financing shortages have limited their effectiveness. G7 members should pledge a benchmark for spending on development financing.

• Establish regular convenings in or with partner countries. G7 members should commit to hosting regular meetings with partners and their private sectors, civil societies, and governments. The Hiroshima G7 meeting highlighting the PGII was a good start, but the initiative should now be further developed with a partner-first mindset. G7 member officials should host annual meetings in partner countries to make the case for the West’s efforts. This would signal a departure from the West’s historically paternalistic approach to engagements with African partners, and the Global South generally. Outreach and consistent engagement at the ambassadorial level would also be useful.

• Identify which third countries can take part in which projects. Currently, there is no clear framework for which third countries can take part in specific development projects or what limits exist to partnering with third countries, including those like China. Where issues like human rights and national security come into play, G7 countries may differ in their strategies for engaging with third countries. At the same time, there should be clearer frameworks for private companies and governments in terms of in which projects each can take part.

• Build in long-term maintenance and implementation of projects at the development stage. Projects should begin with the end in mind. If there is no way to measure success or to educate and employ local populations, these projects will turn into basic assistance with no longevity. G7 countries should agree that investment projects under the PGII umbrella should mandate a long-term implementation and maintenance plan with substantial involvement and buy-in from the partner country. Countries want economic success and want to move up the global value chain; they don’t want to be seen as mere development recipients. It is up to the G7 to ensure such upward movement happens.

• Map and publish all PGII-related projects. The PGII secretariat should map out all investments under the PGII umbrella, along with projects of interest. This could serve as a clearing house, especially for the private sector to identify opportunities for investment. This would also create a strong public relations tools showcasing the West’s impact and investment footprint. This effort could also be utilized to facilitate the submission of new investment projects by the private sector and potentially lead to consolidated funding for joint investments promoted or pursued by G7 members.

Conclusion

Giorgia Meloni called the dialogue around the PGII “one of the most significant achievements of the G7” to deliver “concrete action” to Africa and the Global South.³² The G7 has made progress, but such a conclusion is premature. The G7 is well on its way to turning its ideas and visions for new partnerships with the Global South into action. Putting the resources and people behind those visions will ensure that they come to life.

James Batchik is an associate director at the Atlantic Council’s Europe Center, where he supports programming on the European Union, the United Kingdom, Germany, Italy, and the center’s transatlantic digital and tech portfolio.

Rachel Rizzo is a nonresident senior fellow at the Atlantic Council’s Europe Center. Her research focuses on European security, NATO, and the transatlantic relationship.

Nick O’Connell is the deputy director for public sector partnerships at the Atlantic Council. He also contributes regularly to the Atlantic Council’s Italy project, a collaboration between the Europe Center and Middle East Programs.

New Atlanticist Apr 24, 2024

Dispatch from Rome: Political stability gives Italy a chance to step into the spotlight

By Jörn Fleck, Rachel Rizzo, James Batchik, Nicholas O’Connell

With newfound steadiness at home, Rome can make its priorities for the West heard, especially the security of the Mediterranean and outreach to Africa.

Economy & Business Europe & Eurasia

Report Apr 3, 2024

The case for African social infrastructure

By Tom Koch

Investment in African social infrastructure can be defined as African real estate that serves an essential societal purpose.

Africa Economy & Business

New Atlanticist Feb 5, 2024

Italy’s Mediterranean pivot: What’s driving Meloni’s ambitious plan with Africa

By Alissa Pavia

The Mattei Plan for Africa was presented on January 29-30 to a delegation of more than twenty-five African leaders. It seeks to establish an Italian agenda that prioritizes Africa’s needs and avoids predatory practices.

Africa Economy & Business

The Europe Center promotes leadership, strategies, and analysis to ensure a strong, ambitious, and forward-looking transatlantic relationship.

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The post Doing as the Romans do: Recommendations for the infrastructure development agenda for Italy’s G7 presidency appeared first on Atlantic Council.

Africa is central to the global energy transition. The necessary resources for a low-carbon economy are abundant in Africa, with the continent possessing 30 percent of the world’s known mineral reserves—many of which are critical for the manufacturing of batteries, solar panels, wind turbines, and other clean energy technologies. Africa’s untapped potential is greater yet, with research suggesting that the continent holds 85 percent of manganese reserves, 80 percent of platinum and chromium reserves, 47 percent of cobalt reserves, and 21 percent of graphite reserves, much of which is unexplored or underexplored. Demand for these resources is also on the rise, expected to more than double between now and 2030.

While Africa is rich in minerals and strategically located, it risks losing out on a historic investment opportunity. The infrastructure investment problems that have hindered non-Chinese capital flows into African markets for decades are front and center as investors and governments assess the strategic role the continent could and should play in the global shift to cleaner energy sources. While infrastructure investment has shown growth in recent decades, a significant financing gap persists, estimated to be around $100 billion each and every year.

To counterbalance China’s dominance in battery supply chains, the United States must leverage its strengths in technology, education, and capital markets. Initiatives such as Prosper Africa need to be dynamically scaled and optimized to provide meaningful support, ensuring that US investors can more easily and rapidly navigate the complex landscape of Washington.

With this urgency in mind, this report provides a snapshot of Africa’s mineral wealth and the state of mining industries, draws out the similarities between the mining and infrastructure investment attraction challenges, describes the competitive landscape African nations find themselves in, and makes innovative recommendations—namely to the US government—to rapidly accelerate investment in sustainable mining industries in African markets.

This report is the first in a series on the critical minerals sector in Africa, and is part of the Africa Center’s Critical Mineral Task Force.

The Africa Center works to promote dynamic geopolitical partnerships with African states and to redirect US and European policy priorities toward strengthening security and bolstering economic growth and prosperity on the continent.

Learn more

AfricaSource Jun 7, 2024

Increasing investment in African mining should be a higher priority for the United States

By Aubrey Hruby

If governments, investors, and development partners don’t make dramatic changes in the next five years, the United States will fail to counter Chinese influence in supply chains.

Africa Energy & Environment

AfricaSource Mar 18, 2024

The critical-minerals boom is here. Can Africa take advantage?

By Alexander Tripp

The critical minerals discussion on extraction, national security, and supply chains will move past Africa unless the moment is seized.

Africa Economy & Business

The post From greenfield projects to green supply chains: Critical minerals in Africa as an investment challenge appeared first on Atlantic Council.

• Introduction
• Severe consequences of energy insecurity
• Energy-transition barriers
• Applying the CEWG roadmap
• A global call to action
• Acknowledgments
• About the author
• About the Caribbean Energy Working Group Co-Chairs

Introduction

Countries in the Eastern Caribbean¹ are among the world’s most energy insecure nations. These countries grapple with high electricity costs that undercut economic competitiveness and growth, are heavily dependent on petroleum products, and are uniquely vulnerable to the effects of climate change. At the same time, a World Bank designation as middle- or high-income economies significantly limits access to concessional financing. The result is a slow transition to renewable energy power generation, including attracting commercial interest for the relevant infrastructure and unbundling utility systems that often stymie regulatory changes and curtail needed investments in the energy sector.

The time may be ripe for accelerating the pace of the transition in the Eastern Caribbean. A broad consensus exists among regional governments, the business community, and multilateral partners to further usher in a transition to renewable energy, given the unique vulnerabilities facing Eastern Caribbean countries. Meanwhile, countries in the Southern Caribbean (Guyana, Trinidad and Tobago, and Suriname) are leaning into their hydrocarbon reserves as they balance their own energy transition, while other countries are either attracting commercial interest or are far along in their renewable energy development relative to the Eastern Caribbean. Though there is an abundance of solar and wind power potential in the Eastern Caribbean—along with significant geothermal reserves in Dominica, Saint Vincent and the Grenadines, and Saint Kitts and Nevis—countries in this region are faced with defining how a realistic, affordable, and just energy transition can take place and unlocking new private sector and multilateral resources.

The Atlantic Council’s Caribbean Initiative engaged in a series of consultations with the Caribbean Energy Working Group (CEWG), whose members identified two main constraints to the region’s transition: the top-down vertically integrated nature of state-owned utility systems; and limited access to low-cost financing and credit to governments and clean energy developers. While recognizing that an energy transition requires a holistic approach, CEWG members propose that the starting points must be addressing utility constraints and access to finance to ensure a reliable and resilient energy system transformation that is sustainable and affordable for consumers, governments, and the private sector in the Eastern Caribbean. An energy transition in the Eastern Caribbean must ensure reliable power to combat price volatility for consumers while energy infrastructure should be resilient to the effects of climate change, hurricanes and strong tropical storms, and rising temperatures.

The CEWG brings together up to fifteen policy and technical experts from across the Caribbean, and was first convened in 2023 by the Atlantic Council. This publication builds off the CEWG’s first report, “A roadmap for the Caribbean’s energy transition,” which was published last year and outlined a five-step process that governments, developers, and regional partners can undertake to facilitate an energy transition in the Caribbean. The five-step process includes: conducting energy modeling and analysis; modernizing energy grids; diversifying utility structures; creating bankable projects; and scaling project investment to national and subregional levels. This publication focuses on applying steps three and four of the roadmap.

The CEWG met as part of two roundtable discussions, followed by five one-on-one consultation sessions across the group to identify barriers and solutions to accelerating a reliable and resilient energy transition in the Eastern Caribbean. This publication serves as a complement to existing initiatives and projects dedicated to facilitating an energy transition, with the aim of raising additional awareness of the reality and the urgency of the moment for the world’s most vulnerable countries.

Severe consequences for energy insecurity

Countries in the Eastern Caribbean are open facing, small market economies, vulnerable to ebbs and flows of the global financial system. The region’s import dependence means that supply chain constraints and rising global interest rates have a disproportionate effect on these economies. For example, when Russia’s war in Ukraine stemmed the flow of fertilizer to agriculture commodity exporters, food inflation in the Eastern Caribbean skyrocketed and remained high even as prices eventually declined in industrialized nations.² And although the price of renewable energy, such as solar photovoltaic (PV) power, has declined dramatically over the past decade, capital and investment in this sector naturally gravitated to the bigger economies in the Global North.

Stronger storms, more outages
Climate change is a significant driver of the energy transition in the Eastern Caribbean. Hurricanes and strong tropical storms cause flash flooding and high wind speeds that damage energy infrastructure. Global warming, as a result of increasing greenhouse gas emissions (GHG), is fueling stronger and more frequent tropical storms. The result is lost power for days and weeks, as was the case in 2017 when Hurricane Irma hit Antigua and Bermuda, damaging transmission lines and generators. Similarity, in 2019, Hurricane Dorian caused widespread power outages in Dominica.³

The makeup of these economies has resulted in Eastern Caribbean countries paying some of the highest electricity prices in the Americas, including double and sometimes triple of what the average consumer pays in the United States ($0.109 per 1 kilowatt-hour (KW/h).⁴ On average, consumer costs in Antigua and Barbuda ($0.367 per 1 KW/h) and Saint Kitts and Nevis ($0.333 per 1 KW/h) rank on the higher end of the spectrum, with Saint Vincent and the Grenadines ($0.185 per 1 KW/h) on the lower end, and the rest of the countries falling in between. These high costs coincide with an import dependence on petroleum products, with Antigua and Barbuda (100 percent), Dominica (92 percent), Grenada (93 percent), Saint Lucia (98 percent), Saint Kitts and Nevis (87 percent), and Saint Vincent and the Grenadines (95 percent) all relying on fossil fuels to satisfy almost all of their energy demand.⁵ The cost of these imports account for almost 7 percent of the subregion’s gross domestic product, cutting into public expenditure needed to invest in climate adaptation projects and social sectors such as education and health services.⁶

High electricity prices and energy imports undercut the competitiveness of key economic sectors in the Eastern Caribbean—notably the hospitality sector—and limit the purchasing power of consumers. According to the Inter-American Development Bank, six of the countries prioritized in this publication rank in the global top ten of tourism-dependent economies.⁷ The tourism industry accounts for a significant share of energy demand in these countries, increasing the prices for hotel rooms due to high usage of air conditioning and lighting.⁸ Given that the tourism industry is an economic driver, high energy costs can make industries uncompetitive vis-à-vis other tourist hubs in the region such as Jamaica and the Dominican Republic. Beyond the tourism sector, more than a quarter of energy demand in the Eastern Caribbean is for residential use.⁹ High power bills can take up a large share of household income and decrease the purchasing power of individuals, leaving them unable to spend money on local products and services, like food and transportation, which help to stimulate economic growth.

Despite the challenges facing the Eastern Caribbean, bright spots exist. Renewable energy, such as solar, wind, and geothermal reserves, are abundant. Across the region, the sun shines more than 200 days annually,¹⁰ has an estimated potential of almost 70 gigawatts of available offshore wind (excluding Dominica), and (excluding Antigua and Barbuda) houses an estimated 6,290 megawatts (MW) of available geothermal reserves.¹¹ But this potential has not been tapped. Current installed capacity of renewable energy (as a percentage) stands at: Antigua (4 percent), Dominica (25 percent including hydroelectric power), Grenada (4 percent), Saint Lucia (3 percent), Saint Kitts and Nevis (5 percent), and Saint Vincent and the Grenadines (17 percent including hydroelectric).

Geothermal development is a high priority in the Eastern Caribbean
Dominica has an estimated 1,390 MW of geothermal potential. The country’s small population and energy grid had not provided adequate incentive to develop that capacity, due to the high capital costs of exploring its geothermal reserves at scale- until recently. Commitment by the government in 2023 to develop its reserves and support this year from the World Bank have helped the country begin developing its geothermal potential. The World Bank is financing a new project at $38.5 million to support drilling of new geothermal wells and helping construct new transmission lines and substations to connect the future geothermal plants to consumers. Meanwhile, St. Kitts and Nevis is consistently looking for new partners to support its own geothermal ambitions for close to a decade, with a total project cost estimated at US $505 million. A mixture of bilateral and multilateral financing will be needed to bring this project closed to Dominica’s stage.¹²

Energy-transition barriers

The utility systems in the Eastern Caribbean are state-owned entities—excluding Saint Lucia, which has a public-private model—tasked with providing power to citizens. Tax revenues are used by governments to invest in critical and social services. These are top-down systems in vertically integrated structures, meaning that they single-handedly operate the generation, transmission, and distribution of power. This model can stifle innovation and competition, leaving customers without alternative choices and increasing the cost of electricity. Further, it means that introducing new clean energy technologies, when possible, must be financed and implemented by the utility, which is often devoid of the needed capital and technical assistance to act. Therefore, incorporating renewable energies into this model can be expensive—particularly since these technologies have high upfront costs. It is both a political and economic challenge that clean energy is not necessarily cheap energy.

However, unbundling utility systems is not a straightforward solution and not all state-owned entities are necessarily bad. Breaking these systems apart might divide consumer bases and may not lower the cost of electricity given the small size of Eastern Caribbean countries’ populations. Instead, as discussed below, the best-case scenario is to introduce innovation into the utility system, such as diversifying the utility structure across generation, distribution, and transmission by using public-private models. Maintaining an intact customer base is critical for utilities to keep the costs low for consumers while ensuring that utilities and the private-sector entities are still turning a profit. This does not mean that breaking up systems is the sole way to ensure low prices for renewable energy generation. Some markets, particularly in micro economies like in the Eastern Caribbean, might be too small to introduce competition and keep prices affordable. There is no one-size-fits-all solution, as changes in utility structures need to adapt to and be contextualized for each individual country.

Changing the business model of the utilities can help to create more incentives to incorporating renewable energy generation by factoring in the social cost externalities (the associated costs of fossil fuels on the broader public and society) of depending on fossil fuels as a realistic price comparison. Current models determine the price of electricity based on the cost of petroleum imports. But the emissions of fossil fuels—not just carbon dioxide but also other toxins that cause respiratory illnesses—increase cancer risks and, generally, overall poor health. The future healthcare costs for the consumer and the burden on governments to invest in adequate healthcare infrastructure are typically not added to the total cost of importing fossil fuels. If a full cost analysis and reformed business model are developed, then the price of importing fossil fuels might be higher than renewable power generation.

Commercial developers fund projects initially on their own before seeking to make projects bankable by obtaining loans that are backed by cash flow. Projects in the Eastern Caribbean take a long time to develop, given financing challenges due to unclear regulations and permitting, and a lack of investment-grade utility systems to guarantee payments under negotiated power purchasing agreements. Due to the long period of development, investors and governments look to derisk their projects by seeking full grants or convertible loan grants to help them clear these hurdles.

Commercial renewable energy projects also suffer from limited access to low cost and concessionary finance and capital. As discussed, state-owned utilities and governments are responsible for financing new renewable energy projects. These countries do not have the fiscal space or national budgets to self-finance these projects, leaving them to seek loans and grants from multilateral development banks (MDBs) and bilateral lenders. However, the World Bank classifies Eastern Caribbean countries as middle- and high-income economies, disqualifying them from accessing low-cost loans from the World Bank and those that also use this classification, such as the US Development Finance Corporation. This also applies to the business community and energy developers who need access to financing during the pre-project phase (prefeasibility studies, production of design drawings, and environmental social and impact assessments, among others).

Applying the CEWG roadmap

Addressing utility constraints and unlocking new access to finance and capital both are needed, but a well thought-out process that takes the context and nuances of each country into account is needed. To the international community, these countries are bound by their similarities (e.g., population and market size, and geographic location). Realistically, there are enough differences between them that suggest that no solution to the region’s energy transition challenges can be a one-size-fits-all approach. Each country’s context will determine how the below solutions are applied, from unbundling utility structures to attracting finance and capital based on renewable energy. While each country needs a transition that is contextualized to its own reality, technical assistance and transmission upgrades are at the core of the energy transition. Policy action and financial resources are both required, and Caribbean governments and regional institutions will need the assistance of partners like the US Trade and Development Agency and the Inter-American Development Bank (IDB) to deploy the assistance throughout the transition process.

Based on the small consumer bases and state-owned nature of utility systems in the Eastern Caribbean, unbundling utilities might not actually lower electricity costs. Instead, the structure of the utility might be reformed to a public-private partnership (PPP) model that also accounts for price comparisons between fossil fuel imports with social cost externalities attached to a transition to renewable energies. In essence, PPPs are a collaborative model that leverages the strengths of both the public and private sectors, which can help accelerate the deployment of renewable energy infrastructure while ensuring cost-effectiveness and financing sustainability. For example, needed transmission upgrades can be undertaken by governments to help absorb costs and prevent them from being passed to consumers. And the private sector can take responsibility for generation projects, driving down costs and improving competitiveness. Governments and utilities are still able to benefit from the revenue to use for public-sector investments while private-sector entities can streamline innovation in the energy sector, helping to attract more commercial interest.

Designing PPP models will be complex. Each country and its utility or utilities are unique. The challenge will be designing the appropriate model. Here, entities such as the IDB should work with the Caribbean Development Bank (CDB), and use input from private-sector companies in the region, to design a PPP model for utility structures. The IDB houses the experience and expertise in designing PPP models, and through its new One Caribbean program is already building a project preparation facility that can incorporate PPP designs into its model.¹³ The challenge is that Eastern Caribbean countries are not members of the IDB, though they are borrowing member countries of the CDB. In the past, the CDB and the IDB have worked together to streamline assistance to and analysis for the Eastern Caribbean. The same can be done here, with the added benefit of the CDB already understanding the nuances of each of the countries in the subregion.

However, designing and implementing a PPP model requires political will and government support. Governments might not be anxious to adopt renewables if the cost of the electricity does not lower prices—affecting key political constituents—and if accelerating an energy transition comes with increased public debt through high-interest loans. Simply put, a transition is only possible if governments are given assurances and feel comfortable that incorporating renewables will not affect their standing with their constituents, meaning that entities like the IDB, CDB, and partners, such as the United States, will have to secure government support before an energy transition can take place.

As utility systems are able to reform their models to ensure that renewable energy projects are affordable for governments and consumers, support to countries and investors is needed to finance projects through the project pipeline. As discussed in the CEWG’s first report, the projects in the Caribbean tend to fall in the “valley of death,” due to project delays ranging from limited site access to an inability to secure additional financing. Key to moving projects through the pipeline is to derisk them and ensure their bankability. Two steps are needed. First, Caribbean countries need access to the expertise and capacity to conduct feasibility studies, environmental social and impact assessments, and design power purchase agreements, among other things. Second, Eastern Caribbean countries need access to investment vehicles that prioritize grants or low-cost loans for the upfront costs of renewable energy projects. Entities like IDB Invest have pockets of financing that allows the institution to inject equity into projects, but the pool of funds is small relative to what is available for other countries or subregions in Latin America.

This is where regional partners like the United States and existing regional programs like the CARICOM Development Fund (CDF) and the Bridgetown Initiative¹⁴ should be utilized. The United States government, through the International Development Finance Corporation (DFC), should take advantage of the current DFC reauthorization process to create a carve out for clean energy projects in the region. The scale of investment is minimal compared to other DFC-financed projects and would have outsized effects in the small markets and grids in the Eastern Caribbean. This would take an act of the US Congress—particularly for a middle-income country exception—but there is precedent and increasing appetite to prioritize energy security in the Caribbean. Further, the United States should encourage the IDB and the CDB to work with the CDF and the Bridgetown Initiative to create a project pipeline (with attached equity investments available) to attract large-scale financing and grants from global donors. Capital and finance around the world are available if regional partners and entities are able to build mechanisms that streamline funding to energy projects in the Eastern Caribbean and build a project pipeline to attract commercial investors.

A global call to action

An energy transition in the Eastern Caribbean requires political will, regional coordination, and consistent technical assistance. Relative to the cost of the global energy transition, the needed capital in the Eastern Caribbean is minimal. But the tides are changing in the region, as more political actors and financial institutions are thinking creatively of how to accelerate an energy transition. Still, human capital and capacity limitations stifle the region’s ability to undertake this process alone. Partner governments like the United States and Canada have committed to the region’s energy security in the past few years, but these two countries do not have the funding or domestic political will to direct their attention consistently to the Eastern Caribbean. Addressing the climate crisis and facilitating a global energy transition is increasing in urgency each day, meaning that more actors across governments, international bodies, the business community, and foundations are unlocking new forms of support. Tapping into these resources will be critical. Regional governments and their partners need to continue raising the profile of the Eastern Caribbean and using regional and global platforms, from the Group of Twenty to the UN General Assembly to the COP29 climate talks in November to ensure that these countries are not left behind.

Acknowledgments

The Atlantic Council thanks board member Melanie Chen for her financial support of this publication and the corresponding working group. A thank you also goes to the CEWG members who joined the numerous one-on-one consultations and roundtables that informed this publication, including co-chairs David Goldwyn and Eugene Tiah. A special thank you goes to Jason Marczak, vice president and senior director of the Adrienne Arsht Latin America Center, which houses the Caribbean Initiative, for his guidance and comments throughout the working group and during the drafting of this publication. Maite Gonzalez Latorre managed the production flow of this publication.

About the author

Staff

Wazim Mowla

Associate Director & Fellow, Caribbean Initiative

Adrienne Arsht Latin America Center

Caribbean China

Wazim Mowla is the associate director and fellow of the Caribbean Initiative at the Atlantic Council’s Adrienne Arsht Latin America Center. He leads the development and execution of the initiative’s programming, including the Financial Inclusion Task Force, the US-Caribbean Partnership to Address the Climate Crisis (PACC) 2030 Working Group, and the Caribbean Energy Working Group. Since joining the Council, Mowla has co-authored major publications on the strategic importance of sending US COVID-19 vaccines to the Caribbean, strategies to address financial derisking, and how the United States can advance new policies to support climate and energy resilience.

About the Caribbean Energy Working Group Co-chairs

David Goldwyn is president of Goldwyn Global Strategies, LLC (GGS), an international energy advisory consultancy, and chairman of the Atlantic Council Global Energy Center’s Energy Advisory Group. He is a globally recognized thought leader, educator, and policy innovator in energy security and extractive-industry transparency.

Eugene Tiah is a senior business executive with in-depth knowledge and more than forty years of experience in the oil and gas business within the United States and the Caribbean region. He is also the president and CEO of the Caribbean Energy Chamber.

Report May 31, 2024

PACC 2030 objectives: The road to implementation

By Wazim Mowla, Charlene Aguilera

The Atlantic Council organized a PACC 2030 Working Group and worked closely with governments, the business community, and civil society organizations to support the implementation of PACC 2030’s objectives.

Caribbean Climate Change & Climate Action

Report Mar 1, 2022

Financial de-risking in the Caribbean: The US implications and what needs to be done

By Jason Marczak, Wazim Mowla

This report identifies how the withdrawal of correspondent banking relations, otherwise known as de-risking, affects Caribbean economies, people, and US-Caribbean relations.

Americas Caribbean

Issue Brief Sep 20, 2022

PACC2030: Quick wins for a US-Caribbean partnership on climate and energy resilience

By Wazim Mowla, Riyad Insanally

PACC2030’s success is crucial for CARICOM countries and the United States, and it needs to deliver in the short term to generate confidence that the United States is committed to a sustainable partnership.

Caribbean Economy & Business

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

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The post Accelerating the energy transition in the Eastern Caribbean appeared first on Atlantic Council.

Executive summary

The European Union (EU) has increasingly raised its climate ambition, especially since the launch of the European Green Deal in 2019, which set a target of climate neutrality by 2050. The bloc’s achievement demands a contribution from all sectors: power, industry, buildings, and transport. The latter is sizable, accounting for almost a quarter of the total emissions of the twenty-seven EU members (EU-27) in 2021—with road transport responsible for more than 75 percent of the transport sector’s total emissions given its reliance on fossil fuels. Additional policies and measures are required since the sector’s emissions have substantially increased since 1990, unlike the other sectors.

While EVs are gaining relevance and are set to become an increasingly important factor in decarbonization, policymakers will need to address critical issues, especially relating to enabling infrastructure (i.e., charging stations) to have a sustainable and smooth transition. Italy, one of the largest car markets in Europe, has much to do to decarbonize road transport. It has developed alternative fuels, but electricity still accounts for less than 0.3 percent of vehicle fuels. It has set ambitious EV targets to achieve by 2030: 6.6 million cars including 4.3 million BEVs.

This article explores Europe’s rising ambition in electrifying this sector and the political and market drivers at work; presents the case of Italy, including its national objectives, trends, and challenges in the transition; and provides a summary of takeaways and policy recommendations to further support the electrification of the road transport sector, especially in Italy.

Pier Paolo Raimondi is a researcher in the Energy, Climate and Resources Program at the Istituto Affari Internazionali (IAI) in Rome. His main research topics are related to energy markets, energy policy, energy geopolitics, and geoeconomics. He also is a PhD student in institutions and politics at the Catholic University of Milan. He holds a master of international relations and a bachelor degree in political science from the University of Milan.

New Atlanticist Jun 12, 2024

Europe is gearing up to hit Chinese EVs with new tariffs. Here’s why.

By Atlantic Council experts

The European Commission just proposed new tariffs on China-made electric vehicles of up to 38 percent. Atlantic Council experts explain why—and what might happen next.

China Economy & Business

New Atlanticist May 14, 2024

What to know about Biden’s new tariffs on Chinese EVs, solar cells, and more

By Atlantic Council experts

The Biden administration has imposed new tariffs on imports from China across a range of strategic industries. Atlantic Council experts dig into the details.

China Economy & Business

The Atlantic Council in Turkey, which is in charge of the Turkey program, aims to promote and strengthen transatlantic engagement with the region by providing a high-level forum and pursuing programming to address the most important issues on energy, economics, security, and defense.

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The Europe Center promotes leadership, strategies, and analysis to ensure a strong, ambitious, and forward-looking transatlantic relationship.

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The post Electrification of the road transport sector in Europe and the case of Italy appeared first on Atlantic Council.

These new tariffs on both sides of the Atlantic signal greater alignment between Washington and Brussels on China. That is good news for the transatlantic partnership. But the technical differences in the latest salvos by the United States and Europe point to important differences in where Washington and Brussels are starting from and where they each might move next.

The Biden administration’s tariffs, announced on May 14, cover a wide range of strategic industries deemed critical to national security. These industries include steel, aluminum, microchips, EVs, and batteries. The most eye-grabbing figure was US tariffs on Chinese EVs quadrupling to 100 percent. The news from Brussels on June 12 delivered a similar but smaller effort, and one based less on a national-security framing. Moreover, Europe’s new tariffs are part of an ongoing investigation into Chinese practices, and therefore they are provisional.

The European Commission began its probe into Beijing’s massive subsidies of key sectors in October 2023. It has focused on the threat of cheap Chinese imports flooding the European market, driving down prices, and hurting Europe’s automotive sector. The investigation reflects a calculated approach, aligning with the EU’s new de-risking approach, but still, as is typical for the bloc, centering on adherence to World Trade Organization-complying trade defense regulations. 

Unlike Washington’s tariffs, which apply to the entire sector, the new European tariffs target specific Chinese companies. They do not, in the words of German Vice Chancellor Robert Habeck, amount to “punitive tariffs.” Europe’s tariffs on battery EVs will cover a wide umbrella of companies, including Western brands with production facilities and joint ventures in China. This leaves open the option for carmakers to relocate their production to Europe, thereby avoiding the tariffs.  

Much of the difference between Washington and Brussels is due to the different immediate market threats posed by Chinese EVs. The United States imported fewer than three thousand EVs from China last year, and the tariffs are in part intended to prevent Chinese market share from growing. In Europe, in contrast, China is already a major player. Chinese-made EVs account for around 25 percent of the European market, with Beijing exporting 430,000 such vehicles to the continent in 2023, a number that has quadrupled in the past five years. The EU decision therefore must be seen as an attempt to strike a balance between protecting Europe’s internal automobile industry and avoiding escalation into a trade war with Beijing.

Another factor is European unity—or lack thereof. European Commission President Ursula von der Leyen has underscored that Europe “will not waver from making tough decisions needed to protect its economy and its security” and she has not shied away from directly confronting China’s leadership on Chinese overcapacity “flooding the European market.” But von der Leyen is well out in front of many of her European counterparts with her economic security agenda. Export-oriented members, such as Germany, Sweden, and Greece, have expressed reservations toward the increased tariffs, and the Commission’s announcement came only after an eleventh-hour push by Germany to lower the tariffs.

This hesitance from certain member states is spurred on by Beijing, which has fought the investigation since its inception and sought to sow division within the bloc. Even though Europe’s countervailing duties are likely insufficient to offset the advantage China holds in production, Beijing has warned that the EU’s moves could lead to a trade war. On June 17, Beijing opened a dumping probe into imports of pork from the EU in response to Brussels’ tariff announcement.

Prior to the news of the EV tariffs, China also threatened retaliatory tariffs targeting German carmakers, French luxury products, and the European aviation and agricultural sectors, highlighting the breadth of China’s appetite to hit back at sectors that will hurt specific EU countries.

Another difference between the US and EU tariffs is the finality of these announcements. The Biden administration can move relatively quickly and decisively, but the European Commission’s tariff announcement is provisional. The investigation is still ongoing, and final tariffs will come four months after the provisional tariffs’ imposition on July 4. The EU’s tariffs could realistically be lowered during this time if China continues to push back and if EU member states get skittish. The EU and China have already begun consultations on the tariffs, which may bring about some revisions to the EU’s actions.

Finally, there is the issue of leadership. The United States will hold an election in November, but Washington is generally united on its approach toward China. As the Biden administration’s extension of many of the Trump administration’s policies toward Beijing signal, tariffs and a hardline approach on China will likely feature in any next US administration. There is far less certainty of consistent support in Europe, however.

Over the summer, the European Commission leadership will turn over. If von der Leyen were to win a second term leading the next Commission, it would solidify the EU’s increasingly tough trade policy approach toward China, signaling continuity and alignment with Washington. But nothing is guaranteed. Von der Leyen has yet to be nominated by the EU’s member states or confirmed by the European Parliament. She will certainly defend her Commission’s decisions on China, but she may be forced to make concessions on future action to secure her post. This trade saga is far from over.

Jacopo Pastorelli is a program assistant with the Atlantic Council’s Europe Center.

James Batchik is an associate director at the Atlantic Council’s Europe Center.

The post The EU’s new tariffs are just the start of the EV trade saga with China appeared first on Atlantic Council.

But that assessment seems to be more of an issue of semantics than an accurate reflection of voter sentiment. Widespread discontent among Indian farmers and agricultural laborers (sectors that represent 43 percent of the country’s total workforce), persistent inflation, and a lack of jobs for India’s youth, have all been cited as reasons for the BJP’s slide. All of these problems, at least in part, are caused by climate change, whether post-election coverage acknowledges this or not. To maintain popular support, the coalition government will need to adopt long-term climate solutions that connect directly to the livelihoods and economic needs of India’s youth and agricultural sector.

Farmers have been struggling with the impacts of extreme weather events on their crops for years (not to mention their anger over Modi’s attempts to disincentivize crop residue burning). The corresponding rise in agricultural product prices has stoked inflation. Additionally, disruptions in supply chains caused by flooding, cyclones, and droughts exacerbated already high costs for consumer products. Certainly, extreme heat impacted worker productivity in the agricultural and construction sectors, contributing to lackluster hiring of young workers, who often fill these jobs. Climate change is the hidden hand behind many of these worrying economic trends.

Notably, the BJP did take some significant actions on climate change prior to the elections: Modi made pledges that India would achieve energy independence by 2047, have five hundred gigawatts of renewable energy by 2030, and become central to the manufacture of green technologies. While these are laudable goals, it seems that they were not ambitious enough, or targeted for dates too far into the future, to quell voters’ concerns. Going forward, Modi and his coalition government will need to do more to connect climate change initiatives with kitchen table issues.

An example of a winning climate change solution already exists in Punjab. India’s largest bio-compressed natural gas (CNG) facility became operational in Lehragaga, Punjab, in 2022, with support from the BJP’s Sustainable Alternative Towards Affordable Transportation program, even though Punjab is not a BJP-controlled state. This facility converts paddy stubble (the leftover plant debris after a rice harvest) into bio-CNG, which significantly reduces the need for stubble burning, a major cause of air pollution throughout India. The stubble is collected directly by the facility, alleviating the cost and time that normally burdens farmers, thereby making the harvesting process more profitable. The byproduct of the facility’s process is biomanure, which can be used to enrich soil, further benefitting farmers. Ultimately, the plant produces cost-effective renewable CNG, which can be used for cooking, automotive fuel, and other applications. Duplicating this kind of facility throughout the agricultural regions of India could win over disgruntled farmers, provide new renewable energy jobs for young people, address the harms caused by climate change, and strengthen India’s energy security. The BJP’s Waste to Energy Programme under the Ministry of New and Renewable Energy could be expanded and more aggressively mobilized to facilitate this.

Likewise, the use of vetiver grasses to mitigate the impacts of flooding, which has markedly increased due to climate change, has a long history in India. Unfortunately, a byproduct of the industrialization of agriculture in the name of enhanced productivity has caused traditional, yet effective, practices like the use of vetiver grasses to be left behind. These hardy grasses, when planted along rivers and other sources of floodwaters, strengthen embankments and can largely prevent the soil erosion responsible for catastrophic landslides. These grasses also absorb carbon from the atmosphere and help recharge local groundwater. A new coalition government program that encourages vetiver use would help farmers avoid crop damage from flooding, while also reducing the cost of irrigating fields. The program could create vetiver planting jobs (suitable for youth and agricultural workers) and dovetail with national goals for planting more carbon-sequestering vegetation. This is a climate change solution with a direct connection to the issues that voters care about. Notably, vetiver can also be harvested for use in cosmetics, perfumes, and other personal care products. It can also be used as a feedstock for producing cellulosic ethanol, a renewable fuel. Producing these products domestically using vetiver would also give a boost to Modi’s “Make in India” initiative.

While Modi’s emphasis on building infrastructure for transportation, power, and sanitation has proven popular with the Indian public, more can be done to improve the country’s water management. Rainwater and floodwater retention systems have a long history in India, with the famous Rani Ki Vav stepwell and rainwater retention system (located in Modi’s native state of Gujarat) even being featured on the one-hundred-rupee note. A government coalition program that emphasizes such kinds of water catchment systems would help recharge local groundwater and reduce the impacts of flooding, creating value for the agricultural sector while also allowing Modi to lean into traditional practices that provide a source of national pride. 

There are many climate change programs that connect with kitchen table issues and resonate especially well with farmers and youth; Modi has an opportunity to strengthen support for the BJP by redirecting some of his energies to these programs. His prior use of short-term subsidies on grain and cooking gas temporarily obscured underlying problems without fixing them (which likely had the effect of inhibiting the development of long-term climate solutions). Similarly, export restrictions on rice and other agricultural commodities dampened market demand and farmers’ incomes in the name of marginally helping the common person. Instead of these approaches, Modi and his coalition government would be well served by promoting long-term, job-creating solutions, such as those involving bio-CNG, vetiver grasses, and water retention and detention.

Whether acknowledged or not, climate change influences the Indian electorate and underlies the discontent felt by many voters. Importantly, making progress on climate change in ways that are highly visible to the common person will help galvanize support from India’s youth, who currently have pessimistic views of humanity’s prospects of enduring climate change. They also happen to be the key to winning future elections.

Shék Jain is a nonresident senior fellow at the Atlantic Council’s South Asia Center and chairman of the Pura Terra Foundation.

The post Climate change was a hidden force in India’s elections. Now Modi needs to deliver solutions. appeared first on Atlantic Council.

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Bangladesh’s air quality crisis

The air quality index (AQI) measures air pollution through levels of PM2.5, fine particulate matter small enough to penetrate the lungs and enter the bloodstream. This past decade, PM2.5 concentration in Bangladesh’s capital, Dhaka, came in at a yearly average of 77.1 micrograms per cubic meter (μg/m³), more than eight times higher than the US Environmental Protection Agency’s health-based PM2.5 standard of 9.0 μg/m³ per year.

Bangladesh’s alarming AQI has many causes, including vehicle emissions, industrial discharges, and the widespread use of kilns to make bricks. These are all exacerbated by the absence of stringent environmental regulations and enforcement.

This extreme level of air pollution exacts a severe human toll. Particulate pollution has reduced the average life expectancy in Bangladesh by 6.9 years. By contrast, the next-biggest health hazard in the country—tobacco use—reduces life expectancy by 1.6 years, while child and maternal malnutrition in Bangladesh are responsible for a 1.4-year decrease. Pollution in Bangladesh not only has a dire immediate health impact; it poses negative long-term consequences on the well-being and productivity of its population​​.

Rising incomes, rising emissions

Bangladesh’s level of carbon emissions are also rising, tied to increasing levels of development fueled by hydrocarbons. Between 2010 and 2022, Bangladesh’s annual per capita income rose by three-and-a-half times to reach nearly $2,700 in real terms. Over the same period, Bangladesh’s consumption of oil and coal rose by factors of three and six, respectively. Natural gas consumption also rose by 52 percent.

While greater economic growth has improved living standards in Bangladesh, air quality has worsened. A World Bank study found that average annual PM2.5 concentration levels in Dhaka rose from 84 μg/m³ in 2013 to 106 μg/m³ in 2021.

Bangladesh’s growing use of fossil fuels has not only worsened air pollution, it has also contributed to climate impacts, which will increasingly produce negative economic effects. The United Nations Intergovernmental Panel on Climate Change says Bangladesh could lose 2 to 9 percent of its GDP from more frequent natural disasters like tropical cyclones and severe flooding.

It’s important to note, however, that Bangladesh’s use of coal pales in comparison to other regional actors. According to data from the Energy Institute, China’s consumption of commercial solid coal fuels exceeded Bangladesh’s by more than 325 times in 2023. So, while the world should seek to mitigate Bangladesh’s coal consumption, the country only contributes about 0.4 percent of all world emissions, even as China accounted for about 27 percent of greenhouse gas emissions in 2021, according to Climate Watch.

Nevertheless, if Bangladesh’s use and import of coal remains on its current trajectory, 2024 is poised to break national emissions records—and, more significantly—degrade its air quality and economic goals. Importantly, Bangladesh’s coal use could harm its export abilities as the European Union and other jurisdictions impose carbon border adjustments.

Bangladesh’s difficult transition to clean energy

Bangladesh’s poor air quality is disproportionately large compared to its overall carbon footprint. The country contributes less than 1 percent of global carbon emissions, yet its cities have some of the worst AQI scores in the world. Fifty-nine percent of the country’s energy derives from natural gas, 31 percent from oil, and 10 percent from coal. Renewables are a negligible part of Bangladesh’s energy mix, while coal use has ticked up sharply in both absolute and proportional terms.

Coal-versus-gas competition has great relevance for Bangladesh’s air quality. While natural gas emits carbon dioxide, it produces far fewer particulates than coal, with some studies showing that swapping coal for gas can reduce harmful emissions of sulfur dioxide by more than 90 percent, and of nitric oxide and nitrogen dioxide (NO_X) by more than 60 percent.

Coal-to-gas switching is a quick and relatively easy fix for Bangladesh’s air quality concerns, given the country’s daunting challenges in switching to clean energy. Bangladesh’s solar and wind resources are limited, and it has weak hydropower potential. The country suffers an absence of summertime breezes, reducing wind’s usefulness in meeting peak demand during the hottest months.

The promise of nuclear energy

Given its constrained supply of indigenous renewables, Bangladesh is building two new nuclear power plants, for which Russia, China, and South Korea all provided bids. In 2009, Russia’s proposal was accepted. Bangladesh’s first reactor, which began construction in 2017, is set to begin operation this year.

While nuclear energy produces no emissions or pollutants, Bangladesh’s pursuit of the technology has not been cheap. Russia’s Rosatom is providing technical assistance, but Bangladesh is responsible for financing, for which it received a Russian loan. The Rosatom-led Rooppur project will cost $12.65 billion and is set to have a total capacity of 2.4 gigawatts. While nuclear energy is useful for decarbonization and improving air quality, expanding it further in the near term will prove difficult for Bangladesh. Capital financing costs have risen since Russia’s full-scale invasion of Ukraine, while tie-ups with Rosatom are potentially fraught. Some US legislators have called for sanctions on the state-owned Russian nuclear power giant, although experts generally believe these measures would disrupt Western markets while providing few geopolitical benefits. 

How Bangladesh can improve its air quality

A nearer-term and more affordable option for reducing air pollution is liquefied natural gas (LNG). LNG is a fossil fuel, but it burns cleaner than coal and oil, which can help improve air quality.

Other measures to improve Bangladesh’s air quality could target vehicles, a major source of air pollutants. Bangladesh should look to models such as Mexico City’s ‘hoy no circula’ or Beijing’s odd and even days to limit vehicle pollution.

In Mexico City, the last number of a vehicle’s license plate determines which days it can be driven, with only the lowest-emission vehicles allowed to operate seven days a week. In Beijing, a similar program dates back to 2008, when China hosted the Summer Olympics. Beijing’s restrictions limit which weekdays cars with license plates ending in certain digits are allowed on the road.

These measures come at a significant economic cost, which may be too high given Bangladesh’s lower level of economic development compared to Mexico and China. But Bangladesh’s cities may consider such tradeoffs as acceptable given the severity of the country’s air quality crisis.

Over the longer term, Bangladesh can access cleaner electricity and lower its air pollution by integrating its grid with other hydropower-rich countries in the region. In January 2024, India concluded an agreement with Nepal to import 10,000 megawatts of hydropower from the Himalayan country, showing that cross-border electricity deals are possible in the region.

While deeper integration of regional electricity markets will require substantially more political trust than exists today, cooperation is necessary to meet Bangladesh’s energy access and air quality needs.

Bangladesh’s air quality trilemma

There are no easy ways to mitigate Bangladesh’s air quality crisis. Bangladesh has little renewable energy potential and faces difficulties in expanding nuclear energy or adopting vehicular emissions programs given the country’s limited financial resources. Moreover, Bangladesh suffers from substantial energy poverty, making improved energy access a top priority.

It is extremely difficult to balance these concerns, particularly in the short term. But in the longer term, trade in low-emission fuels and clean electricity can help Bangladesh resolve its trilemma of ensuring clean air, economic growth, and sustainable energy access.

Joe Webster is a senior fellow at the Atlantic Council Global Energy Center.

Natalie Sinha is a former young global professional at the Atlantic Council Global Energy Center.

Sarah Meadows is a former young global professional at the Atlantic Council Global Energy Center.

This article reflects the authors’ personal opinions.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Joseph Webster

Senior Fellow, Global Energy Center

Global Energy Center Indo-Pacific Security Initiative

Central Asia China

EnergySource Feb 10, 2020

The climate and equity dilemma: Bending the coal curve in South and Southeast Asia

By Robert F. Ichord, Jr.

South and Southeast Asia are leading the world in terms of developing countries’ energy growth—how can need be met while avoiding new coal investments?

Bangladesh Energy Transitions

EnergySource Jun 6, 2023

Natural gas reduced China’s urban air pollution. Can it be a global climate solution?

By Joseph Webster

Greater uptake of natural gas has helped substantially reduce urban air pollution in Beijing. Ahead of COP28 discussions this year, the United States, China, and other countries should encourage responsible natural gas production as a solution for reducing global emissions and urban air pollution.

China Climate Change & Climate Action

EnergySource Sep 20, 2021

India is key to US climate ambitions, and the Quad can help

By Reed Blakemore, David Yellen

India’s massive demand for energy is projected to grow rapidly over the next several decades, and its current coal reliance will be difficult to break. But doing so is vital, both to global decarbonization and US geopolitical interests. The Quad can help provide the requisite security, investment, and support to help India undertake this challenge.

Energy & Environment Energy Transitions

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Bangladesh’s air quality is among the world’s worst. What can be done? appeared first on Atlantic Council.

The statement released by G7 leaders after their summit last week garnered ample attention for its strong language on China’s unfair economic practices and ongoing support for Russia’s war on Ukraine, and triggered a predictably sharp Chinese response. The back-and-forth is another reminder of China’s worsened relations with developed democracies over the past few years.

Beijing is by no means abandoning those relationships – Premier Li Qiang’s visit to Australia and New Zealand this week, not to mention President Xi’s trip to Europe last month, underscore a drive to mend damaged ties. But the incident is another piece of evidence confirming that Beijing’s positions on global and economic issues receive a more welcoming reception in the developing world, where China’s economic and political ties are growing by the day.

China’s strategic shift toward greater focus on the so-called Global South is unmistakable. One need only look at where China is spending diplomatic attention and propaganda dollars.

As colleagues at the Digital Forensics Research Lab explore in a new report on China’s messaging in Africa, China is increasingly promoting pro-Russian narratives about Ukraine in sub-Saharan Africa using its media platforms, commentators, social media, and broadcasting infrastructure. The effort aims to portray China as a force for peace while the United States prolongs the war, in line with Beijing’s drive to enhance its reputation relative to Washington across the developing world.

This effort to shape perceptions of China’s responsible global role in contrast to the United States is now routinely reflected in the content of high-level diplomatic engagements with developing countries.

In his speech just last week at the BRICS Dialogue with Developing Countries in Russia, Foreign Minister Wang Yi not only underscored China’s leadership of the Global South as the “largest developing country” but also called for the convening of “a true international peace conference” on the Ukraine war that involves Russia – after Beijing pulled out all the stops to try to scuttle the Swiss-organized conference earlier this month – and threw in some choice words on US efforts to “maintain its unipolar hegemony” for good measure.

As I and the Global China Hub team discovered on a trip to Brazil, Colombia, and Honduras earlier this month, China is also ramping up diplomatic, economic, and technological engagement across Latin America, and pairing those efforts with a push to shape understanding of China across the region. Our editor-in-chief Tiff Roberts dives into that and much more in this issue of Global China – take it away, Tiff!

-David O. Shullman, Senior Director, Atlantic Council Global China Hub

Fellow

Dexter Tiff Roberts

Nonresident Senior Fellow

Global China Hub Indo-Pacific Security Initiative

China Chinese

Latin American officials flood Beijing revealing China’s global priorities

Want to know one key region of the Global South China is now focusing on? Take a look at who visited Beijing in early June. Before the first week of the month was even over, Brazil’s Vice President Geraldo Alckmin, Venezuela’s Foreign Minister Yván Gil, and special envoy of Cuban President Miguel Díaz-Canel and Minister of Foreign Affairs Bruno Rodríguez Parrilla had all passed through China’s capital (the Brazilian vice president met with Xi Jinping and secured $4.49 billion in credit concessions. Brazil has been a key market for China too, as evidenced by an eighteen-fold surge in Chinese EV sales by value).

Latin America, with its rich resources, is a key target as China expands its global economic and political reach, and that’s a concern for the US. Testifying before the US-China Economic and Security Review Commission hearing “Key Economic Strategies for Leveling the U.S.-China Playing Field: Trade, Investment, and Technology,” Pepe Zhang of the Adrienne Arsht Latin America Center called for a development-focused economic partnership with LAC that would make the Western Hemisphere more competitive, resilient, and better integrated with the US.

Economics used to bolster authoritarian power in Global South training

China’s commerce ministry isn’t just fretting about EU tariffs (see below). It has also spearheaded an effort to train officials in countries across the Global South. And perhaps not surprisingly, the instruction is about more than trade and economics: “This effort is integral to the PRC’s drive to transform a global order currently predicated on the centrality of democracy and individual rights to one more “values-agnostic” and thus suited to China’s rise under authoritarian CCP rule,” writes the Global China Hub’s Niva Yau in a June 12 report called “A Global South with Chinese Characteristics” (watch the launch event here). The 795 training descriptions reviewed by Yau show “how the PRC marries economics and politics in its trainings, revealing that Chinese economic achievements are used to support authoritarian ideals.”

The report certainly got the PRC’s attention. The Chinese Embassy responded, saying the report is “full of Cold War mentality and ideological prejudice,” with the Foreign Ministry adding that “China has always respected the peoples of all countries in independently choosing their development paths and social systems,” which is very reassuring.

A new, coordinated transatlantic response to China emerges on trade?

In a widely expected move, the European Union announced new tariffs on Chinese electric vehicles on June 12, up as much 38.1% on top of existing taxes of 10% before, affecting companies including BYD, SAIC, and NIO. Also to no surprise was the heated response from Beijing: the move by the EU “undermines the legitimate rights and interests of China’s EV industry,” and is “blatant protectionism,” Ministry of Commerce spokesperson He Yadong said in a press briefing. On June 17, Beijing officially launched an anti-dumping probe on imported pork and its by-products from the EU in response.

With the EU action coming just over a month after US President Joe Biden imposed tariffs on EVs of 100%, is a new, more coordinated transatlantic response to the Chinese trade juggernaut emerging? On June 3rd, in an ACFrontPage conversation with United States Trade Representative Katherine Tai, she did not mince words on how the US and the EU should adapt the transatlantic trade relationship to reflect the realities of China’s economic system, saying “Capitalism with Chinese characteristics… I haven’t heard that term used in many, many years. At this point, I think it’s less diplomatic than just sort of ahistorical. The China that we’re dealing with now, the PRC, is not a democracy. It’s not a capitalist, market-based economy.”

In an Econographics article exploring a similar theme entitled “Biden’s electric vehicle tariff strategy needs a united front,” the GeoEconomics Center’s Sophia Busch and Josh Lipsky write, “tariffs, working in isolation, can’t fully achieve all the objectives—no matter how high they go. It’s only when tariffs are relatively aligned across countries… that the trajectory could change.”

And it’s not just EVs that pose a threat to global industries. Without tariffs, the EU faces a flood of Chinese imports of the “new three” clean tech exports—lithium-ion batteries, solar panels, and, of course, electric cars (along with the action against EVs, the White House also raised tariffs simultaneously on lithium-ion batteries and solar cells to 25%.) “Imports of the new-three cleantech export categories have skyrocketed in recent years. Over the course of 2023, China’s exports to the EU totaled $23.3 billion for lithium-ion batteries, $19.1 billion in solar panels, and $14.5 billion for electric vehicles,” the Global Energy Center’s Joseph Webster wrote in a piece for EnergySource.

• Beginning on June 17, Atlantic Council President and CEO Fred Kempe and former President of Latvia Egils Levits have co-led the Atlantic Council’s annual delegation trip to Taiwan, hosted by the Taiwanese government. Joined by former Czech Minister of Foreign Affairs Tomáš Petříček, they will meet with Taiwan government leaders, including President Lai, think tanks, and business representatives to discuss security and economic issues facing Taiwan and the Indo-Pacific.
• The Global China Hub hosted a public conversation on allied solutions to de-risking tech supply chains from Chinese investment to spur collective action between the United States and government and private sector partners in Europe and the Indo-Pacific. The event was a continuation of the Hub’s work on tech competition and China’s drive to dominate emerging technologies and relevant supply chains.
• China’s trade with Russia has risen substantially since the Kremlin’s full-scale invasion of Ukraine, significantly bolstering Moscow’s war aims, according to new research by the Global Energy Center’s Joseph Webster.
• Xi Jinping’s recent visit to Europe was in part intended to divide it as the EU increasingly hardens its stance on China. The Global China Hub’s Zoltán Fehér explores the degree to which Xi was successful in these efforts in a New Atlanticist piece.

Global China Hub

The Global China Hub researches and devises allied solutions to the global challenges posed by China’s rise, leveraging and amplifying the Atlantic Council’s work on China across its 16 programs and centers.

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The post Global China Newsletter – Sharp words, sharper tools: Beijing hones its approach to the Global South appeared first on Atlantic Council.

While energy was not the driving issue for the majority of the 185 million European voters for this election, the newly elected Parliament will play an important role in determining how to defend the bloc’s energy security, reduce emissions, and boost competitiveness.

Our experts weigh in on the impact of Europe’s elections on these issues.

Click to jump to an expert analysis:

András Simonyi: Will the EU elections slow its energy transition?

Pau Ruiz Guix: How the EU can stay the course on clean energy goals

Andrei Covatariu: EU elections put climate, energy security, and political capital at risk

Elena Benaim: EU climate and energy agenda hangs in the balance

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Will the EU elections slow its energy transition?

Five years ago, the European Commission under President Ursula von der Leyen set out to make the green transition its top priority. What comes next for the EU’s climate and energy agenda is uncertain. The Parliament’s new composition, and, perhaps even more importantly, the final choice of Commission president (which is up in the air) and members of the Commission, along with the distribution of portfolios, will be reflective of but also critical to the future direction of the EU.

While the gains of the extreme right are mainly a result of the migration crisis, the huge losses suffered by the Greens, plus the economic and political costs of the energy transition, need to be taken into account. These indicate a strong push to “rebalance” green transition and energy security.

Europe’s competitiveness has thus been added to climate and security/energy security concerns—for some member states, it is the number-one priority. Besides the geopolitical realities, as we warned years ago, the “absorption” capacity of European societies increasingly determines the speed with which the green transition can move forward.

There is an overwhelming view that now the next Commission will have to focus on the implementation of previous decisions. There are clearly two competing political trends, however. One aims to speed up the green transition as a panacea to all the issues mentioned above. The other takes a more pragmatic and realistic position to continue the transition, while taking into account the security, cost, and social aspects of that transition.

No matter what, energy security will take center stage. This means that US liquefied natural gas (LNG) will continue to play a major role, particularly as the majority view in Europe is that it will not go back to the status quo ante with Russian energy supplies.

András Simonyi is the former Hungarian ambassador to the United States and a nonresident senior fellow with the Atlantic Council Global Energy Center.

How the EU can stay the course on clean energy goals

The European elections results reflect a sentiment that has already been increasingly apparent: a need to align ambitious climate policy with a competitiveness and resilience agenda that delivers growth and economic security. While the reality of European policymaking means that a clearer picture will only emerge when new leadership is at the helm of the European Commission, the next five years will be all about implementing already-adopted regulation to reduce European greenhouse gas emissions by 55 percent by 2030.

To deliver on deep decarbonization goals, EU countries will need to implement targets to decarbonize hydrogen production at a time when carbon pricing will be extended, and the Carbon Border Adjustment Mechanism will be implemented and potentially expanded.

To deliver on domestic clean technology manufacturing goals, the new European leadership may opt to accelerate a trend toward re-shoring and friend-shoring, requiring new instruments, partnerships, and relationships within the multilateral trade system.

To deliver on clean hydrogen deployment goals, a sector where final investment decisions (FIDs) are struggling to take off, the new mandate should finalize low-carbon hydrogen rules and revise clean hydrogen rules reflecting what works and what doesn’t.

Achieving these three broad goals, which inevitably tackle global and trade-exposed sectors, will require strong climate and energy diplomacy that strengthens global cooperation on increased decarbonization of hard-to-abate industries, supply chain security, and regulatory alignment and certification. The US position and transatlantic cooperation will play a key role in achieving these objectives, and, therefore, not only European elections but American ones in November will inform and influence the realm of possibilities.

All in all, a world of different speeds in the energy transition is a challenging place, and the European experience shows that only by working together is it possible to balance climate, economic, and security objectives to the benefit of the people and the planet.

Pau Ruiz Guix is a trade and international relations officer with Hydrogen Europe.

EU elections put climate, energy security, and political capital at risk

In 2022, after Russia’s full-scale invasion of Ukraine, the European Commission set ambitious energy and climate targets to a significant extent aimed at minimizing social unrest and maintaining political stability in the European Parliament for the 2024 elections. This strategy largely succeeded, with the 2019 political coalition still holding a majority—albeit a narrow one— while public protests have been managed over the last years.

However, overambitious targets may soon backfire. As Commission President Ursula von der Leyen works to secure a strong coalition (which could include the Greens), some of the energy and climate objectives are at risk. Revising the approved 2030 targets is complex and politically risky with a right-leaning European Parliament. This could slow the transition pace, possibly enhancing short-term energy security but undermining long-term climate goals and supply security.

An alternative would be to maintain the existing targets, but this approach would also risk leaving goals unmet. This outcome could hurt energy security and political credibility, especially as the deadline for meeting targets falls right after the five-year term of the newly elected European Commission. Failing to meet the targets could erode the credibility of the leaders who will be in power at the end of this decade.

Looking beyond 2030, negotiations over the unapproved 2040 EU energy and climate targets pose even greater challenges than before, thus creating yet another significant political risk. Additionally, the EU enlargement process may also become less ambitious, which will only continue to generate spillover effects. Prospective countries would remain easily targeted by Russia with physical attacks on critical infrastructure, cyberattacks, or energy supply cuts, which will continue to hurt EU member states.

Andrei Covatariu is senior research associate at Energy Policy Group (EPG) and a research fellow at the Centre on Regulation in Europe (CERRE). This article reflects his own personal opinion.

EU climate and energy agenda hangs in the balance

On June 6, 2024, when called upon to vote for the European Parliament, European voters kept the center-right European People’s Party (EPP) as the leading group with 190 seats—a slight increase compared to the previous elections. However, to hold the majority, which requires 361 seats out of 720, the EPP will need to find working coalitions with other groups to pass legislation.

As announced by the EPP, European Commission President Ursula von der Leyen will again be their candidate for the presidency. With a second mandate, von der Leyen would be expected to protect the Commission’s legacy (including its key initiatives such as Fit for 55 and RePower EU) and to continue focusing on competitiveness, cleantech, innovation, global leadership, and energy resilience. However, coalitions in the European Parliament will heavily determine the direction of climate and energy policies.

With a majority formed by the EPP, Progressive Alliance of Socialists and Democrats (S&D), Renew Europe, and the Greens, the European Green Deal could be safe in terms of ambitions and targets. The coalition would probably maintain a decarbonization agenda strongly focused on energy security and industrial competitiveness and a likely dominant conversation around the social dimension of the energy transition.

With a majority that includes the hard-right group European Conservatives and Reformists (ECR), there could be a serious risk of seeing climate ambition weakened. Right-wing parties in member states have openly criticized Europe’s climate ambition, and this could result in undermining the provisions of the Fit for 55 plan. It might also complicate the already challenging discussion on unlocking investments for the green transition at the EU level.

A move to the right by the EPP would have severe implications for the legacy that the previous Commission built and hinder the possibility for the EU to build a strong industrial competitiveness strategy that supports the energy transition and climate targets.

Elena Benaim is a nonresident fellow with the Atlantic Council Global Energy Center.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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András Simonyi

Nonresident Senior Fellow

Global Energy Center

Energy & Environment Europe & Eurasia

Staff

Olga Khakova

Deputy Director, European Energy Security

Global Energy Center

Geopolitics & Energy Security Europe & Eurasia

Fellow

Elena Benaim

Nonresident Fellow

Global Energy Center

Energy & Environment

EnergySource May 3, 2024

G7 pledges to end coal—but only inclusive action will make a real climate impact

By Elena Benaim

During the G7 energy ministerial in Turin, Italy, climate, energy, and environment ministers made a historic pledge to phase out coal power plants by 2035 among other agreements. But members ultimately need to turn pledges into action to blunt the impacts of climate change.

Africa Brazil

EnergySource May 23, 2024

From Vilnius to Warsaw: How to Advance Three Seas Goals Between Summits

By Olga Khakova

To define regional goals of digital, transport, and energy integration, the leaders of the Three Seas Initiative member states and partners meet annually. But to make real progress toward these goals, they must now create a secretariat to coordinate and act on challenges throughout the year.

Central Europe Eastern Europe

EnergySource Apr 3, 2024

Central and Eastern Europe needs to rethink its approach to energy security

By Pawel Czyzak and Nolan Theisen

The upcoming Three Seas Initiative Summit is an opportune time for Central and Eastern European leaders to pivot toward clean, affordable, and local renewables to build energy security.

Central Asia Central Europe

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Will the new Parliament change Europe’s course on energy security and climate? appeared first on Atlantic Council.

A recent survey by the Yale Program on Climate Change shows that Indians are highly aware of climate change and its impact on India’s future: A staggering 86 percent “favor the Indian government’s commitment to reduce India’s carbon pollution to nearly zero by 2070.” According to the survey, 85 percent agree that “transitioning from coal to wind and solar energy to produce electricity will reduce air pollution,” and 82 percent say “doing so would reduce global warming.” Surprisingly, the survey revealed that 84 percent “favor banning the construction of new coal power plants, closing existing ones, and replacing them with solar and wind energy.”

At the same time, Indians are concerned about the unintended consequences of climate change policies. The Yale survey showed that 61 percent say transitioning from coal to wind and solar energy to produce electricity “will increase unemployment in India,” 58 percent say “it will cause electricity outages,” and 57 percent say “it will increase electricity prices.” 

Indians are aware that they are among the world’s top emitters of greenhouse gases, including carbon dioxide (CO2). India’s CO2 emissions are relatively low per capita, ranking just sixteenth in Asia and ninety-ninth globally. But India’s burgeoning population, need for economic and job growth, and role in the global digital and technology ecosystem mean that India will need multiple power sources, including coal and other fossil fuels, for the near future. In fact, the International Energy Agency’s 2021 India Energy Outlook notes that the country needs to add a power system the size of the entire European Union grid to meet its energy requirements over the next twenty years. A blend of energy sources that moves swiftly toward green energy is the only viable option.

Indian leaders have committed to lowering their country’s dependence on coal and other fossil fuels, reduce its carbon intensity by 45 percent, and achieve 50 percent cumulative electric power from renewables by 2030. Equally ambitious, India would like to achieve net-zero carbon emissions by 2070. A 2023 report by the International Energy Agency stated that India is expected to produce over half of the world’s new capacity for renewable energy over the next three years. Much of this should be credited to India’s aggressive renewable energy policies.

Three opportunities for Modi to boost clean energy

But with Prime Minister Narendra Modi winning a historic third consecutive term, leading a coalition government, he has the mandate to go beyond issuing regulations and providing government financing. There are three opportunities that the Modi government could take right away to further support and strengthen its clean energy agenda.

First, businesses require certainty. Indian laws and regulations are not required to have sunset provisions and can be revoked or terminated at any time. This discourages large-scale private sector commitments and investments. Defined regulatory and legislative terms articulate the government’s commitment to its policies and allow businesses to accurately assess its financial commitments. Similar to the United States’ 2022 Inflation Reduction Act, the Modi government could commit to a ten-year sunset for its clean energy programs. After ten years, when the regulations need to be reauthorized, the laws can be updated to meet current demands.

Second, to help support clean energy businesses, the government needs to expand its institutional capacity at the state level and properly invest in education systems to produce a skilled workforce.

Third, with the increase in power generation, India must ensure that its electrical grids can receive and transmit the power to customers (the last mile). Failure to do so could cause India to miss its clean energy targets and lead to a slowdown in economic and job growth.

Over the past three decades, more than 3,500 climate policies have been announced by nations around the world, according to the World Economic Forum. From 2010 to 2015, China issued the highest number of climate policies. But from 2015 to 2022, India took the lead by issuing more than fifty climate change policies. These ranged from production-linked incentive schemes to policies that encourage the use of clean energy products such as rooftop solar energy. This multifaceted approach is backed with the objective of reducing India’s carbon intensity by 45 percent compared with 2005 levels and generating 50 percent of electric power from renewable sources by 2030.

What the private sector is already doing

The private sector has positively responded to India’s ambitious goals. For example, in 2022 the Adani Group* started developing the world’s largest renewable energy park. Through an ecosystem of manufacturing, generation, and transmission, the Khavda renewable energy park, located in the deserts of Gujarat, is combining wind and solar power to generate 30 gigawatts of energy for the national grid. When completed in 2029, the park will power 16.1 million homes and eliminate 58 million tons of CO2 emissions annually, the developers say. To put that in perspective, it is the equivalent of planting more than two billion trees or not burning 60,300 tons of coal each year. Another massive Indian conglomerate, Tata Group, recently completed India’s largest solar and battery energy storage system via its Tata Power Solar Systems subsidiary. Tata says that the facility, which is in Chhattisgarh, combines a 100 megawatt solar photovoltaic project combined with a 120 megawatt hour battery storage system. The developers expect the project to reduce India’s carbon footprint by 4.87 million tons of CO2 over twenty-five years.

However, more is needed. The Adani Group has the size and diversity of businesses to marshal the necessary resources to build something like Khavda. It was able to develop the basic infrastructure—including the roads and telecommunications systems, an airstrip, a self-sustaining ecosystem for a workforce of more than eight thousand, and the transmission lines—within twelve months of launching the project. But Adani, Tata, and other major Indian conglomerates are the exception more than the rule in terms of ability to marshal resources.

To encourage even more private capital and participation, public-private partnerships (PPPs) will be needed. For example, earlier this year, First Solar inaugurated India’s first fully vertically integrated solar manufacturing plant in Tamil Nadu. Buoyed by a $500 million loan from the US International Development Finance Corporation, the First Solar facility will produce its Series 7 photovoltaic solar modules supported by an annual capacity of 3.3 gigawatts while employing approximately one thousand people. This can be a model for future PPPs.

India’s emissions will continue to grow before they peak and fall. The question is, can a third Modi administration continue creative policies that fulfill India’s ambitious climate goals—and will the rest of the world meet India both where it is today and can be tomorrow?

Kapil Sharma is the acting senior director and a senior fellow at the Atlantic Council’s South Asia Center.

Note: The Adani Group is a donor to the Atlantic Council’s South Asia Center.

The post Modi should make India’s energy transition his third-term legacy appeared first on Atlantic Council.

At a time of rapid growth in renewable energies such as solar and wind, it would be easy to write off the region (as some are doing) as a waning power, both in terms of energy and geopolitics. After all, how good can the outlook be for petrostates in a world focused on moving to net-zero emissions? In our view, the opposite is true: the region is well placed to become not just a major source of renewable energy, but also a central and indispensable player in the global energy transition, uniquely able to balance supply and demand for all types of energy, both hydrocarbons, and renewables.

Saudi Arabia and other GCC countries are already moving in this direction, perhaps faster than many outside the region realize, thanks to a powerful mix of investment, infrastructure, and political determination. They have a unique opportunity to take the lead in putting the world on a more sustainable energy footing while simultaneously diversifying and enriching their economies.

A critical question is whether and how the other countries in the region follow their lead. A new phase of cooperation within MENA will be needed if the potential for the region in a reconfigured energy setup is to be realized.

GCC countries are in a strong starting position for the energy transition in large part because of their natural advantages. Thanks to abundant sunshine and wind, they can produce and export renewable energies at a consistently lower cost than any other region. For example, Saudi Arabia’s Al Shuaiba project is projected to generate solar energy at a levelized cost of electricity (LCOE) of 1.04 US cents per kilowatt hour, which is just one-fifth of the 2023 global average for solar photovoltaic (PV) energy. This is followed by the United Arab Emirates’ 2 gigawatt (GW) Al Dhafra Solar PV project, which can produce solar energy at a price as low as 1.35 US cents per kilowatt-hour.

The abundance of both fossil and renewable resources means that, at every point on the path from a hydrocarbon-based energy system to a fully decarbonized one, GCC countries can deliver the cheapest configuration for the desired CO2 emissions level without compromising on energy security. In other words, they are well placed to continue with their role of balancing supply and demand—not just with oil and gas, but in a new, green era with a full range of energy resources, both renewable and traditional.

Other advantages are the region’s central geographical location, which provides comparatively easy access to large import markets in both Europe and Asia, as well as to developing markets such as those within Africa, and a ready supply of capital to help finance the transition. Moreover, the closely regulated single-buyer market in GCC countries, which grants regulators greater control over the whole electricity system, enables them to efficiently enact state policy and ensure a choreographed deployment of supply and transmission investments.

For the GCC alone, as we write in our recently published book, Arabian Gambit, these advantages provide the opportunity to become a global force in green hydrogen, recycled plastics, artificial proteins, and even some low-energy manufacturing, among other prospects. For instance, we estimate that every million tonnes of recycled plastics produced could create around 1,450 jobs and contribute US$650 million directly to the GCC’s gross domestic product. Furthermore, attracting 10 percent of global manufacturing in high-potential products could bring up to US$300 billion in foreign direct investment and create 150,000 new jobs, while also unlocking US$25 billion in nonoil exports and offsetting 75 million tonnes of CO2-equivalent emissions annually. Where does that leave other countries in MENA—a region that is particularly exposed to climate change as well as to global efforts to mitigate it?

It’s important to draw some distinctions between countries: MENA is not a monolith and can be distinguished into three groups based on national governmental budget and net energy exports. The first group consists of countries with a budget surplus and large net energy exporters, such as Saudi Arabia, the UAE, Kuwait, and Qatar. With their strong financial position, they can invest heavily in renewable energy infrastructure. The second group consists of countries with a budget deficit, but are net energy exporters, such as Oman, Libya, and Algeria. These countries might face challenges in transitioning to renewable sources of energy due to budget constraints. Egypt is a country in this category, but it has already made significant progress in the renewable transition despite similar constraints. The third group consists of countries with a budget deficit which are net energy importers such as Morocco, Jordan, and Lebanon. Morocco and Jordan focus heavily on renewable transition and have considerable potential to become significant hubs for renewable energies.

The push into renewables in many of these countries is impressive. The International Energy Agency (IEA) estimates that, over the past decade, North Africa has managed to increase its renewable energy production by 40 percent. Countries like Egypt and Morocco are leading in solar and wind energy production outside the GCC, according to the IEA. Egypt alone added 25.5 GW of new generating capacity between 2015 and 2019, including 1 GW of solar PV and nearly 840 megawatts (MW) of new wind capacity—and in the process, went from chronic power shortages to having a 25 percent surplus of electricity supply. Morocco, meanwhile, accounts for three-quarters of the region’s renewable electricity production growth. Home to one of the largest solar farms in the world, the Noor Ouarzazate complex, Morocco is on track to increase the share of renewables in electricity to 60 percent to 65 percent by 2030, according to IEA estimates. Jordan has also been developing substantial solar and wind projects.

Much more still needs to be done to press home the renewable energy advantages that the whole MENA region has—and help those countries still lagging accelerate their energy transition. Wind and solar energy are only the beginning: even when countries have renewable resources and land on which to build installations, they lack some of the other attributes that are needed, including long-term finance, trust of investors and other potential stakeholders, appropriate regulatory regimes, and the government offtake that will make these installations viable.

This is where the GCC countries can help, taking the lead to build a collaborative energy framework and network across the region. The GCC members have a natural edge through their access to capital and the stability that allows for long-term investments that some other countries in the region may lack—and they can be the prime movers and facilitators of such a network.

There are multiple opportunities for greater collaboration. These include opportunities to integrate more renewables overall: creating possibilities to balance loads by exchanging renewable energy with neighboring countries, building out renewable energy infrastructure, and, potentially, marketing jointly to other regions such as Europe. GCC countries could facilitate the transfer of technology and expertise to other MENA countries, focusing on training and capacity building in renewable technologies. They can do so by fostering joint ventures and public-private partnerships with local companies and government agencies in those countries.

Further, the GCC countries can lead in developing a harmonized regulatory framework for renewables that encourages investments across the region. Harmonization of renewable energy practices and standards among MENA countries would be a big step forward to greater cooperation. For financing, GCC countries could develop a foreign direct investment approach, stepping in to help, where useful. They can establish a MENA renewable fund to support projects in countries with budget deficits and high solar or wind potential and use this to drive demand for the export of components manufactured in the GCC. For manufacturing, for example, GCC countries could help finance and develop the capacity to produce solar and wind turbines elsewhere in the region. If the cooperation develops strongly, it could even give rise to the creation of a clean energy souk, or marketplace, that brings together all the different elements under a single umbrella.

Some of this is already starting to happen, particularly on the investment front. Saudi Arabia is heavily investing in the renewable transition of MENA countries. The Saudi firm ACWA Power is looking to ramp up investments in both Egypt and Morocco to further clean energy projects there. This includes setting up a 200 MW solar project in Kom Ombo, Egypt, and a 150 MW solar plant as part of the Noor Ouarzazate solar complex in Morocco. The UAE also is driving large investments in solar and wind projects in Egypt, Morocco, and Jordan. In Egypt, Abu Dhabi’s Masdar signed an agreement to build a US$10 billion wind farm, and AMEA Power completed a US$1.1 billion deal to deploy 1 GW of wind and solar energy. Further, AMEA Power has won a contract to build two solar power plants in Morocco, and Masdar is set to develop a 1 GW wind project in Jordan. Additionally, Arab Petroleum Investments Corporation has taken a 20 percent stake in a major Jordanian wind project.

This is just the beginning, and more can be done to promote ties and further cooperation in clean energy across the MENA region. Much is at stake and much can be gained: the energy transition amounts to a larger regional reset as a global clean energy powerhouse. For all their differences, MENA countries have the essential components required to step into the new role. Now they need to take decisive steps toward realizing that potential.

Dr. Shihab Elborai and Anthony Yammine are partners, and Pavel Popikov is a manager, at Strategy& Middle East, a strategy consultancy part of the PwC network.

The post Policy memo: What will it take to make the MENA region a renewable energy powerhouse? appeared first on Atlantic Council.

In 2017, the Trump administration imposed sanctions on Gertler, accusing him of “opaque and corrupt mining and oil deals” that cost the DRC more than $1.36 billion in revenues from 2010 to 2012 alone. Gertler has repeatedly denied any wrongdoing and, through a representative, said that he would abide by sanctions. The news that the Biden administration may ease these sanctions should be viewed positively, as an indication that US sanctions can achieve both economic and geopolitical goals.

Eased sanctions, whether a formal delisting or the issuing of a general license to Gertler, would allow for the sale of currently sanctioned entities. Following the easing of sanctions in this case, US firms could gain access to new investment opportunities by investing in mining projects that currently have links to Gertler, leading to economic growth in the United States and the DRC. In addition, the DRC has an opportunity to showcase the improvements that the country is making in the fight against money laundering and terrorist financing. While some senior officials, human-rights defenders, and anticorruption fighters have valid concerns about easing sanctions on Gertler, the decision could be a win for the DRC and the United States.

The choice—and the history behind it

Both the Trump and Biden administrations have gone back and forth over the tightening and easing of sanctions on Gertler. That has drawn much attention, but what hasn’t is the fact that the United States has quietly used sanctions effectively in this case to get its way.

In 2019, The Sentry—an investigative organization that aims to hold to account predatory networks that benefit from violent conflict, repression, and kleptocracy—conducted a six-month-long study on the effectiveness of sanctions in Africa in the twenty-first century. The study found that better strategies for achieving identified goals in each sanctions program must be developed if sanctions effectiveness was to improve. The Sentry study set the stage for the Treasury 2021 Sanctions Review, which drew conclusions on how to modernize US sanctions and make them more effective. Treasury recommended a “structured policy framework” that “links sanctions to a clear policy objective.” The Biden administration has made no secret of its desire to improve access to critical minerals, diversify its supply chains, and work with US partners to achieve those goals. Since 80 percent of the DRC’s cobalt output is owned by Chinese companies, US policymakers should be seeking ways to reduce barriers to entry in the DRC’s mining sector and to actively promote investment there. 

As the United States seeks to gain greater access to critical minerals and diversify its supply chains away from Chinese influence, Biden administration officials hope that granting Gertler a general license to sell his holdings in the DRC would increase US or Western firms’ willingness to invest in the country. That’s because those firms have been largely boxed out as Gertler, according to the US Treasury, used his closeness with government officials to secure below-market rates for mining concessions for his companies. Beyond Gertler, the business environment of the DRC ranks 183 out of 190 on the World Bank’s Doing Business indicators. Easing sanctions, through a coordinated US government effort that seeks to maximize this move, could send an important signal to Western investors that the DRC is open for business. Western firms could lift their bottom lines while stimulating the DRC economy by paying market rates.

The potential delisting of Gertler and his companies is a good example of an instance in which sanctions—or, in this case, the easing of sanctions—are being used in support of a specific policy objective.

Delisting would be good—but more must be done

Building on a potential delisting, the Biden administration should work with Congress to expeditiously pass the bipartisan BRIDGE to DRC Act—which helps the United States secure access to critical-mineral supply chains and sets human-rights and democracy benchmarks for strengthening the US-DRC relationship. These moves could be further timed or calculated to magnify the impact of ongoing foreign assistance programs led by the United States Agency for International Development or other US government agencies.

The United States should coordinate additional moves to support the DRC. In October 2022, the Financial Action Task Force, the standard-setting international organization that seeks to strengthen the global financial system, placed the DRC on its list of jurisdictions under increased monitoring—also known as the “grey list”—for the country’s dismal record in fighting money laundering and terrorist financing. While many African countries are on the grey list, the impact is considerable, as it limits capital inflows, makes investors wary of doing business, and leads to reputational damage and a reduction of correspondent banking relationships, among other consequences. The US Treasury should look to bolster the DRC government’s approach to anti-money laundering and combating the financing of terrorism (AML/CFT) by equipping the country with the knowledge, know-how, and capacity that it needs.  

Regardless of whether the delisting happens or whether the BRIDGE Act becomes law, the DRC must do more to help itself. News of a failed coup attempt in Kinshasa on May 19 certainly does not help, especially since—according to local reports—the assailants were linked to exiled DRC politician and US citizen Christian Malanga, who was killed by the country’s security forces in a firefight. Three US nationals were allegedly also involved in the attempt to overthrow the government of President Felix Tshisekedi.

The DRC must continue to take concrete steps to improve the business environment and reduce its political and economic risk factors. Since 2022, the DRC built on its high-level political commitments to improve its AML/CFT regime, finalize its three-year national AML/CFT strategy, and improve its macroeconomic performance—boosting its credit rating. The DRC has an opportunity to continue to make progress in its fight against corruption, money laundering, and terrorist financing that threaten the stability of the country from Matadi on the Atlantic seaboard to Goma in the Great Rift Valley.

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A win in the heart of Africa

Delisting Gertler would not only help the United States get its way, but it would show that its sanctions policy in Africa can be effective; its industrial and national security policies can be successfully implemented; and that all of this can be done in a manner that can help an African partner generate greater economic growth, jobs, and the foreign investment it seeks.

The United States can’t do it alone. It must also partner with the DRC in a serious manner to help strengthen the DRC’s framework to combat money laundering and terrorist financing, improve Kinshasa’s image, and reduce barriers to investment such as perceived political and economic risk.

The DRC occupies a central role on the African continent and with its economic potential could serve as a future hub for transportation, logistics, mineral processing, and more. If the DRC wins, all of Africa benefits—as do the United States and the West.

Benjamin Mossberg is the deputy director of the Atlantic Council’s Africa Center. He previously served in the US Treasury Department and US State Department with a focus on Africa policy.

The post In a Congolese mining case, Biden can secure a win for US sanctions policy in Africa appeared first on Atlantic Council.

Solving these administrative problems is one of the biggest impediments to formalizing a secretariat. To ensure that the Three Seas Initiative (3SI), which convenes at the annual summits, can effectively and quickly address the unique challenges facing its thirteen Southeastern, Central, and Eastern European member states, associate states, and strategic partners in reaching common goals, its leaders must now agree on a structure.

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More than 900 participants joined this year’s summit, which every year aims to explore ways to tap members’ vast economic potential while fortifying against mounting security threats. They discussed ways to advance connectivity, economic growth, and broader security by overcoming shared regional barriers via the 3SI mechanism. However, making progress between summits requires institutionalization of the 3SI through a permanent secretariat body to maintain momentum and focus between the annual events.

How a 3SI institution could work

The secretariat could be launched and housed in a neutral, non-3SI city in Europe, preferably a financial hub, like Brussels, with a small permanent team whose operating costs would be covered by the 3SI country hosting the summit that year. The 3SI team’s initial guidance could include exchange of information between 3SI stakeholders, outreach to private investors, and the promotion of cross-border digital, energy, and transportation projects in the region, with a particular focus on the project priority list. In a sense, the secretariat would serve as a library of projects for inquiring investors. The 3SI platform can play a meaningful role in helping resolve top priority issues in the region, which were raised repeatedly at the summit, ministerial, and in private events (including those jointly hosted by the Atlantic Council, Clean Air Task Force, and Amber Infrastructure Group). These issues include:

• Access to finance
• Fragmented market
• Supply chains risks
• Russian aggression in Ukraine and the broader region
• Commercialization of new technologies and innovative solutions
• Workforce shortages

By addressing these challenges throughout the year (through the work between the summits), the 3SI stakeholders would create compounding benefits, securities, and efficiencies for Europe, particularly through 3SI’s unique power to connect traditionally siloed sectors and geographies and its magnifying platform for bringing attention to the top challenges in the region.  

Leaning into the 3SI mission

Once a 3SI body is created, it can rapidly get to work on actualizing steps toward achieving its goals, including regional integration of resources, coordination of workforce development, optimization of external partnerships, and raising finance. Dialogue at the Three Seas summits has yielded broad consensus and support for these priorities.

Goal 1: Integrating the regions, markets, and innovation

Despite gigantic leaps in connectivity across Europe, regional integration is hampered by the lack of cross-border coordination, regulatory hurdles, supply chain risks, and market fragmentation. These gaps create diverging prices, inefficient routes, and lags in information sharing. 3SI would not be a one-fix-fits-all in resolving these issues, but the presidential-level platform has untapped potential to alleviate some of these challenges. 3SI is uniquely positioned to highlight the regional cost and security threats of insufficient energy interconnection, transportation routes, and digital integration. Priority-project lists should be frequently updated and expanded, something the secretariat can manage, to provide ample options for potential investors with projects’ bankability and other relevant details included.

Moreover, 3SI has a unique opportunity to embrace a technologically neutral approach while focusing on solutions-driven criteria: competitive pricing, carbon emissions, environmental impacts, and secure and diversified supply chains. To scale new technologies, the 3SI secretariat could support existing regional coordination on regulatory alignment to forge an easy-to-navigate investment environment. Cooperation on cyber security and kinetic threats across 3SI stakeholders can enhance protection for these technologies and infrastructure in the region.

Goal 2: Investing in a workforce that will transform the region

In addition to the work dismantling regulatory barriers, 3SI can contribute to forging an innovation ecosystem through building a talented workforce for the future. The Three Seas economies have a unique opportunity to exchange data around the current labor force and the anticipated talent gap in energy, digital, and transportation sectors. The region is already leading in science and technology education in Europe and can build on this competitive advantage by scaling the number of trained professionals through coordinating programs and forging an efficient education-to-workforce placement pipeline. The annual 3SI summits could include programming dedicated to student engagement, recruitment, and education on key opportunities in the growing sectors.

Goal 3: Optimizing collaboration with 3SI associated and strategic partners

Japan’s inclusion as a 3SI strategic partner this year is a testament to the value of global partnership on commercialization of new technologies and diversified supply chains. Several summit panels touched on driving Japanese companies’ investments in the region, particularly rail and communications sectors development.

3SI countries also have an opportunity to develop strategic priorities in support of associate members Ukraine and Moldova (complementary to the existing efforts), while exploring the potential to build additional energy and transport interconnections, as well as collaboration in the digital space.

Goal 4: Financing a secure, competitive, and low-carbon Three Seas region

An enormous barrier to achieving 3SI priorities is the trillion-dollar gap between where infrastructure stands today and where the region agrees it needs to be. National budgets are insufficient. EU funding is challenging to access and excludes some infrastructure and technologies. The Three Seas Fund, 3SI’s investment arm, can play an important role in leveraging private finance and helping match public and private capital to realize the projects. As the next round of the 3SI fund is established, attracting private equity will be crucial for reaching scale of impact. Cross-country coordination creates efficiency and minimizes risk for cross-border investments, particularly in addressing the grid infrastructure gaps and preparing roads for a safe, low-carbon transportation future.

Achieving a shared vision of the future

No similar coalition exists with focus on security and economic prosperity through integration. This shared vision of a secure, digitized, integrated, low-carbon, resilient economy is refined every year at the Three Seas Summit as new ideas are shared on stage, discussed during coffee breaks, and put to the test following the conference. With the formalization of a 3SI institution to build on the work between summits, 3SI could be an unstoppable platform for realizing the region’s rich potential and talent.

Olga Khakova is the deputy director for European energy security at the Atlantic Council Global Energy Center

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Staff

Olga Khakova

Deputy Director, European Energy Security

Global Energy Center

Geopolitics & Energy Security Europe & Eurasia

EnergySource Apr 3, 2024

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By Pawel Czyzak and Nolan Theisen

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Central Asia Central Europe

EnergySource Aug 31, 2023

A Three Seas Chamber of Commerce could enhance energy diversification across Central and Eastern Europe

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The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

learn more

The post From Vilnius to Warsaw: How to Advance Three Seas Goals Between Summits appeared first on Atlantic Council.

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On one hand, lithium-ion (li-ion) batteries, including those made in China, the world’s largest li-ion manufacturer, are useful for decarbonizing the US grid, improving the economics of solar deployment, and providing a key input for electric vehicles. On the other hand, ceding a new and important clean tech industry could pose long-term economic damages. Allowing China to dominate this sector hollows out US manufacturing capacity and know-how, while giving China’s battery complex the opportunity to grow in capacity and provide synergies with its submarine and drone-making capabilities, which are increasingly important in modern warfare. This rise in industrial capacity could prove significant in military contingencies involving Taiwan.

Managing these battery dilemmas will be challenging, but not impossible. Most immediately, the United States and its allies, friends, and partners should rigorously investigate where Chinese-made batteries do—and, significantly, do not—pose security risks. Most importantly, however, they should accelerate development of their own battery supply chains. 

Chinese li-ion battery exports and US decarbonization objectives

China’s global lithium-ion battery exports reached $65 billion in 2023, up nearly 400 percent from pre-COVID levels in 2019. More than half of these 2023 exports were shipped to the European Union and the United States-Mexico-Canada (USMCA) free trade zone.

Chinese li-ion battery exports are largely bound for the European Union and North America.

Source: PRC General Administration of Customs, author’s calculations

Chinese battery exports to USMCA are highly correlated with EV manufacturing capacity and solar installed capacity, which are often paired with battery energy storage systems. In North America, these facilities are overwhelmingly concentrated in the United States, which accounts for the lion’s share of USMCA’s lithium-ion battery imports, according to Chinese trade statistics. (Note: the United States and China report slightly different total trade figures, due to reporting lags and the timing of international shipments.)

Chinese exports to USMCA are largely routed through the United States.

Source: PRC General Administration of Customs, author’s calculations

According to the US Census Bureau, in 2023, the United States directly imported $13.1 billion in lithium-ion batteries from China, accounting for 70 percent all US li-ion battery imports in 2023, as measured in value. US li-ion imports are split between storage and batteries for electric vehicles.

US lithium-ion batteries derive primarily from China, both directly and indirectly.

Source: US Customs Data, author’s calculations

It’s worth noting that China’s share of all US li-ion batteries is understated in official statistics, in both absolute and relative terms. Chinese battery companies, as well as big battery players based in South Korea and Japan, often have manufacturing facilities in third-party countries that export to the United States.

In other words, China is currently an important player in US decarbonization, particularly when it comes to energy storage. China exported $10.8 billion of Li-ion storage batteries to the United States in 2023, accounting for 72 percent of all US imports of the product.

Chinese imports are particularly important in the storage market.

Source: US Customs Data, author’s calculations

These li-ion storage batteries are useful for decarbonizing the US power sector and complementing solar generation. As recent research shows, California and other western states have significantly increased their uptake of storage batteries on the grid, enabling solar’s percentage share of all generation to rise, advancing state and national decarbonization objectives.

The security risks from China’s battery complex

While mainland China’s li-ion batteries are useful for decarbonization, its battery complex poses often-overlooked security risks, especially in the event of a contingency over Taiwan. Batteries figure increasingly prominently in military affairs, including for diesel-electric submarines and unmanned platforms. Critically, US restrictions on Chinese li-ion batteries or of electric vehicles, another end use of li-ion batteries, will limit China’s industrial capacity that could readily be repurposed from the civilian industry to its defense industrial base. Just as crucially, by diminishing China’s battery business, US tariffs could constrain Beijing’s ability to secure technological breakthroughs with military uses.

China’s battery complex complements its military capabilities in multiple ways. Take aerial drones, which often employ lithium-ion batteries for propulsion. These weapons are already a critical element in Russia’s full-scale invasion of Ukraine, as both sides are estimated to field at least 50,000 first-person-view suicide drones per month.

Drone technology could play an even larger role in any confrontation over Taiwan. Mainland China’s industrial capacity in aerial drones and batteries could loom large in any confrontation, as its manufacture of dual-use drones dwarfs production seen in both Ukraine and Russia. There are limitations to the role batteries could play in the aerial domain due to constraints in energy density and range. Still, advances in battery technology could increase the potency of aerial drones in a potential Taiwan contingency.

Batteries are also useful for unmanned underwater vessels, unmanned surface vessels and, critically, conventional (i.e. non-nuclear powered) submarines. Diesel-electric submarines are powered by batteries charged by onboard diesel generation. Those with li-ion batteries offer performance improvements over those with lead-acid batteries, including quieter operations, and higher speeds for sprinting and cruising. Japan’s Maritime Self-Defense Force is the only navy known to operate diesel-electric submarines with li-ion batteries.

But the possibility that China could also develop li-ion submarines is a concern. Its battery complex has made undeniable technical advances in recent years and is, in many ways, technologically ahead of advanced economies, including Japan and South Korea. It is likely only a matter of time before China’s navy develops advanced li-ion diesel-electric submarines—if it is not doing so already.

Another risk posed by China’s battery complex is its development of solid-state batteries (SSBs), which enjoy further performance advantages over li-ion batteries, including greater density, capacity, range, and no risk of fire. While SSBs have yet to be commercialized, their development could offer substantial performance improvements for both diesel-electric submarines and unmanned systems.

The massive industrial scale and growing technological sophistication of China’s battery complex could therefore not only enable Beijing to secure the commanding heights of a global industry, but also enhance its military capabilities in ways that threaten US interests.  

Finding a balanced approach

Because the Chinese battery complex presents decarbonization opportunities, but also security risks for the United States and other constitutional democracies, policymakers should adopt a balanced approach to batteries, working together with allies, friends, and partners to take risk mitigation steps when necessary.  

Similar to its investigation into connected vehicles, Washington should comprehensively study where batteries pose potential security risks and take countermeasures where appropriate. Given the need to decarbonize the electricity system, Washington should act against existing installations or near-term imports of Chinese batteries for grid storage only when there is a compelling reason. Despite concerns about the security of Chinese-made grid storage batteries, any efforts by China to destabilize the grid appear far more likely to emerge from offensive malware operations or China’s cryptocurrency mining assets. As an interim measure, however, the United States and its allies should increase resiliency against potential grid subversion by undertaking more spot checks of battery imports and by booting Chinese-made batteries from sensitive locations, such as military bases.  

The best way to mitigate battery-related risks, however, is to develop a US and “friend-shored” supply chain. Washington, Brussels, and other allies and partners should de-risk the entirety of the battery supply chain. The coalition should focus on potential supply chain chokepoints, especially graphite, as the United States has no existing production sites for this key battery material. Fortunately, the United States has already made substantial progress on developing its battery industry, as nearly $34 billion in actual investment into battery manufacturing has occurred in 2023 alone.

But more can be done. Washington should enact policies to speed up clean energy deployment to both reduce emissions and enhance national security. This includes permitting reform, which is critical for connecting clean energy to the grid. Also, deployment of more US-made batteries could provide synergies with key defense industrial capabilities, including for unmanned platforms and manned submarines. Similarly, the United States should continue to build out its domestic charging infrastructure for electric vehicles, which are an important use for lithium-ion batteries. Finally, the United States and its treaty allies—Japan, South Korea, and the Philippines—should explore siting battery manufacturing capabilities in areas relevant for contingences involving Taiwan and the South China Sea.

Striking a responsible balance between the competing imperatives of national security, economic interests, and decarbonization is challenging. Many actors fail to grasp that multiple things can be true at once: climate change poses a massive threat to our shared global future—but so does mounting clean energy dependence on the Chinese Communist Party. US tariffs on Chinese batteries aim to take a balanced approach to managing this complicated dilemma.

Joseph Webster is a senior fellow in the Global Energy Center and the editor of the independent China-Russia Report. This article reflects his own personal opinion.

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The post What US tariffs on Chinese batteries mean for decarbonization—and Taiwan appeared first on Atlantic Council.

California’s experience shows that batteries will play an important role in lifting solar power’s share of all electricity generation. The Golden State is showing that it can ramp up solar generation and, thanks to batteries and greater transmission connectivity, that it can do so without a sharp rise in curtailment. On the leading edge of this transition, the state’s success or failure could inform how local and national governments worldwide go about greening their grids. 

Batteries rising

Batteries are helping improve the economics of Californian solar and decarbonize the grid of its California Independent System Operator (CAISO), which covers most of the state (and parts of Nevada). Batteries are succeeding in CAISO because they are helping mitigate its curtailment problems, which surged in the first part of 2023.

Solar curtailment in CAISO and elsewhere is determined by two main factors. In conditions of system oversupply, the grid does not have enough demand for renewable electricity generation. Local transmission constraints also produce curtailment. By shifting electrons into less-congested and higher-priced times of the day, storage batteries avoid saturating system demand or overwhelming local bottlenecks, improving the economics of solar and other clean energy sources and easing duck curve constraints.

California is mitigating curtailment via batteries. US battery storage installations are overwhelmingly concentrated in solar-rich areas of the country: California, Texas, and the “Mountain West battery states” of Arizona, Colorado, New Mexico, and Nevada.

California has traditionally been the United States’ leading solar market. In 2023, solar power’s share of all net generation in the Golden State stood at 19 percent; in Texas and the Mountain West battery states, conversely, its proportion reached only 5 percent and 9 percent, respectively, although solar notably accounted for 23 percent of Nevada’s net generation.

California is also, not coincidentally, the nation’s largest battery market. In addition to deploying nearly 19 GW of cumulative solar capacity, it currently has more than 10 GW of batteries, with its clean energy goals requiring more than 50 GW by 2045.

All these batteries are complementing solar generation and leading to lower curtailment. Battery capacity as a share of solar generation capacity in CAISO surged in the past twelve months, rising from 29 percent in January 2023 to 41 percent by December 2023. As new batteries have entered the grid, curtailment as a percentage of all solar generation has reversed its upward trend and even declined from recent highs, suggesting that more electrons are finding their way to the grid economically. While recent analyses catalogued that CAISO’s solar curtailment rose in early 2023, the newest data shows that batteries—and, crucially, new transmission lines—have reversed this trend, at least in relative terms.

Lower curtailment has lifted solar generation’s share of all electricity output. Solar’s twelve-month average of CAISO’s electricity load, or demand, totaled 18.6 percent in February 2024. That’s an all-time high—even as curtailment as a percentage of all solar generation has dropped.

Importantly, relative curtailment has decreased from recent highs despite the addition of significant new solar generation. While solar generation continues to rise as a percentage of the total load, curtailment’s percentage of all solar production has declined from recent highs. While CAISO’s overall curtailment rose by nearly 135 gigawatt hours (GWh) in the last six months of 2023 from prior year levels, it also generated 3,725 GWh more in solar electricity.

CAISO’s recent relative curtailment downtick could be due to several factors besides batteries, such as weather conditions and new transmission lines. Still, grid storage battery deployment has undeniably been an important element. CAISO’s addition of over 2.4 GW of battery storage capacity from June 2023 through the end of the year coincided with a sharp reduction in curtailment.

CAISO is set to continue deploying even more batteries in 2024. The US Energy Information Administration’s latest estimates suggest it will install nearly 5 GW of incremental battery storage capacity in 2024, along with 3.5 GW of new solar photovoltaic capacity. While not every project in queue will ultimately move forward, CAISO’s absolute increase in battery capacity and its relative rise as a percentage of solar capacity will mitigate curtailment.

More encouragingly, it’s early innings in the rise of batteries. While lithium-ion battery technologies are most prevalent on the grid today, other advances are possible. Most deployed batteries today, such as lithium-ion batteries, have storage of around four hours or less. New technologies, such as iron air batteries, could provide multiday storage solutions. As the quantity and quality of battery deployments improve, the grid will become more resilient and, all else being equal, solar generation’s share of the electricity grid will continue to grow.

Of course, solar and batteries face substantial challenges ahead: namely, geopolitics and economics. China’s massive role across clean energy supply chains raises thorny questions and difficult tradeoffs. China dominates solar supply chains and is deeply enmeshed in battery supply inputs, including for lithium. Political tensions with China could spike prices, especially if Beijing interferes with markets. Even without geopolitical disruptions, however, renewables could face growing costs and disruptions due to supply chain bottlenecks and the boom-bust cycle of commodities and inputs. With a prolonged period of high interest rates posing challenges to capital-intensive renewables, policymakers should alleviate inflation by accepting short-term increases in hydrocarbon output and accelerating housing construction. Meanwhile, managing illiquid commodities and inputs for solar and batteries could require creative policy mechanisms, such as financing hedging instruments or creating new benchmarks.

Increasing solar electricity’s share of generation via batteries would be good news for consumers and the environment. By some metrics, unsubsidized solar is the cheapest generation source, while solar photovoltaic plus storage is economically competitive with other, more polluting resources. Additionally, solar panels and lithium-ion batteries require virtually no water after entering service, unlike coal, for example. The increasing wave of solar and batteries hitting the grid could aid the economic and environmental goals of California and other states.

Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center. This article represents his own opinion.

The post California’s battery boom is a case study for the energy transition appeared first on Atlantic Council.

Owing to its deployment patterns and underlying resource constraints, China’s solar usage rates, known as capacity utilization factors, are among the lowest in the world. But this could be about to change. Recent data suggest that China may be shifting from distributed solar to utility-scale solar, which would, all things being equal, raise the overall efficiency of its electricity grid while aiding decarbonization. Given that China is by far both the world’s largest greenhouse gas emitter and coal consumer, its domestic solar deployments will have global consequences. However, several hurdles hindering the country from reaching its domestic solar potential have emerged.

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Utility-scale versus distributed solar

China’s domestic solar choices matter because distinct types of solar installations have vastly different generation potentials. Distributed solar, which is typically found on rooftops, lacks the capability to track the sun’s movements and optimize sunlight reception. It therefore has a lower capacity factor than utility-scale solar, which is generally ground-mounted with single- or dual-axis tracking.

Tracking systems typically entail securing bulky frames and motors, and drilling holes to hold the system in place. This type of solar installation is generally not suited for rooftops. Buildings can struggle to structurally bear the weight of tied-down panels, while high winds pose additional risks for rooftop panels. Consequently, rooftop panels typically do not have tracking, which limits their ability to receive optimal amounts of sunlight.

Case in point, in the United States, utility-scale capacity factors in the best locations and with the latest technology, including tracking capabilities, often exceed 30 percent; utilization factors for residential solar average nearly 16 percent. China doesn’t provide a comparable data breakout for its own utility-scale versus distributed solar. It does, however, provide information about its nationwide solar capacity factors. In 2023, China’s solar capacity factors stood at 14.7 percent, versus 23.3 percent in the United States.

China’s lower capacity factors are due, in large part, to its disproportionately high deployment of distributed solar generation relative to utility-scale deployment. There are several potential reasons for China’s tilt toward disturbed solar. China’s best solar resources are in the northern and western parts of the country, relatively distant from the coastal population centers to the south and east, where much of its solar is deployed. Additionally, China has limited interprovincial electricity transfers. These transmission-related factors, along with China’s higher electricity prices for coastal provinces, incentivize rooftop solar deployment in coastal areas, as seen in the chart below. 

China’s solar strategy may be shifting away from distributed solar, although the evidence is mixed. In the last quarter of 2023, China reported 58 gigawatts (GW) of utility-scale solar capacity installations, an all-time high and a massive increase from prior periods. In the first quarter of 2024, China once more installed greater amounts of distributed solar capacity than utility-scale solar.

China’s utility-scale breakout?

Some features of China’s potential turn to utility-scale deployments are worth examining. In both 2022 and 2023, China’s utility-scale installations surged in the final quarter, potentially to meet year-end construction deadlines and capacity targets set by national and provincial governments.

Additionally, some provincial-level trends are noteworthy. Hebei, for example, enjoys good solar irradiance, while its proximity to Beijing’s substantial electricity load limits transmission costs. And Yunnan, in southwest China, installation of major utility-scale capacity began at the end of 2023 and continued through the first quarter.

Xinjiang is a striking anomaly. It reports virtually no distributed solar capacity despite having good solar potential, moderate per-capita income, and 34 GW of installed utility-scale capacity (including solar that China attributes to the Xinjiang production corps). Xinjiang’s deployment patterns constitute a major outlier in a country where rooftop deployment has been encouraged through official policy.

The most plausible explanation for this anomaly emerged from a solar expert on China. In written comments to the author, the expert suggested that “If you live in a low rainfall area with dust storms then somebody must keep the panels clean or wipe them down every so often. With a multifamily dwelling a ’crisis of the commons’ issue is quick to emerge.”

While Xinjiang’s lack of distributed solar capacity may be related to several factors, it is also hard not to wonder if the Communist Party’s pervasive repression of the province’s Uyghur population weakens social trust and, consequently, disincentivizes rooftop solar deployments.

Finally, Inner Mongolia’s modest deployment of utility-scale solar has major climate consequences. The sun-soaked, windy province enjoys some of China’s best renewable energy resources, and it is also a coal bastion. In 2023, Inner Mongolia produced 1.21 billion tons of coal supply, of which 945 million tons were supplied to coal-fired power plants, as the renewables-rich province incongruently supplied over 25 percent of China’s coal production last year. Since Inner Mongolia’s thermal coal and solar production compete to provide electrons for the Chinese grid, this province will play an outsized role in shaping China’s climate trajectory.

It’s too soon to say if China is shifting solar deployment into a more efficient model: namely, utility-scale solar in the northern, more sun-soaked regions of the country. Encouraging signs include the planned construction of over 225 “renewable energy bases” across the Chinese interior, comprising total wind and solar capacity of 455 GWs, along with associated transmission lines. Some Chinese provinces are also siting solar panels on land repurposed from mining. These steps are constructive.

Yet there are also reasons to temper expectations. China’s solar utilization rates actually fell in 2023. That may be attributable to the type and regions of deployment, or bad luck from weather, but other factors are possible. With China exhibiting sudden year-end deployment surges to meet construction targets, the long-term performance and sustainment of its panels could degrade if maintenance needs rise. Finally, solar faces economic headwinds in Shanxi, Inner Mongolia, and Shaanxi—some of China’s most sun-soaked provinces. These regions also have an abundance of coal, some of which is used for steel production rather than electricity generation. Still, the fossil fuel keeps electricity prices low, disincentivizing solar.

China is showing signs of a shift toward more utility-scale solar in suitable regions, and it is making substantial progress in deploying massive volumes of solar capacity, but powerful structural hurdles to the technology’s domestic adoption are coming into focus.

Joe Webster is a senior fellow at the Atlantic Council Global Energy Center, and editor of the China-Russia Report. This article represents his own personal opinion.

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Ukraine’s gas transmission system has traditionally played a major role in delivery of Russian gas to Europe. As late as 2019, transit volume was about 90 bcm, accounting for one half of Russia’s total gas exports to Europe. After Moscow’s full-scale invasion, the continuation of Russian gas transit through Ukraine provided EU member states energy security while also buying them time to arrange for alternative natural gas supplies. And by 2023, the transit volume had fallen to less than 13 bcm, with most of the gas being delivered to Austria, Italy, Hungary, and Slovakia. Other major consumers, including Germany, Poland, and the Czech Republic, have managed to end their dependence on Russian pipeline gas and Russian gas in general, although Russian LNG exports to Europe have continued to rise. But since 2022 the United States has emerged as a main LNG supplier to Europe, accounting for nearly half of total EU LNG imports in 2023 and helping to blunt Europe’s need for Russian LNG.

Of the countries most likely to be directly affected by the expiration of the 2019 agreement, Slovakia and Hungary have been the most vocal in calling for the continuation of Ukraine transit. Italy already has been able to largely replace Ukraine transit gas with LNG and pipeline gas from other sources, including Azerbaijan, and has been silent on the future transit issue. Austria presents a mixed picture. Some Austrian politicians have expressed concerns over its growing dependence on Russian gas, while others have signified their reluctance to break existing supply contracts. 

For its part, the EU has expressed the view that there is no need to extend the current transit agreement, although it has not commented on the prospects for transit in the absence of an agreement. This could take the form of capacity bookings by European traders who would take delivery of Russian gas at Ukraine’s eastern border. This possibility has been discussed with little interest for many years until recently, presumably because European traders were not willing to take the attendant risk. 

Meanwhile, the view from Kyiv is muddled at best. The minister of energy has completely ruled out future transit, but the prime minister has nixed an extension of the current agreement, while suggesting that transit still might continue under the right circumstances. The head of the Ukrainian gas transit company has similarly expressed willingness to continue transit at least through 2027, the proposed target date for EU countries to phase out imports of Russian fossil fuels.

The arguments in favor of Ukraine continuing to offer transit are weak, premised on the revenue Ukraine earns from transit and concerns over the availability and price of replacement gas. The first concern is overblown. Although Ukraine currently collects about $800 million per year from transit, that does not account for the costs of operating the system. Given the (EU-style) tariff methodology employed by Ukraine, the actual financial benefit is much less, and in the context of Ukraine’s economy, relatively insignificant at 0.46 percent of GDP.

Concerns about replacing Ukraine transit gas are equally overblown. Countries now dependent on Ukraine transit can easily source replacement gas, particularly LNG. Increases in US and Canadian LNG production in 2025-2026 alone would more than replace Russian gas currently being transited via Ukraine.

Meanwhile, the EU has added around 50 bcm of LNG regasification capacity since 2022. Further capacity expected to come online by the end of 2024 will result in total capacity of about 235 bcm, able to meet over 55 percent of European annual gas demand based on the gas consumption average of the last five years.

The argument that the end of transit would lead to much higher gas prices in Europe is likewise questionable. The EU gas market has currently stabilized and returned to its pre-war price range, and Ukrainian transit accounts for only 4 percent of total European demand.

So why the pressure to continue transit once the agreement lapses if Ukraine transit gas can economically be replaced with gas that doesn’t originate in Russia? In the case of Slovakia, and to a lesser extent Austria, purely financial considerations may be at work. The end of Ukraine transit could hit Slovakia hard, since most of the Ukraine transit gas also transits Slovakia through the Eustream pipeline system. However, Eustream has a ship-or-pay contract with Gazprom extending to 2028, obligating payment by Gazprom even in the absence of transit (although force majeure might excuse non-performance). The economic damage to Austria is likely smaller, since it also earns revenue from non-Russian gas transiting its Baumgarten hub.

However, Russia’s continued aggression and the war’s potential to escalate into a NATO-Russia or EU-Russia conflict underline the need for European unity and solidarity, particularly in reducing the export revenues of the aggressor. Billions of dollars in gas revenues from NATO and EU members should not be used to fuel Russia’s military capabilities. In fact, the EU is now considering a complete ban on Russian LNG imports.

Moreover, the continued reliance on Russian pipeline gas gives Russia undue political leverage and creates disunity among EU member states, weakening the West’s overall response to Russian aggression. Ending transit via Ukraine after 2024 would enhance the region’s energy security and diminish Russia’s export income with minimal disruption in gas supplies.

The Ukrainian government may face political pressure from some EU member states to maintain gas transit, with or without an agreement. To counter this pressure, the United States should: (1) discourage its EU allies from continuing to import Russian gas via Ukraine and (2) urge Ukraine to resist this pressure, while also encouraging the EU to support Ukraine in its stance.

Sergiy Makogon is the former CEO of GasTSO of Ukraine (2019-2022).

Daniel D. Stein is a former senior advisor with the Bureau of Energy Resources at the US Department of State.

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The commitment of “phasing out coal by 2035 or on a timeline consistent with the 1.5 temperature limit” marks a further step in the direction indicated last year by the UN climate summit, known as COP28, to reduce the use of fossil fuels, of which coal is the most polluting. Mentioning the IEA’s Net-Zero Roadmap report, G7 countries say that “phase-out of unabated coal is needed by 2030s in advanced economies and by 2040 in all the other regions, and that no new unabated coal power plant should be built.” This represents the first agreement on a timeline for phasing out coal after the initiative had previously failed due to opposition by some members. However, it should be noted that, despite the positive step towards a common goal, by using the term “unabated” in the communication, members of the G7 leave open a potential path for the use of coal beyond the indicated timeline. 

In addition to the importance of ending coal reliance, it is now widely recognized that the success of the energy transition is linked to a technology-inclusive approach both for reaching climate neutrality and strengthening energy security. The communication of the G7 promotes members’ increasing use of diverse low-carbon energy technologies including renewable energy, energy efficiency, hydrogen, carbon management, storage, nuclear energy, and fusion.

Energy ministers fully committed to the “implementation of the global goal of tripling installation of renewable energy capacity by 2030 to at least 11 terawatts (TW)” and to “double the global average annual rate of energy efficiency improvements by 2030 to 4%,” signaling the intention to create a strong connection with COP28 pledges.

On energy storage, G7 members agreed to a global goal in the power sector of 1500 gigawatts (GW) in 2030, a more than six-fold increase from 2022. Introducing this target for storage is very important to support renewable implementation and ultimately reach the installation capacity target set in Dubai.

The communication highlights the importance for countries to reduce reliance on civil nuclear technologies from Russia and commits to strengthening the resilience of the nuclear supply chain. Countries opting for nuclear energy would work to deploy next generation nuclear reactors.

Fusion made it in the final text with a strong emphasis on the potential of this technology to provide a lasting solution to the global challenges of climate change and energy security in the future, marking an important addition to the G7 joint communication, since in the Hiroshima Communique, fusion was not mentioned.

In order to implement these targets and scale technologies, the G7 countries this year also reaffirmed their commitment to jointly mobilize $100 billion per year until 2025 and their intention to scale up public and private finance. “We stress the need to accelerate efforts to make finance flow consistent with a pathway towards low greenhouse gas emissions and climate-resilient development,” and “we acknowledge that such efforts involve the alignment of the domestic and international financial system.” Attention is now directed toward the upcoming G7 finance meeting, the G20 in Brazil, and the “finance COP” in Azerbaijan.

Finally, convergence and cooperation with countries outside the G7 will play a crucial role in the success of the transition. The joint communication acknowledges that developing countries represent “an important partner in the just energy transition” and recognizes “the great potential of the African continent in becoming a global powerhouse of the future.”

At this year’s energy ministerial meetings, Azerbaijan’s Deputy Minister on Energy Elnur Soltanov (representing the 2024 COP29 presidency), Brazil’s Minister of the Environment and Climate Change Marina Silva (representing the 2024 G20 presidency), and Kenya’s Principal Secretary on Energy Alex K. Wachira, participated along with the G7 partners. This approach shows recognition of the fundamental role that inclusivity plays in a successful transition and the willingness to create strong synergies with the upcoming multilateral forums.

It would be difficult to overstate just how critical pragmatism and convergence are to the energy transition. But this message, in addition to being successfully incorporated in the communication was further reinforced during the Future of Energy Summit, a half-day event hosted by the Atlantic Council Global Energy Center, Politecnico di Torino, and World Energy Council Italy as part of Planet Week on the sidelines of last weekend’s G7 ministerial meeting. Experts and speakers at the Summit emphasized the need to strengthen a technology-inclusive, not exclusive, approach and cooperation among countries.

The IEA’s Net Zero Emissions by 2050 Scenario (NZE) envisages that by 2030, advanced economies would end all power generation by unabated coal-fired plants, making the new G7 historic commitment unfit for purpose. However, the overall success of the transition will not be determined by pledges, but more so by the will of countries to transform pledges into action. Whether G7 countries will be able to succeed in the energy transition will depend on their capacity to create resilient clean energy supply chains, implement diversified energy mixes, promote collaboration with developing countries, scale up public and private finance, and it seems like many steps are being taken in the right direction. 

Elena Benaim is a nonresident fellow with the Atlantic Council Global Energy Center.

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The post G7 pledges to end coal—but only inclusive action will make a real climate impact appeared first on Atlantic Council.

What can Europe learn about decarbonization from the US Green New Deal? How can climate action now save costs for healthcare later? Do we need more advanced renewable energy technologies to successfully reduce carbon emissions at the necessary rates?

On this episode of #AtlanticDebrief, Carol Schaeffer sits down with ark Z. Jacobson, Professor of Civil and Environmental Engineering and Director of the Atmosphere/Energy Program at Stanford University about what challenges policymakers need to consider in developing renewable energy infrastructure.

You can watch #AtlanticDebrief on YouTube and as a podcast.

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The post #AtlanticDebrief – What lessons can the EU take from the US Green New Deal? | A Debrief from Professor Mark Z. Jacobson appeared first on Atlantic Council.

Public Event Wed, April 24, 2024 • 3:00 pm ET

CEO Scott Nathan on DFC’s work on energy security and other strategic priorities

An #ACFRONTPAGE EVENT—Scott Nathan, chief executive officer of the US International Development Finance Corporation, discusses the agency’s role in US efforts to advance global energy security and other strategic US priorities.

Energy & Environment Energy Markets & Governance Geopolitics & Energy Security

The US International Development Finance Corporation (DFC) isn’t “directly competing” with China, according to its chief executive officer Scott Nathan, but it is “offering an alternative.”

Nathan spoke at an Atlantic Council Front Page event hosted by the Council’s Global Energy Center on Wednesday, explaining that the DFC is different from Chinese development banks or Chinese investment initiatives (such as the Global Development Initiative and Belt and Road Initiative) because it supports the private sector directly. The DFC doesn’t lend money to governments for “big and also sometimes bloated” projects that aren’t “appropriate for local laws and conditions,” he said, alluding to China’s investments that have pushed countries into deep debt.

The DFC head recalled how foreign government officials have told him that “they don’t want to be dependent on one country for their source of finance.”

“Good development is good foreign policy,” he explained. “That’s in our national interest.”

Here are more highlights from the conversation, moderated by Amelia Lester, executive editor of Foreign Policy.

Standing out in the marketplace

• How exactly does the DFC differ from China’s investment engines? Nathan said it’s in part because “we maintain the highest standards possible” when it comes to “environmental, social, [and] labor” practices. It is “critical,” he added, not only to support economic development but also to “promote . . . values.”
• One important area is in internet connectivity—in which China is investing heavily, particularly in the Indo-Pacific. The DFC, meanwhile, is supporting projects that push forward secure equipment and networks that protect privacy, Nathan said, highlighting specific DFC-supported projects in Australia and Africa that are offering an alternative to China’s services. “This is critical for growth,” he said, adding that infrastructure is “not just energy, airports, and railways. You need the infrastructure of the twenty-first century for economic development.”
• Nathan explained that the DFC was created by Congress in 2018 due to a “strong sense” among both Republicans and Democrats that the United States needed to improve its economic-diplomacy game. “We needed to show up in the developing world and offer an alternative to what was being offered by authoritarian governments and our strategic competitors,” he said.
• The DFC is due to be reauthorized by Congress in 2025. “There is a strong demand signal for us to do more to show up,” Nathan said. “That requires us being reauthorized; it requires continuous funding.”

Showing up for Ukraine

• Nathan explained that the DFC has provided nearly $500 million in financing to businesses in Ukraine and has offered political risk insurance—which includes coverage for war-related risks—that has catalyzed more investments in Ukraine’s private sector.
• The most critical tool to support Ukraine’s private sector, however, is “solid air defense,” Nathan said. It’s “hard to make decisions around investment and capital expenditure in an environment of such high insecurity.”
• Nathan explained that the United States has had a long history of providing political risk insurance. Since the Overseas Private Investment Corporation (DFC’s predecessor) started offering the insurance, he said, the United States has “done over $50 billion. . . of political risk insurance” and has had “just over a billion dollars of claims.” The institutions have covered 97 percent of those claims, he added. “So it’s not only been very important for economic activity. . . but it’s been very profitable.”
• Working in Ukraine, Nathan said, has shown him how important it is for the DFC to work closely with its peers, including the European Bank for Reconstruction and Development, International Finance Corporation, and European Investment Bank.

A diversified system

• Earlier this year, the DFC provided a $500 million loan to US company First Solar to build a new solar panel manufacturing facility in Tamil Nadu, India. Nathan said that the plant, which will use cadmium telluride sourced from India instead of China, “fits into the [DFC’s] supply chain diversification goals. . . We need to make sure that we’re not dependent on one country or one company for the inputs of the industries of the future.”
• “If we can do this kind of thing elsewhere in the world to make sure that supply chains are broadly diversified, that helps with resilience,” he argued, adding that the United States must not “replace dependency on oil” with dependency on “a couple of nations,” as that would bring “all sorts of strategic vulnerabilities.”
• “Having countries be able to be self-reliant, to have the energy they need for economic development, that promotes stability. . . that’s good for our security,” he said.
• On critical minerals, Nathan highlighted several projects underway in Africa, including one on graphite in Mozambique. And, he added, as the DFC invests in that project, it will also be working with the US Department of Energy, which has loaned a company in Louisiana funds to expand its capacity to produce graphite-based materials for batteries. “It’s critical to start with the sourcing of the minerals,” Nathan said. “But there’s a whole value chain” to support.

Katherine Walla is an associate director on the editorial team at the Atlantic Council.

Watch the event

The post How the US is pitching a development finance ‘alternative’ to China’s initiatives, according to Scott Nathan appeared first on Atlantic Council.

Executive summary

Within the short span of three years, the global economy has needed to contend with the COVID-19 pandemic, subsequent inflation, the Russian invasion of Ukraine, and the impact of that conflict on commodity shortages, rising energy costs, and declining energy security. As a result, short-term reliance on fossil fuels has increased, fewer resources are available for the energy transition, and coordination among regional and global partners has become more complicated. In the longer term, the crisis underscored the dangers of reliance on fossil fuel imports and exposure to price volatility.

All of this augers broadly for accelerating the energy transition. But narrow approaches to the transition run the risk of curtailing existing energy sources before viable alternatives are sufficiently scaled and integrated.

In their crudest form, policies to incentivize investment into decarbonization are based on categorizing energy sources as either “clean” or “dirty”—despite a wide range of emissions implications depending on the particular energy source. In the case of natural gas, the reality is that there are gradations of “clean.”

Alternatives also matter. Gas replacing coal or upgrading older gas-fired turbines to highly efficient modern ones are major wins. But greenfield unabated gas-fired generation will not be sustainable and will often be more costly than the renewable alternative.

Even under a credible net-zero scenario, gas demand will likely persist, both for technical reasons and to create low-carbon fuels like blue hydrogen. In the medium term, natural gas can be part of a solution in which sustainable economic development is a corollary (or prerequisite) to climate action. In developing countries where industrial activities are a source of growth and are particularly effective at addressing poverty, such development can equip societies with the resources and space to address climate concerns.

About the author

Phillip Cornell is a nonresident senior fellow at the Atlantic Council’s Global Energy Center. He is a specialist on energy and foreign policy, global energy markets and regulatory issues, critical energy infrastructure protection, energy security strategy and policy, Saudi Arabian oil policy, Gulf energy economics, and sustainable energy transition policy. He currently leads the global practice for energy and sustainability at Economist Impact, part of the Economist Group.

New Atlanticist Feb 8, 2024

Global LNG markets are transforming. It’s an opportunity to enhance energy security.

By David L. Goldwyn, Joseph Webster

Climate change and technology are decreasing European natural gas demand in the winter, at the same time as the “equatorialization” of LNG demand is changing world markets.

Energy & Environment Europe & Eurasia

TURKEYSource Jul 26, 2023

A new Black Sea natural gas project could be a game changer for the region—and a challenge for Putin

By Arnold C. Dupuy

Romania’s efforts to develop Black Sea gas can weaken Moscow’s influence. Here’s how.

Eastern Europe Energy & Environment

The Atlantic Council in Turkey, which is in charge of the Turkey program, aims to promote and strengthen transatlantic engagement with the region by providing a high-level forum and pursuing programming to address the most important issues on energy, economics, security, and defense.

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The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Natural gas and the energy transition: Security, equity, and achieving net zero appeared first on Atlantic Council.

Public Event Wed, July 24, 2024 • 2:00 pm ET

Effective jurisdictional approaches to forest conservation

Please join the Atlantic Council’s Global Energy Center for the launch of a recent Atlantic Council issue brief, The flaws in project-based carbon credit trading and the need for jurisdictional alternatives.

Energy & Environment

This issue brief highlights several significant, and at times unresolvable, problems with the project-based approach to carbon credit trading, the purpose of which is to reduce deforestation and sequester carbon. Beginning with first-hand observations of the principal author during his experience with forest conservation efforts in the tropics, the brief describes the challenges that arise when this crediting model is implemented in the field, particularly in rainforests and other remote areas of the world. The publication then assesses the three critical structural problems with project-based credit trading that lead to a fundamental lack of integrity in such programs:

• The intractable challenges of a project-based regulatory structure involving difficult-to-prove requirements of additionally and leakage prevention.
• The major transaction and intermediary costs that can amount to half of project funding.
• The credit duration that is far less than the life of the additional CO₂ emissions that are consequently emitted.

The analysis also explains how economic forces and incentives exacerbate these problems, particularly with programs that are carried out by commercial credit traders as opposed to nonprofit entities. Finally, this brief discusses better alternatives, such as jurisdictional programs administered by governments or Indigenous associations, that could more effectively reduce emissions and strengthen the social fabric of communities required to assure credit integrity, accurate measurement, and adequate co-benefits.

Byron Swift is an environmental lawyer and senior adviser for wildlands at Re:wild. He has devoted much of his career, over forty years, to conservation issues in Latin America, working in almost all countries with a focus on protected areas, natural resources management, and capacity building of local institutions. An environmental lawyer, he has served as president of Nature and Culture International, founder and president of Rainforest Trust, and head of the US office of the International Union for Conservation of Nature (IUCN). He has also spent a decade working with the Environmental Law Institute on pollution control and trading issues, and has worked on carbon issues since 1996.

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Senior Fellow

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Distinguished Senior Fellow

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Energy & Environment Energy Transitions

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This report was written and published in accordance with the Atlantic Council policy on intellectual independence. The authors are solely responsible for its analysis and recommendations. The Atlantic Council and its donors do not determine, nor do they necessarily endorse or advocate for, any of this report’s conclusions.

Issue Brief Aug 24, 2023

Transitioning to the clean energy grid: A deep dive into the levelized cost of electricity

By Ken Berlin, Frank Willey

To benefit fully from the lower cost of generating renewables and to achieve a transition to a clean energy system as rapidly as possible, the United States must implement a more efficient planning and permitting process.

Energy & Environment Energy Transitions

Issue Brief Sep 18, 2023

Guarantees 2.0: Meeting climate finance needs in the Global South

By Ian Callaghan, George Frampton, Ken Berlin, and Frank Willey

Transforming global energy, manufacturing, and transportation systems for a net-zero future requires a huge investment, but current financial flows toward these goals are vastly insufficient.

Energy & Environment Energy Markets & Governance

New Atlanticist Sep 20, 2023

Carbon removal is a once-in-a-generation opportunity to reduce the risks of overshooting global warming targets  

By Mahmoud Abouelnaga, Raul Brens Jr.

Carbon dioxide removal technologies offer a crucial pathway to achieving net-zero emissions and minimizing the extent and duration of any overshoot.

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Image: Conserving tropical forests can sequester carbon and help mitigate climate change. Unsplash/Ruben Ramirez

The post The flaws in project-based carbon credit trading and the need for jurisdictional alternatives appeared first on Atlantic Council.

Click to jump to an expert analysis:

David Goldwyn: Energy markets will hinge on Israel’s response

Ellen Wald: Will Iran close the Strait of Hormuz?

Brenda Shaffer: Iran-Israel direct confrontation will last months, not days

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Energy markets will hinge on Israel’s response

Energy markets have been pretty sanguine about rising tensions in the Middle East for some weeks. This may not last. The baseline assumptions have been that the Strait of Hormuz will remain open because it is in Iran’s interest to keep them open. Trade in liquefied natural gas (LNG) has been rerouted to avoid Houthi attack in some cases, but Qatar has had a fast pass to deliver to market. Even this week, markets were relieved at the ability of Israel and its allies to repel the Iranian drone and missile attack, and continue to assume that Israel’s response will not attack Iranian oil production.

But the key question is what comes next. Pressure in Israel to respond to the Iranian attack is intense. There is a high risk of confrontation with Hezbollah in the north to mitigate the risk of a short-range missile attack on Israel. And the Israelis are not done with their Gaza operation. Iran has taken what it thinks is a well previewed and measured response to Israel’s strike on its consulate in Syria to end the cycle of response, but neither Israel nor the United States can tolerate Iranian attacks on Israel as the new normal.   

Key issues to watch in the next two weeks are: 1) what measures the United States and allies will take to try to forestall an Israeli escalation that could lead to a wider war; 2) whether new sanctions on Iran will target insurance clubs, Chinese banks, or both; 3) whether the United States will dramatically increase targeting of Houthi strongholds as a way of reducing the threat to shipping and retaliating against Iran; and 4) whether Israel will exercise restraint, or whether it will trigger a new round of kinetic activity.

At minimum, shipping costs are likely to increase based on the increased risk of military action in the Persian Gulf, pressure on US and European insurance clubs to avoid any transactions—including those with China—that involve Iranian crude and additional rerouting of oil and gas shipments in response to Houthi threats, or Allied responses. Cooler heads in the United States, Europe, Jordan, Saudi Arabia, and hopefully China will try to head off confrontation that will drive oil and gas prices into triple digits. But they may not prevail….

David L. Goldwyn served as special envoy for international energy under President Obama and assistant secretary of energy for international relations under President Clinton. He is chair of the Atlantic Council’s Energy Advisory Group and a nonresident senior fellow with the Council’s Global Energy Center.

Will Iran close the Strait of Hormuz?

As the conflict between Iran and Israel intensifies, the big question is “will Iran close the Strait of Hormuz”? This narrow waterway must be traversed by all ships exiting and entering the Persian Gulf. According to the EIA, about 21 percent of the world’s liquid petroleum (crude oil, condensate and petroleum products) travels through the Strait of Hormuz, making it the most important oil transit chokepoint.

If Iran shut down transit through the strait, oil supplies would be immediately and significantly impacted. Asia would feel the effects most acutely, as 80 percent of the crude oil and condensate that leaves the Persian Gulf through the strait is shipped to Asian customers.

Iran has threatened this action in the past, but never followed through. Iran isn’t likely to close the strait to Saudi, Kuwaiti, Iraqi, and Emirati oil, because if it did, the United States would immediately deploy naval forces to prohibit ships carrying Iranian oil from exiting the Persian Gulf. Iran is completely dependent on revenue from its illicit oil trade, and if it could not export oil, the government would become immediately insolvent.

Even though Iran’s oil is technically under heavy US sanctions, those sanctions are applied on the buyers of Iranian oil, and those buyers have ways of evading sanctions by masking the origin of the oil they purchase. In addition, the Biden administration has not enforced sanctions violations against Iran’s largest customer, China, in ways significant enough to deter Chinese refiners from buying Iranian oil.

Sanctions enforcement and the security of the Strait of Hormuz go hand in hand. If the United States starts enforcing its oil sanctions more strictly and Iran cannot not find buyers for its oil, then Iran could be motivated to close the strait to shipping, because it has nothing to lose. But if sanctions are not as strictly enforced and Iran continues to generate significant revenue from its oil sales, then it will be motivated to keep the Strait of Hormuz open to all shipping.

At the same time, Iran uses revenue from its oil industry to fund terrorism and unrest throughout the Middle East and beyond. Iran isn’t going to close the Strait of Hormuz unless it has nothing to lose. Insurance costs on transporting oil through the Persian Gulf will likely rise, as the potential for an oil tanker to get caught in the crossfire is now more likely. The risk of short-term spikes for oil prices will remain, but the risk of long-term, elevated oil prices owing to a supply shock from the Middle East is still low.

Ellen R. Wald is a nonresident senior fellow with the Atlantic Council Global Energy Center and the co-founder of Washington Ivy Advisors.

Iran-Israel direct confrontation will last months, not days

The Iran-Israel direct confrontation is not over. Currently, the oil market does not correctly reflect the risks to disruption of oil supplies, especially to Iran’s oil production and exports.

Israel will respond to Iran’s April 13 massive aerial barrage. The timing of Israel’s response will depend on when the proper target emerges. States do not pick a date to attack and then look for targets, rather the opposite. When the proper target is identified, the attack will take place.

Iran’s oil production and export is an attractive potential target, because a severe disruption of Iran’s oil infrastructure will be a strategic loss to Iran—and can be accomplished with few human casualties. Yet, clearly the United States would oppose an attack that would reduce Iranian oil exports. The Biden administration wants as many barrels on the market as possible in an election year to keep the global oil prices low, and has not been enforcing US sanctions on Iranian oil exports. Iranian oil production and exports have grown significantly under the Biden administration. In new Iran sanctions that the administration announced on April 18, reference to oil was conspicuously missing.

An illustration of the administration’s tenacity in keeping foreign barrels in the market, Washington asked Ukraine to refrain from attacking Russian oil refineries, despite the effectiveness of these attacks to slow Russia down. If Israel decides to attack Iran’s oil infrastructure, it will likely wait to do it until after the US November elections. Thus, in assessing the impact of the Iran-Israel confrontation on the global oil market, it is important to assess impact over months and not over days.

Iran’s decision to attack Israel from its own territory, and not via proxies as it has done for over twenty years, is exceptional. The regime in Iran is quite calculating and strategic and this decision to attack Israel does not fit its normal mode of behavior. Iran essentially has no modern navy, no serious air defense, and no air force (most of the planes in is inventory were purchased from the United States and France in the 1970s). In this state, it is surprising that Tehran launched the massive aerial attack on Israel, opening itself up to a counterattack. There are two potential explanations to Iran’s decision. One, Iran may be very close to developing a nuclear weapon (or has succeeded), thus has increased confidence, despite its conventional military inferiority. Or, Tehran may have underestimated US support for Israel and the mobilization of most Arab states to challenge the Iranian attack.

Brenda Shaffer is a nonresident senior fellow with the Atlantic Council Global Energy Center.

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The post What Iran’s attack on Israel means for global energy appeared first on Atlantic Council.

The cost of rebuilding Ukraine is currently estimated by the World Bank at $486 billion. Some of this, hopefully, will be paid for by Western governments and with seized Russian assets, but private investment and Ukrainian ingenuity will have to foot a large portion of the bill. However, with no end in sight to hostilities, global investors are more likely to put their money into longer term projects, of which large energy infrastructure is a prime example. Nuclear power is among the most promising options.

Ukraine has been a nuclear energy country since 1977. With the very high-profile exception of the 1986 Chornobyl nuclear disaster, which was much more a failure of Soviet bureaucracy and politics than of Ukrainian nuclear energy management, the country actually boasts a strong record of nuclear power success. Before Russia’s full-scale invasion forced the shutdown of the Zaporizhzhia Nuclear Power Plant in 2022, Ukraine had 15 reactors running, constituting approximately 54% of its baseload power generation.

Ukraine has a well developed nuclear energy industry including a national regulator and a large nuclear workforce. It also has a bilateral civilian nuclear power agreement with the US, known as a 123 Agreement, which means it is authorized to receive most US civilian nuclear technology. With US and European nuclear ambitions bogged down by over-regulation, spiraling construction and commodity costs, a limited nuclear labor force, underdeveloped supply chains, and a near irrational fear of nuclear accidents, Ukraine’s nuclear sector has a number of clear advantages.

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Ukraine’s nuclear agility is unparalleled. Now that it is a fully integrated member of ENTSO-E, the potential for the country to export nuclear-generated clean power to Europe is huge. While building new nuclear power plants in Ukraine is hardly a quick option, once full commercial power exports are authorized, Ukraine could make many billions per year on electricity sales to the rest of Europe.

With its preexisting nuclear industry, Ukraine could also potentially expand its nuclear capacity much faster than any newcomer to nuclear power generation. In the West, nuclear power plants can take 8-15 years to build, depending on regulatory approval times. They can cost approximately $2-3 billion for a single small modular reactor and as much as $15 billion for a large plant. In the past, Ukraine has been able to build nuclear power plants with significantly lower costs and in shorter time frames.

By purchasing Ukrainian power, Europe could save billions and reinforce its energy security. The EU’s energy transition plan is mostly focused on renewables, but a baseload is required to make renewable power sources usable as peak load. With war in the Middle East shutting down the Red Sea and Suez Canal shipping routes, new EU sanctions under consideration targeting Russian liquified natural gas (LNG), Russia bombing Ukrainian gas storage facilities holding European gas supplies, and the end of the Gazprom-Naftogaz transit contract in December 2024, nuclear power is the only scalable baseload available that is secure and zero emission.

Ukraine can also offer much cheaper power than other European countries. Although current Ukrainian prices are regulated according to wartime restrictions, and while Russian devastation of Ukrainian power generation capacity in March and April 2024 has affected markets, Ukraine will remain extremely competitive with the rest of Europe even once controls are lifted.

Eurasia Center events

Online Event Thu, August 15, 2024 • 9:00 am ET

Ukraine’s advance in Kursk: What’s next and implications

Conflict Russia Security & Defense Ukraine

The path forward will not be straightforward. In addition to the obvious challenges presented by Russia’s ongoing invasion, the biggest obstacles Ukraine faces in expanding its nuclear power capacity are investor fears and the need for reform at the country’s state-owned nuclear power company, Energoatom.

The possibility of private nuclear power plants is a huge opportunity for Ukraine’s economy and thus reconstruction, because the private sector almost invariably moves faster and more efficiently than the public sector. Many countries have privately owned and operated nuclear power plants, including the US and UK. This model makes it possible to raise funds quickly. It also brings security and rule of law benefits, along with operational benefits and the anti-corruption protections of Western business standards. Moreover, private companies can get started now, potentially years before state-owned entities.

As to public nuclear development, meaning with and through Energoatom, success will depend on achieving de-monopolization and reform of the state-owned company. Despite its nuclear power prowess and ownership and operation of all four of Ukraine’s nuclear plants, Energoatom is hampered in its nuclear expansion plans by a legacy Soviet corporate culture based on monopoly status. Its monopoly position in Ukraine has eliminated any internal incentive to adopt Western corporate standards, including anti-corruption norms.

In recognition of this, Ukraine’s parliament enacted a law in February 2023 requiring the corporatization of Energoatom in order to “open up additional opportunities for attracting significant investments in the industry and development of domestic nuclear energy, which is the key generation in the country,” according to Ukraine’s Minister of Energy German Galushchenko. This corporatization process is currently underway.

Intended to bring the nuclear behemoth into line with international corporate governance and structure standards, the reform of Energoatom requires the selection of an independent international supervisory board and the implementation of numerous internal policies and standards. It is seen as so important that its completion is a requirement for Ukraine to receive up to $100 million in financial support from the US under the recently signed Ukraine-US Memorandum of Understanding regarding Collaboration on Ukrainian Energy System Resilience.

Once the reform of Energoatom advances and possibilities for private nuclear power open up, Ukraine could lead the rest of Europe in constructing new nuclear power plants. Energy is one of Ukraine’s great strengths, as are an educated labor force and technological skills. Taken together, these assets can help fuel Ukraine’s reconstruction and power Europe’s energy transition through new nuclear development.

Suriya Jayanti is a nonresident senior fellow at the Atlantic Council’s Eurasia Center.

Further reading

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A new Russian air offensive has destroyed much of Ukraine’s civilian energy infrastructure in a matter of days and threatens to spark a humanitarian catastrophe if Ukraine does not urgently receive enhanced air defenses, writes Suriya Evans-Pritchard Jayanti.

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The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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The post Ukrainian nuclear energy can fuel country’s recovery and power Europe appeared first on Atlantic Council.

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Navigating outside interests

Historically dependent on Russian fossil fuels, CEE now plays a crucial role as the eastern flank of NATO and a logistics hub for Ukraine aid. Additionally, China has been active in CEE trade and investment through its 14+1 format (formerly 17+1), which includes battery, wind, and solar energy supply chains, while the United States promotes close cooperation with its gas and nuclear industries.

As the largest inter-governmental organization in the region, the Three Seas Initiative (3SI) is uniquely positioned to define CEE’s role among these interests. It includes member countries Estonia, Latvia, Lithuania, Poland, Czechia, Slovakia, Hungary, Slovenia, Croatia, Bulgaria, Romania, Austria, and Greece with the participation of Ukraine and Moldova as partners. However, despite 3SI’s original goal of enhancing North-South collaboration and connectivity, of its forty-one energy priority projects, only one is dedicated to cross-border electricity interconnection and one to an offshore wind farm grid connection, while twenty are linked to gas infrastructure expansion.

CEE’s appetite for gas is no longer growing

Enabling natural gas in CEE is becoming increasingly untenable. Data suggest that by 2025, LNG import capacity across 3SI countries is likely to exceed historical imports of Russian pipeline gas. To use this expected growth in supply, LNG consumption in the region would have to grow well beyond past demand.

Furthermore, evidence is mounting regarding the adverse climate and environmental impacts of LNG. Reflecting global concerns along these lines, the Biden administration suspended approvals for liquified natural gas (LNG) exports, in an effort to better align US foreign policy with its climate ambition.

The potential for stranded assets

Forecasts by European power and gas grid operators estimate that total gas demand in 3SI countries will stabilize around the 2023 level of 70 bcm and reach between 61 and 73 bcm by 2030, depending on the scenario and the displacement of coal in the power sector. Over the same period, LNG import capacity in 3SI countries is expected to reach 53 bcm (by 2030), complemented by 17 bcm from the Baltic Pipe, Balticconnector, and Trans Adriatic Pipeline, as well as 15 bcm of domestic gas production (16 bcm in 2023), reaching 85 bcm in total. This means that by 2030, across 3SI members, the sum of domestic production and gas import capabilities through LNG terminals and pipelines from North and South directions will exceed demand of 3SI countries by 17-40 percent (12-24 bcm).

The outlook varies at the country level, but outsized gas facilities funded by EU taxpayer money in Poland or the Baltic States in particular risk becoming stranded assets. By 2040, demand is expected to decrease due to intensified energy efficiency measures and growth in heat pump installations replacing gas boilers.

The energy security risks of LNG reliance

While LNG has played an indispensable role filling the Russian supply gap, security concerns remain for certain landlocked CEE and 3SI countries with unequal access to market-based LNG. The reality is that all importers and consumers of LNG face risks from global fuel price fluctuations, contract renegotiations, and competition from buyers willing to spend more. Pakistan’s experience in 2022 and 2023 highlights these challenges. Whenever China’s economic recovery arrives, it will have major ramifications across the global LNG market. The EU’s gas import bill ran close to €400 billion in 2022 alone—more than three times the level in 2021, showing how high the price of energy security can be.

The Three Seas Summit is an opportunity to pivot from gas to renewables

This year’s Three Seas Summit provides a unique opportunity for CEE governments to articulate a long-term vision pivoting away from fossil fuel interests toward clean, affordable, and local renewables, enabled by an expanded interconnector network. The new pro-Europe and pro-climate government in Poland, the largest 3SI member, could lead the charge for 3SI to transition away from gas use.

The opportunity to implement this change is significant, especially for the Lithuanian 3SI presidency and its Baltic Sea neighbours, which are on track to deploy 15 GW of offshore wind by the early 2030s. Capitalizing on the wind and solar potential would increase the share of renewables in 3SI’s electricity generation from 39 percent today to 67 percent by 2030, and lead to a 27 percent reduction in power prices compared to a current policy scenario.

Realization of this renewable potential would bring major economic and security benefits. The expansion of offshore wind in the region is already creating hundreds of jobs, and lower electricity prices will attract further manufacturing and industry investments. Examples from Ukraine show that distributed energy generation and interconnection provides better resilience in times of war than a traditional, centralized power system.

However, grid expansion and upgrades have to keep pace with the electrification of the economy. The European Commission estimates that by 2030, €584 billion in investments are necessary to modernize the aging grid infrastructure, making it fit for variable renewables and new demand from electric vehicle charging points and residential heat pumps. This presents a vast investment opportunity for the next phase of the Three Seas Initiative Investment Fund, especially in the area of cross-border interconnection.    

With the expansion of wind and solar, the CEE region can become a model for reduced dependency on fossil fuel imports—and transform into a European clean energy hub.

Pawel Czyzak is Central and Eastern Europe lead at Ember.

Nolan Theisen is a senior research fellow at Slovak Foreign Policy Association.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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California, New York, and other states should move heaven and earth to authorize and construct new housing rapidly, especially in dense urban areas. If these states and others prioritize building houses, emissions and interest rates could fall substantially, providing a major economic and climatological boost to the United States.

The US housing shortage

Like all prices, elevated housing costs are a symptom of supply and demand.

Housing demand surged amid the pandemic and shifting office routines. With Covid-19 constraining mobility, individuals working from home upsized into larger dwellings suitable for full-time remote work.

The housing problem is on the supply side: the United States is not building enough housing.

From 2012 and 2022, the gap between household formations exceeded national home constructions by 2.3 million homes.

While many places have underbuilt housing, it’s worth highlighting the abject failure of two large and important states: California and New York. The nation’s largest and fourth largest states by population have failed to match the housing construction pace of Texas and Florida, the nation’s second-largest and third-largest states, respectively. In 2023, Florida and Texas together authorized three times more housing than California and New York combined.

The situation is even more stark after normalizing for population. California and New York’s per capita homebuilding rate actually declined from 2019, while Florida and Texas’ rose slightly despite a much less favorable interest rate environment.

Why have California and New York failed to build housing? As John Burn-Murdoch identified in a trenchant analysis for the Financial Times, these states’ planning systems place artificial restrictions on supply.

California and New York’s permitting processes are in shambles, largely due to state and local dysfunction. In San Francisco’s infamously restrictive housebuilding environment, it usually takes two years to fully approve a housing development, without even taking construction time into account. New York state legislators, meanwhile, blocked tax and zoning changes that would have allowed for more new large apartment buildings.

Due to insufficient housing supply, California and New York are, unsurprisingly, deeply unaffordable compared to other markets that are constructing housing. The burden of these failed policies disproportionately affects the young and individuals of color.

Housing accounts for about one-third of a median household’s budget. But costs are even higher for younger individuals: in 2022, half of all householders aged 15-24 spent 35 percent or more of their annual household income on rental costs.

Similarly, individuals of color are particularly impacted by higher rental prices. Black and Hispanic Americans have home ownership rates of 44 percent and 51 percent, respectively, while white Americans have home ownership rates of 72.7 percent.

How housing prices affect inflation—and the cost of clean energy

Rental prices rose 22 percent from December 2019 to December 2023, higher than the 18.4 percent rate of inflation if shelter is excluded. Consequently, renters have experienced higher rates of inflation. Expanding housing supply could therefore have a positive impact on renters.

US inflation today is largely a housing phenomenon, as shelter now accounts for over two thirds of the rise in the US core consumer price index (CPI), which excludes volatile food and energy prices and is a useful proxy for tracking consumers’ out-of-pocket spending and inflation-adjusted wages. Moreover, real-time measures of shelter costs, such as Zillow’s Home Value Index, show that prices rose 3.6 percent year-over-year in February 2024. (Housing represents a smaller share of the Fed’s preferred inflation measure, the Personal Consumption Expenditures Index, but even there it’s a major chunk of the total.)

With housing shortages contributing to inflation, the Federal Reserve has been forced to impose higher interest rates. High interest rates are disastrous for US climate goals, as capital-intensive clean energy projects benefit from lower financing costs and are penalized by higher rates. If interest rates rise to 7 percent from 3 percent, the cost of offshore wind and solar farms rises by about one-third, nuclear energy costs grow by even more, but natural gas plant prices barely budge. Unsurprisingly several US clean energy projects, from nuclear to renewables, have faced cancellations due to higher-than-expected interest rates.

As inflation abates, central banks will be freer to lower interest rates, reducing financing costs for clean energy projects. Expanding housing would therefore not only provide a sizable economic boon to the United States, producing a virtuous cycle of lower interest rates for longer, but also deliver progress on climate.

Dense housing is good for climate mitigation

Insufficient housing, especially dense urban housing sited near transit, also carries huge climate consequences. Per-capita greenhouse emissions are much lower in urban neighborhoods than other areas.

New York and California are not only failing to build a sufficient quantity of housing stock, but also to build sufficiently dense units. In California, dense housing stock is facing an array of challenges, especially at the local level. Although New York’s home building is very dense, owing to the prominence of New York City, the share of dense housing structures as a percentage of all units has fallen sharply since 2019.

In sum, greater housing—especially in urban areas—would provide reduce inflation and interest rates while lowering emissions. Expanding dense, urban housing options should be a top policy priority.

There are several ways to accelerate housing construction.

The most important step is to identify the problem and mobilize actors across all levels of government—national, state, and local—to build housing as quickly as possible.

Legalizing apartment units, including same-lot units, and eliminating parking requirements are also important steps for cities. Additionally, lowering or eliminating tariffs for some housing inputs, such as softwood lumber imports from Canada, would incentivize housing construction. Incredibly, the US Commerce Department is considering raising duties on Canadian lumber imports. This action would raise consumer prices and disincentivize new housing. It would constitute a profound error with grave inflationary and climate consequences. Instead of raising tariffs on what is arguably the United States’ closest ally, Washington should vigorously pursue policies that decrease shelter costs as quickly as possible.

Reducing shelter costs should be considered a primary priority for US policymakers. While apartment rental price increases have recently abated, and even begun to decline in some markets, these benefits have often yet to pass through to consumers on year-long leases. Rental prices may decline further if action is taken at all levels of government. If housing prices continue to lift inflation, however, the consequences could be profound.

Joseph Webster is a senior fellow at the Atlantic Council. This article represents his personal opinion.

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Boasting the largest agricultural landmass in Europe, Ukraine’s biomethane potential is unrivaled across the continent. The country is not only able to produce volumes that could singlehandedly cover the equivalent of a medium-sized European nation’s annual natural gas consumption; it can also do so at prices that are comparatively cheaper than other EU states.

Although Ukraine adopted legislation regulating the production of biomethane last year, it could not realize its full potential because of restrictions introduced at the start of Russia’s full-scale invasion in February 2022. Immediately after the start of war, Ukrainian policymakers imposed a blanket ban on the export of natural gas, fearing the country would be left without supplies to keep the lights on or provide heating to consumers.

While this ban was designed with natural gas in mind, wartime restrictions also extended to biomethane because it is approximately equal to natural gas in quality. As a result, many companies which had invested in producing biomethane using biomass crops had to suspend production or postpone investments as they could not access lucrative European markets.

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With restrictions now lifted, biomethane companies are aiming to export the first volumes to Germany by May. Ukraine is expected to develop its own EU-aligned guarantees of origin which will demonstrate compliance with European Union sustainability criteria. These guarantees will then be linked to the EU’s Union Database for Biofuels (UDB), becoming part of the EU’s single market. Although this process may take two years to complete, Ukrainian companies looking to start exports immediately will be able to do so by providing customs-agreed certificates of compliance or proofs of sustainability.

Ukraine’s enthusiastic embrace of biomethane will help the country move further away from its past reliance on Russian gas and coal imports. Crucially, this shift toward green energy will also support Ukraine’s efforts to monetize its agricultural resources in a way that benefits both local producers and European consumers.

Five biomethane refining plants are currently gearing up to produce and export 77 million cubic meters of biomethane this year. Another ten plants are expected to enter commercial operation in 2025, nearly doubling production. As there is keen interest from large international customers to secure more biomethane from Ukraine, there are expectations that output may be scaled up even further to cover 20% of the EU’s biomethane demand of 35 billion cubic meters by 2030. Within 20 years, Ukraine’s annual output could potentially rise to around 22 billion cubic meters, one of the highest expected levels in Europe.

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To a significant degree, the Ukrainian biomethane industry’s success depends on its ability to export fuel to Europe. Under current regulations, Ukraine doesn’t subsidize internal production, which means it is only viable if exported to countries which have financial support schemes in place. Beyond that, there are also a number of challenges related to potential opposition from European farmers who may fear Ukrainian competition.

Following the introduction of wartime regulations easing Ukrainian access to EU markets, farmers in a number of EU countries have been pushing for greater import controls on Ukrainian agricultural products. This is forcing European politicians to address domestic agricultural sector opposition while also continuing to support Ukraine in the fight against Russia. Since biomethane production is an emerging industry, Ukrainian and EU policymakers have a window of opportunity to find mutually attractive solutions capable of easing Ukraine into the European single market while preparing farmers to face fair competition.

The most important and immediate challenge that Ukraine faces is the Russian threat to its energy infrastructure. A series of Russian missile and drone strikes in late March represented the largest concentrated attack on Ukrainian energy infrastructure since the start of the full-scale invasion in February 2022. This has added to the comprehensive damage already sustained by Ukraine’s energy infrastructure over the past two years. Ukraine’s new biomethane plants will be dotted across the country, but they will not be completely shielded from similar strikes.

To protect the country’s infrastructure and help Europe secure clean sources of energy, Ukraine urgently needs additional air defense systems in large quantities. Failure to act will endanger more Ukrainian lives and could also undermine Europe’s chances of securing competitively-priced green energy.

Dr. Aura Sabadus is a senior energy journalist who writes about Eastern Europe, Turkey, and Ukraine for Independent Commodity Intelligence Services (ICIS), a London-based global energy and petrochemicals news and market data provider. Her views are her own.

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The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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Recently, the US Treasury released its critical hydrogen guidance, called 45V, but the domestic hydrogen ecosystem has yet to see major positive final investment decisions (FID). While 45V is an undeniably important element in determining the future of the industry, and its related emissions, insufficient attention is being paid to the substantial technical, commercial, and regulatory challenges that must be overcome if hydrogen is to realize its potential as a key decarbonization vector. 

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45V is a tax credit for the production of what the US Treasury terms “qualified clean hydrogen.” The US Treasury released its 45V draft guidance in late December, imposing strict guidance on the so-called “three pillars” of temporal matching, additionality, and deliverability.

Critics of the 45V guidance argue it is too restrictive and will prevent the industry from reaching scale, or even cede the sector to China. Conversely, environmental groups and academics are broadly supportive of the Treasury’s decision, holding that hydrogen’s ambitions must match its thermodynamic and technoeconomic realities, as insufficient restrictions could actually increase US emissions at the cost of tens of billions of dollars.

While 45V will have enormously consequential impacts on US hydrogen’s scalability, as well as emissions, it’s not the only factor affecting the industry. These challenges include the following:

• Elevated interest rates and lengthy permitting times for new clean infrastructure are slowing capital-intensive energy deployment, including clean hydrogen. 
• Technology and supply chain issues are also impacting hydrogen development. While hydrogen production tax credits will improve project costs, they do not address persistent issues with integration of the supply chain and onsite systems. Hydrogen suppliers are inexperienced, with many having just come out of a technology-development phase. They often lack operations support and robust system design around the core technology. 
• Poor technical integration due to the lack of robust modern digital platforms that can communicate with and manage assets across the supply chain impairs a project’s ability to pass FID. Hydrogen generation projects will not pass FID unless offtake is secured. Integration challenges will continue to delay FIDs. 
• Technical scope will be highly project dependent, making economies of scale difficult to achieve. Hydrogen production projects will change significantly in scope—and cost—depending on the offtaker.

For instance, mobility end users will require significant hydrogen storage, compression trains or liquefaction trains, and export systems. Conversely, industrial customers will seek to develop systems designed specifically to avoid potential unintended consequences of hydrogen blending in gas pipelines. These technical requirements from the offtaker impose significant scope change to the production project.

Infrastructure limitations will result in market inefficiencies, adding a commercial hurdle to scaling hydrogen. Due to limited pipeline infrastructure, hydrogen markets have virtually no inter-regional connectivity with one another, limiting the number of buyers and sellers in each market.

To wit, there are only 1,600 miles of hydrogen pipelines in the United States, mostly along the Gulf Coast. In comparison, nationwide there are about 3 million miles of natural gas pipelines. Additionally, existing hydrogen networks are typically private-carrier pipelines, which are used by incumbents but not necessarily open to new producers.

Limited inter-regional trade in clean hydrogen means that the number of buyers and sellers will be highly constrained in local markets, especially in parts of the United States where there is little or no existing merchant trade in hydrogen. This could create considerable market distortions in places where industrial-scale clean hydrogen consumers will be the dominant—if not sole—offtaker in their local market. Markets where there is a sole buyer—a monopsonist—are prone to inefficiencies.

With some hydrogen markets unable to rely on fully competitive market structures, which rely on many buyers and many sellers, the development of the technology may be constrained. Notably, credit conditions for projects seeking to sell to a sole offtaker may be challenging. 

The US hydrogen hubs, supported by funding from the Department of Energy, aim to solve this foreseeable problem by building an ecosystem of many buyers and sellers, aggregating demand and supply to create a more efficient market. Indeed, in existing ports and industrial zones, there will be few risks of a monopsony problems due to varied potential customers. Still, less developed H2 markets will be subject to this risk.

Most importantly, a lack of reliable demand exists for green hydrogen in any volume outside the heavy mobility market in California, and grey hydrogen producers will not be incentivized to switch until price parity is achieved, either via carrots (such as incentives in 45V), or sticks (such as pollution fees or regulatory measures). The issue is one of price, and it’s not clear that the combination of carrots and sticks in enough to achieve a switch from grey hydrogen to lower carbon products. 

In sum, while the Treasury Department’s guidance on 45V is grabbing a lot of attention, multiple other factors impacting the clean hydrogen industry must be addressed. Industry and policymakers need to grapple with these challenges and identify effective solutions.

Matthew Blieske is the former CEO and co-founder of LIFTE H2, which develops and deploys novel end-to-end hydrogen supply chains. Blieske sold his stake in the company in October 2023 and is now an independent hydrogen consultant.

Joseph Webster is a senior fellow at the Atlantic Council. This article represents their own personal opinion.

EnergySource

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Introduction

Cities and states are at the forefront of US efforts to achieve decarbonization goals, manufacture low-carbon technologies, and identify opportunities to align the energy transition with economic opportunities for businesses and workers. These subnational strategies align with ambitious nationwide objectives, including reducing US greenhouse gas emissions 50–52 percent below 2005 levels by 2030, achieving 100-percent carbon pollution-free electricity by 2035, and attaining a net-zero emissions economy by 2050. Achieving these targets will require cities and states across the United States to adopt decarbonization technologies, policies, and strategies. The leadership of state, local, and tribal leaders in climate action is pivotal for ensuring the long-term and sustainable decarbonization of the US economy.

Cleveland, Ohio, a mid-sized lakefront city with a rich manufacturing history, was once the fifth-largest city in the United States. However, as was the case with many Midwestern cities, Cleveland’s deindustrialization led to its economic decline. Yet Cleveland has an opportunity to establish itself as a leader in low-carbon and equitable growth. The city is pioneering valuable lessons learned and best practices to share with other cities facing similarly challenging conditions. It provides an example of how cities can leverage the benefits of the low-carbon transition to address climate change while providing public health, social, and economic opportunities for everyday Clevelanders—and to use this transition as an opportunity to reestablish itself as an industrial powerhouse in a low-carbon economy.

Cleveland is building toward a decarbonization agenda that envisions a city and region that are more equitable, sustainable, and livable. Yet while there are important voices advocating for an environmentally and socially sustainable future, it has proven challenging to build the critical mass of support required for structural, long-term change in Cleveland. Progress toward a comprehensive decarbonization vision, therefore, has been uneven in both the city and the surrounding region, including Cuyahoga County.

Nonetheless, key stakeholders continue to press forward to ensure that the Cleveland region will have a decarbonized future for all its citizens. For that to occur, the city’s public, private, philanthropic, and civil-society leaders will have to build upon their existing efforts, expanding and deepening the coalition of groups and interests that want to transform Cleveland’s economy in a decarbonized direction.

Following his election in 2021, Cleveland’s mayor, Justin Bibb, reaffirmed his predecessor’s commitment to sustainability and climate action. He announced a goal to transition Cleveland to 100-percent renewable energy by 2030, funded an initiative focusing on the circular economy, and stressed environmental justice as a core priority of his administration, among other actions. The city launched its Climate Action Plan in 2013, and updated the plan in 2018 to provide a framework for the city’s approach to tackle climate change across five focus areas: energy efficiency, clean energy, sustainable transportation, food systems, and clean water and vibrant green space. The plan also addressed cross-cutting priorities across the focus areas of social and racial equity, good jobs, climate resilience, and business leadership. The city is currently working on updating the 2018 iteration and expects to release an updated version in 2024. Members of the Greater Cleveland Partnership, the city’s Chamber of Commerce, for example, have begun to monitor their scope-one and scope-two emissions due to increasing customer demand for sustainability. And a steering committee, consisting of representatives from leading organizations in the region, has been formed to support an update to the city’s essential targets and goals—and, ultimately, to advance a unified vision for the city.

Cleveland: Basics

The Cleveland-Elyria Metropolitan Statistical Area (MSA), defined as the core city of Cleveland plus the surrounding Cuyahoga, Geauga, Lake, Lorain, and Medina Counties, had a population of 2.1 million people in 2020. The once-thriving city of Cleveland has experienced substantial population decline, from nearly one million residents in 1950 to 364,000 in 2022. The city’s population loss was the surrounding Cuyahoga County’s gain (Cuyahoga is by far the largest county among the five in the MSA), although it too has declined in population, from around 1.7 million in 1970 to 1.24 million people in 2022. The core city’s population decline stemmed from several forces that were common to US cities in the postwar era, including net out-migration, underinvestment in public infrastructure, and a shifting economic base, especially industrial-plant closures. Many of these demographic shifts resulted from the long-term decline, starting in the 1960s, of Cleveland’s industrial and manufacturing bases, which continue to be the backbone of Cleveland’s economy.

Such changes also landed unequally on Cleveland’s population. As just one of many possible examples, the construction of highways through Cleveland starting in the 1950s split the city unevenly, and to the detriment of poorer minority communities. Today, the legacy of Cleveland’s unequal economic geography remains, in particular for the city’s Black population, which remains concentrated in neighborhoods characterized by lower incomes, employment, and educational attainment. Within the city of Cleveland, 31.4 percent of residents live below the poverty line.

Decarbonization: State and local

With respect to greenhouse gas (GHG) emissions, the city of Cleveland has made some progress in mitigating its climate impact. Cleveland’s GHG emissions stood at 11.65 million tons in 2018, down 7 percent from 2010 levels, with an 11-percent improvement in emissions per dollar of gross domestic product (GDP). Cleveland’s GHG reductions occurred as regional eGrid emissions fell on coal-to-gas switching, as well as the increased adoption of clean energy. At the state level, Ohio’s use of coal in the electricity sector halved to 59 terawatt hours (TWh) over the same time period, while its natural gas usage rose 545 percent to 46 TWh to 2018; generation from clean energy sources, such as nuclear energy and wind, also rose sharply from 2010 to 2018. As is true of other US cities, greenhouse gas emissions in the greater Cleveland region are lowest toward the city center and highest toward the region’s periphery, owing to the roles played by population density, mixture of uses, commute lengths, and housing sizes.

While at the city level, Cleveland has notched key gains toward decarbonization, it faces state-level headwinds. Policymakers in Ohio’s state government appear willing to tilt energy markets toward fossil fuels. State officials have implemented restrictive legislation concerning the transition to renewable power sources, instituting onerous property-setback requirements for wind turbines and making approval processes for wind and solar projects much more difficult. As a result, Ohio’s electricity grid fuel mix will constrain Cleveland’s decarbonization ambitions. Ohio’s electricity generation is dominated by coal and natural gas, with clean energy sources such as nuclear, wind, and solar accounting for a very low proportion of overall output. In 2022, Ohio garnered only 15.4 percent of all electricity generation from nuclear, wind, or solar sources, versus nearly 51 percent for natural gas and nearly 32 percent for coal. Because clean electricity accounts for only a small fraction of Ohio’s total generation, there will be fewer decarbonization benefits to Cleveland from the electrification of vehicles or heating of buildings.

At the same time, there are countervailing forces at work within the state. The Inflation Reduction Act (IRA) of August 2022 has already generated new investments totaling $8.03 billion and more than five thousand good-paying clean energy jobs in Ohio, per research from the nongovernmental organization Climate Power, suggesting the clean energy transition’s economic potential there. Reflective of Ohio’s industrial history, Honda, LG Energy, and EdgeEnergy have invested in the electric vehicle economy and First Solar and Invenergy have invested in solar manufacturing. Federal support also aims to reduce energy bills through the Home Energy Rebate program and energy-efficiency grants.

While investment outcomes are typically tracked at the state level, local organizations in Cleveland are attempting to catalyze clean energy investments into the city. The GO Green Energy Fund, headquartered in Cleveland, is not only the nation’s first Black-led green bank program, it is also leading an initiative to secure $250 million in funding from IRA to support residential solar uptake for low-income residents across twenty counties, including Cuyahoga. In addition to solar, the fund is also examining other clean energy technologies, such as appliances and weatherization. With state policymakers evincing little interest in advancing decarbonization, local groups are aggressively pursuing federal funding from the Environmental Protection Agency (EPA).

Cleveland: Decarbonization pillars

Despite the constraints at the state level on decarbonization parameters, Cleveland and other local jurisdictions are setting forth strategies to reduce carbon emissions where possible. Cleveland’s efforts can be summarized with four key pillars: environmental justice; industry and manufacturing; transportation; and conservation. The pillars are generally aligned with the cross-cutting focus areas outlined in the city’s 2018 version of the Climate Action Plan (these include environmental justice, the green economy including business leadership, climate resilience, clean energy and efficient buildings, transportation, land and water conservation, and food security).

Environmental justice

As occurred in other US cities, Cleveland’s economic development historically disadvantaged poor and minority communities. East Cleveland, a suburb, was redlined on racial grounds and now has the lowest median income in Ohio, a 50.3-percent child-poverty rate, and 40 percent of its Black population living in poverty. The city’s decarbonization strategy includes a commitment to ensure that decarbonization efforts are equitable. For example, Mayor Bibb announced a $15-million investment for three disadvantaged neighborhoods to actualize the concept of a walkable or bikeable “fifteen-minute city,” and intends to allocate $50 million from the American Rescue Plan Act (ARPA) funding to prepare a thousand acres of vacant land to attract development and revive well-paying jobs in the city.

The historical legacy of discriminatory practices has cast a long shadow over Cleveland, amplifying the adverse impacts of economic and environmental outcomes such as high energy costs. Electricity and gas bills in Cleveland consume 6.6 percent of the average household income, nearly double the national average of 3.6 percent. Within the region, there are efforts to provide relief while pursuing decarbonization. The city of Cleveland, for example, is implementing a pilot program to install solar panels on the homes of low- and moderate-income families. Such efforts overlap with those by co-ops such as the Solar United Neighbors, Cuyahoga County Solar Cooperative, and Cleveland Solar Cooperative, which also develop solar assets in low- to medium-income neighborhoods.

Industry and manufacturing

Industry and manufacturing played a pivotal role in both Cleveland’s growth and its decline, but also should play an important role in the city’s rejuvenation efforts. Industry and manufacturing are Cleveland’s largest electricity consumers, using about 60 percent of the city’s total electricity. Energy efficiency is a central pillar of Cleveland Cliffs’ environmental strategy (the company, which is headquartered in Cleveland, is the largest flat-rolled steelmaker in the United States). Its Cleveland Works plant produces hot-rolled, cold-rolled, and hot-dip galvanized sheet and semi-finished slabs, and has the capacity to manufacture more than three million tons of raw steel annually using its two blast furnaces. Working closely with the Department of Energy’s Better Plants program, Cleveland Cliffs is committed to achieving a 10-percent reduction in energy intensity over ten years and announced a target to purchase two million MWh annually of renewable power.

Transportation

The transition to electric vehicles (EVs) is a vital step in reducing the city’s emissions, but its effectiveness in achieving decarbonization goals relies on the electricity grid. The absence of signals from the state pertaining to grid decarbonization fosters hesitation regarding investments in, and adoption of, decarbonization technologies like EVs. Cleveland’s EV adoption remains limited, accounting for merely 2.2 percent of new vehicle registrations in the Cleveland-Akron metro area, in contrast to comparable cities such as Columbus (3.7 percent), Detroit (4 percent), and Indianapolis (3.1 percent). The slow growth of EVs can be attributed partly to the lack of state-level EV tax incentives in Ohio, a contrast with other states such as Washington, Oregon, and California that are offering substantial incentives, leading to higher levels of EV registration rates in cities such as Seattle (17.2 percent), Portland (13.1 percent), and San Francisco (32.9 percent).

EV-charging infrastructure in Cleveland remains underdeveloped, although the mayor’s office has initiated the installation of its first free EV-charging station in the Lee-Harvard neighborhood, with plans for multiple additional installations throughout the city. The Greater Cleveland Regional Transit Authority’s 2020–2030 strategic plans include measures to introduce electric-powered buses, integrate alternative power at stations, provide EV charging at its facilities, and support multimodal connections to its transit systems. At the state level, there are plans to install EV-charging infrastructure across a corridor of 1,870 miles, facilitating a more comprehensive charging network across the region. Additionally, the Northeast Ohio Areawide Coordinating Agency (NOACA) has identified forty-seven locations for charging stations, spanning five counties in the region.

The city of Cleveland’s Mobility Plan demonstrates a proactive approach toward improving the city’s bike and pedestrian infrastructure, a step toward realizing Mayor Bibb’s fifteen-minute city framework, which has the potential to reduce vehicular traffic and associated emissions. This plan is multifaceted, aiming to bolster transit-oriented development, inject investment into Cleveland’s neighborhoods, and encourage multimodal transportation options. Currently, the city’s bicycle lanes are disjointed, catering to pockets of the city. Bike Cleveland, a local nongovernmental organization (NGO), has identified twenty-seven miles of potential new or improved bike facilities to enhance biking connectivity and safety.

Conservation

The conservation of land resources is integral to any vision that seeks to improve Cleveland’s livability, local economy, and environmental sustainability, while contributing to climate adaptation and energy efficiency. Among other benefits, conserving land helps mitigate climate-change impacts, contributing to local air and water quality and reducing urban heat-island effects. As with so many other aspects of the Cleveland case study, its conservation story is a combination of a troubling history and promising future.

For many decades, Cleveland was known as the Forest City for the extent and diversity of its tree canopy. Trees provide shade, reducing the heat-island effect, and can thus lower energy demand and associated emissions for keeping buildings cool. Since the 1950s, the city of Cleveland has lost half its tree cover, now estimated at around 18 percent of what the Cleveland Tree Coalition estimates as a possible upper limit. The city continues to lose trees at the rate of seventy-five acres per year. Unsurprisingly, the lowest coverage levels are in the city’s poorest neighborhoods contributing to poor air quality and access to shade, a result of systematic underinvestment in the city’s tree canopy there. An Urban Forestry Commission has been reconstituted under the aegis of the city government. It has the express goal of reversing the loss of tree cover through identifying appropriate policy remedies and generating public and civil-society buy-in to reforestation of the city.

The city’s history shows that a concerted, collaborative effort can accomplish this major conservation and decarbonization goal. The Cuyahoga River, which flows through Cleveland, is an iconic example of the city’s ability to achieve such an ambitious aim. The river is known for the 1969 fire that helped spark the mass environmental movement across the United States. Over decades, the determined efforts of federal, state, and local officials—as well as industry, civil society, and the Cleveland-Cuyahoga County Port—have brought the Cuyahoga back from its near-dead status of half a century ago.

Conclusion and recommendations

For the city of Cleveland and the surrounding region to successfully decarbonize, leaders from the public, private, and philanthropic sectors, plus those from civil society, will need to sustain and strengthen the coalitions that are moving the region in this direction. There are many promising signs on this front, as shown by the growing efforts of the Climate Action Plan steering committee and efforts to update the 2018 version of the plan. The city has made progress toward ensuring a just transition to a clean energy community, promoting low-carbon industrial production, advocating for an increase in EV adoption and charging infrastructure, and conserving tree cover, but much more work is needed to realize its climate and decarbonization agenda. The city will need to overcome remaining challenges by continuing engagement with all stakeholders: at the household and business levels to promote wider adoption of low-carbon technologies such as heat pumps, EVs, and charging systems; with the city’s utility, Cleveland Public Power, to develop a clean-energy grid; and through recognition by industry and large firms that decarbonization strategies are a better way of doing business.

Despite the state of Ohio’s recalcitrant policies toward renewable energy, there is much opportunity for Cleveland in this domain. For example, the city and region have numerous synergies between onshore and offshore wind on the one hand and steelmaking on the other. Great Lakes offshore wind must overcome several hurdles, including permitting challenges, height restrictions on wind turbines, cost inflation, and more, yet the Cleveland region nonetheless has a unique opportunity to accelerate decarbonization and economic development by leveraging its existing industrial base for wind development.

Finally, an oft-repeated message in consultations with key stakeholders is that the city and region need to realize the opportunities and benefits of recent federal legislation like the Inflation Reduction Act, CHIPS Act, and Infrastructure Investment and Jobs Act, as seen by recent investments in other regions of Ohio. There is enormous public funding available for investment from these acts. Leaders will need to bring the right groups of stakeholders together to aggressively pursue federal incentives and funding.

Staff

Peter Engelke

Senior Fellow, Scowcroft Strategy Initiative

Global Energy Center Scowcroft Center for Strategy and Security

Technology & Innovation Europe & Eurasia

Staff

Joseph Webster

Senior Fellow, Global Energy Center

Global Energy Center Indo-Pacific Security Initiative

Central Asia China

Former staff

Maia Sparkman

Former Associate Director, Climate Diplomacy

Global Energy Center

Africa Climate Change & Climate Action

The Atlantic Council would like to thank the Natural Resources Defense Council for its support of this work.

The authors would like to thank the following local and state stakeholders who provided valuable insights that informed this report:

• Deepa Vedavyas, director of resiliency and sustainability, NOPEC
• Jennifer Lumpkin, manager of local partnerships, Cleveland, Alliances for Great Lakes
• Joel Brammeier, president and CEO, Alliance for the Great Lakes
• Emily Keller, manager of sustainability initiatives, Greater Cleveland Partnerships
• Jacob Schwemlein, director for Drive Electric Ohio, Clean Fuels Ohio
• Tim Cho, senior manager of federal grants and special projects, Clean Fuels Ohio
• Hannah Ruscin, program manager, Clean Fuels Ohio
• Eleanor Jersild, senior manager of compliance and operations, Clean Fuels Ohio
• Paige Lampman, Professional Services Manager of Projects, Clean Fuels Ohio
• Joe Flarida, Executive Director, Power a Clean Future Ohio
• Jacob VanSickle, Executive Director, Bike Cleveland
• SeMia Bray, Co-Director Black Environmental Leaders Association
• Elena Stachew, Northeast Ohio Strategy Consultant, Power a Clean Future Ohio
• Kirt Conrad, Chief Executive Director, Stark Area Regional Transit Authority
• Sarah E. O’Keeffe, Director, Sustainability and Climate Justice, Mayor’s Office of Sustainability, City of Cleveland
• Max Zandi, former young global professional, Atlantic Council Global Energy Center
• Grant Goodrich, executive director, Great Lakes Energy Institute, CWRU

This report was written and published in accordance with the Atlantic Council policy on intellectual independence. The authors are solely responsible for its analysis and recommendations. The Atlantic Council and its donors do not determine, nor do they necessarily endorse or advocate for, any of this report’s conclusions.

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The post Cleveland, Ohio: Promoting a local and just energy transition appeared first on Atlantic Council.

Western Balkan energy: Too little competition, too much coal, and too much Russia

Energy sectors across the Western Balkans are dominated by state enterprises whose non-transparency and mismanagement have hampered competition, enabled Russian meddling, and slowed investments in the energy transition.

Privatizations of electricity networks in Serbia in the mid-2000s and Montenegro in 2009, for example, were marred by allegations of undervaluing state assets to benefit politically connected investors and thereby defrauding state budgets. The European Commission, meanwhile, recently criticized a lack of transparency in access to North Macedonia’s natural-gas transit infrastructure, as well as the country’s illiquid gas market. And concerns about corruption, mismanagement, and environmental degradation regarding the Kalivac hydropower project in Albania have resulted in major delays and cost overruns, with the project ultimately scaled back significantly.

Russia exploits these energy-sector weaknesses for both economic and geopolitical gain. The 2007 Comprehensive Energy Agreement Between Serbia and the Russian Federation, for example, outsources much of Serbia’s energy security and fiscal control to Russia.  Under this framework, Russia’s Gazprom Neft acquired 50 percent of shares in Serbia’s national oil company, Naftna Industrija Srbij (NIS), while Gazprom gained 6.15 percent, yielding a controlling stake of 56.15 percent for Russia’s majority state-owned Gazprom group. Moreover, this arrangement grants Gazprom control over NIS revenue payments to the Serbian government that account for approximately 25 percent of national budgetary revenues.

Serbia is also a key player in the Balkan Stream pipeline, an extension of the TurkStream pipeline that exclusively carries Russian gas under the Black Sea to Turkey, then across Bulgaria to Serbia and Hungary. Moscow has pursued this project, previously called South Stream, since 2007 to resist competition from Azerbaijani gas while bypassing Ukraine as a transit route into Southeast Europe.

Today, Balkan Stream reinforces the efforts of both Serbian President Aleksander Vucic and Hungarian President Viktor Orban to balance relations between the EU and Russia.

Meanwhile, governments across the Western Balkans have also failed to make concerted efforts on perhaps the quickest and most cost-effective way to reduce carbon emissions in their countries’ energy sectors: switching from coal to natural gas as a primary fuel for electricity generation.

Though also a fossil fuel, natural gas emits only one-half to one-third the amount of carbon dioxide when burned that coal does. Moreover, switching to natural gas is a cost-effective way to maintain sufficient electricity volumes to sustain economic growth, even as countries muster the massive investments required to transition fully to renewable energy.

Germany provides an illustrative case. For the past four decades, the German government has been a global leader in transitioning to renewable energy under its Energiewende program, through which it has invested hundreds of billions of euros in wind and solar-power technologies, electricity-grid upgrades, and other elements of the green-energy transition.

Germany chose affordability over sustainability, however, when the US “Shale Revolution” took off in 2008, as new horizontal-drilling and rock-fracturing technologies unlocked vast new quantities of natural gas. This large increase in supply caused the price per unit of energy of natural gas in the United States to drop beneath that of coal. As a result, many US electricity companies switched from coal to gas as a primary fuel. This freed up US coal for export, causing its price per unit of energy in Germany to fall below that of natural gas. Many German electricity producers therefore moved in the opposite direction of their US counterparts, shifting back to “dirty” coal. Germany consequently missed its targets under the 1997 Kyoto Protocol for reducing its greenhouse-gas emissions while the United States, which never ratified the protocol, met its Kyoto targets thanks to its increased use of natural gas rather than coal.

Despite Germany’s short-term reembrace of coal but long-standing pursuit of renewable energy, German industry still chooses to depend significantly on natural gas to cover approximately 27 percent of the country’s fuel demand, second only to oil and significantly more than renewables’ share of 16 percent.

Before its full-scale invasion of Ukraine in February 2022, Russia provided 70 percent of Germany’s natural-gas supply. When Russia subsequently slashed those supplies, Berlin did not double down on renewable energy. It instead replaced Russian gas supplies with liquid natural gas (LNG), largely from the United States, after executing an unprecedentedly quick investment program to develop four import terminals to re-gasify LNG and deliver it into Germany’s pipeline network.

Western Balkan countries, however, have so far not chosen to follow Germany’s lead in relying on natural gas as a key transition fuel to a renewable-energy future. As the table indicates, Kosovo, a potential EU candidate country, uses coal for 95 percent of its power generation—primarily lignite, which is locally plentiful but the dirtiest variety of the dirtiest primary fuel. In North Macedonia, coal is responsible for generating 75 percent of the country’s electricity, while the figure is 70 percent in Serbia and 63 percent in Bosnia.

Montenegro and Albania use less coal and more hydropower. Coal is responsible for 43 percent of electricity generation in Montenegro, hydropower provides 47 percent of its electricity, and wind and solar provide the remaining 11 percent. In Albania, hydropower generates 99 percent of the country’s electricity, but the supply is insufficient, which requires electricity purchases from neighboring countries, most of which are generated from coal.*

Many climate activists are pleased that none of the Western Balkan countries relies on natural gas to generate significant volumes of electricity, and they advocate for the EU to press these aspirant countries to jump directly from coal to renewables. This is precisely what Kosovo plans to do. It is difficult to understand, however, how Kosovo will be able to attract the massive investments necessary to generate sufficient volumes of renewable electricity quickly enough to alleviate serious electricity shortfalls and affordably enough to maintain political stability, especially with 40 percent of its population living below the poverty line.

The government of Serbia, in contrast, is planning to increase the role of natural gas in its economy. Serbia has been buying Russian natural gas for decades. It now plans to increase those purchases via the Balkan Stream pipeline. In addition, Bulgaria and Serbia are finalizing a separate gas interconnection that could theoretically provide non-Russian supplies, but in practice may deliver exclusively Russian gas—albeit disguised as “Turkish gas”—via a recent agreement between the state-owned natural gas monopolies of Turkey and Bulgaria.

At the same time, Belgrade is also planning to diversify its supplies of natural gas to try to reduce its dependence on Russia.  Serbia thus hopes to purchase Azerbaijani gas via the EU-supported Southern Corridor.

The Southern Corridor consists of the South Caucasus Gas Pipeline across Azerbaijan and Georgia, which then connects with the Trans-Anatolia Pipeline (TANAP) across Turkey, which in turn feeds into the Trans-Adriatic Pipeline (TAP) across Greece and Albania and under the Adriatic Sea to Italy. The Interconnector Greece-Bulgaria (ICGB) will divert gas from TANAP at the Turkey-Greece border and deliver it into Bulgaria; from there it will soon be able to enter Serbia via a new Bulgaria-Serbia interconnection.

Albania is also weighing whether to introduce natural gas into its economy to expand electricity generation in a more cost-effective way than building new hydropower plants, which have sparked sharp environmentalist protests in the past, such as at the aforementioned Kalivac dam project. Thus, the government of Albania is considering whether to develop localized natural-gas grids in two cities, perhaps as precursors for a national natural-gas grid.

North Macedonia, Bosnia and Herzegovina, and Montenegro are also considering significant investments in natural-gas infrastructure. Moscow, however, is working to lock these countries and their neighbors into dependence on Russian natural gas, with Russia now developing seven natural gas power plants, in tandem with Chinese financing and technology, in North Macedonia, Bosnia and Herzegovina, Serbia, and Croatia.

Bulgaria: State monopolies and coal crowd out the private sector and gas

In contrast to plans by five of the six Western Balkan countries to adopt natural gas as a cost-effective way to sustain economic growth and reduce carbon emissions, Bulgaria has been moving in the opposite direction for the past thirty years. Natural-gas consumption has decreased from 7 billion cubic meters (BCM) in 1993 to approximately 3 BCM today. As a result, coal remains the primary fuel for generating 56 percent of Bulgaria’s electricity. In contrast, during the same period, natural-gas consumption increased in Greece from zero to 7 BCM, and in Turkey from 15 BCM to 70 BCM.

To make matters worse, Bulgaria’s electricity system remains so inefficient that 80 percent of the energy released by burning coal in power plants is lost before the electricity reaches customers. This creates a double blow to the EU’s greenhouse-gas reduction targets: excessive use of fuel in general, and over-reliance on the dirtiest fuel, coal.

Bulgaria, like Serbia, consequently consumes more than three times as much energy and emits three times as much carbon per unit of GDP as do the EU’s original member states, which have been consuming significant volumes of natural gas for decades. It is, therefore, no coincidence that the energy intensity of Bulgaria’s economy today is roughly equal to that of Germany and the Netherlands in the 1970s, when they first began to adopt natural gas. Rather than emulating the Netherlands and Germany in switching from coal to natural gas, however, the Bulgarian government continues to subsidize coal-fired electricity, perpetuating decades of non-transparent revenue streams acquired and distributed via state-owned energy monopolies.

Moreover, with the lowest per-capita GDP in the EU, Bulgaria’s energy investments must be affordable, which rules out the enormous capital investments required for a direct jump from coal to renewables. The most cost-effective—and therefore politically sustainable—way for Bulgaria to slash carbon emissions would be to encourage private investment in a shift from coal-fired electricity to natural gas.

Unfortunately, this is not happening. Instead, Bulgaria’s state-owned energy monopoly, Bulgaria Energy Holdings (BEH)—which includes natural-gas supplier Bulgargaz and transmission-system operator Bulgartransgaz—has been crowding out private companies that are eager to invest in Bulgaria’s natural-gas infrastructure.

In 2012, for example, BEH prevented private companies from using Bulgaria’s natural-gas transmission pipelines. The European Commission fined BEH 77 million euros for this anticompetitive behavior. BEH continues to fight that fine in court, while private companies struggle to carve out space to compete with the state monopoly.

Punished for doing the right thing

Bulgaria’s private natural-gas suppliers are under severe financial strain after obeying EU regulations to fill Bulgaria’s underground gas storage (UGS) to 80 percent capacity by November 2022 to ensure security of supply in case Russia cut off gas to the EU following its invasion of Ukraine. This required Bulgarian gas suppliers to buy natural gas last summer at all-time peak prices and inject it into Bulgaria’s natural-gas storage facility at Chiren. Once the winter heating season concluded, natural gas prices in Europe fell to a fraction of the price suppliers paid to fill Bulgaria’s UGS. Normally, Bulgaria’s gas suppliers would have purchased hedges to protect against such dramatic seasonal price shifts. In this instance, however, there appeared to be no reason to do so because the European Commission had directed member-state governments with gas in storage to take “all necessary measures” to protect gas suppliers against such financial losses, as per Regulation (EU) 2022/1032.

Unfortunately, as of February 2024, the Bulgarian government had not yet promulgated the compensation mechanism it promised in accordance with the EU regulation. Private buyers of the stored gas therefore face a brutal financial dilemma: either sell now at enormous losses or hang onto the gas until prices rise, denying them the revenues required to service their loans. Either way, private Bulgarian gas suppliers face a severe liquidity squeeze, which could bankrupt them. As a result, they would likely be unwilling and/or unable to make emergency gas purchases again for this coming winter in case of another supply crisis.

Sofia did, however, extend a highly concessional 400-million-euro loan to Bulgargaz to compensate for some of its unhedged losses. However, the government then rejected requests by the country’s private gas suppliers for an analogous loan. The government’s loan to Bulgargaz would therefore appear to be an example of illegal state aid and another example of the state crowding out private companies in Bulgaria’s energy sector. The European Commission, however, decided to permit the market-distorting example of state aid because of what it terms an “energy” crisis caused by Russia’s sharp curtailment of natural gas deliveries into the EU.

Bulgaria’s nexus among corrupt energy officials and Russia

BEH’s non-transparent and anti-competitive behavior also undercuts the EU’s geopolitical goal of reducing energy revenues on which Russia relies to finance its war against Ukraine.

Bulgaria is infamous for murky ties between its government officials and their Russian counterparts. One former Bulgarian minister of energy, Rumen Ovcharov, is sanctioned under the US Global Magnitsky Act for participating in corrupt deals with Russian natural-gas and nuclear-fuel suppliers, as are Aleksandar Nikolov and Ivan Genov, two former chief executive officers (CEOs) of Bulgaria’s Kozloduy nuclear-power plant.

Today, Russia’s enduring presence in Bulgaria’s energy sector is evident at the country’s most valuable industrial asset, the Neftochim oil refinery in Burgas, which is owned by Russia’s Lukoil. While Bulgaria’s current government may be planning to nationalize and then privatize the refinery via non-Russian investors, its predecessor caretaker government secured a derogation from the EU’s ban of Russian oil imports to feed the refinery until 2027.

Meanwhile, Russia’s role in Bulgaria’s natural-gas sector appears to be growing, thanks to a January 2023 confidential agreement between the state-owned natural-gas monopolies of Bulgaria and Turkey. That agreement, the terms of which were leaked to Bulgarian media and subsequently confirmed by the current Bulgarian government, define a thirteen-year contract that reserves the entire capacity of the gas interconnection between Turkey and Bulgaria for BOTAS and Bulgargaz, locking out all competitors. Moreover, the agreement obligates Bulgargaz to accept any gas from BOTAS without BOTAS having to disclose the origin of that gas, while obligating Bulgartransgaz to deliver that gas to any exit point from Bulgaria via the country’s transmission pipeline system.

These unusual contractual obligations by Bulgargaz and Bulgartransgaz are now reportedly under investigation by the European Commission as potential violations of EU competition rules. The commission is also exploring whether the contract provides a potential “backdoor” for Russian gas to enter the EU even after the EU’s 2027 cutoff date for ending all imports of gas and oil from Russia, a suspicion reinforced by Russian President Vladimir Putin’s proposal to establish what he termed “a Turkish hub for Russian natural gas” during his September 4 meeting with Turkish President Recep Tayyip Erdogan. Erdogan, in contrast, is pressing for a genuine natural-gas trading hub in Turkey, where supplies converge from multiple directions and prices are set by market forces.

Conclusion: Set the right example in Bulgaria for the EU’s enduring integrity

Analogous versions of these Bulgarian energy problems are prevalent across the Western Balkans. They are almost certain to persist as long as government-owned companies dominate these countries’ energy sectors. Although it will take years to eliminate these state-led market distortions, there are significant steps the European Commission can take now in Bulgaria to strengthen private-sector competition, reduce greenhouse-gas emissions, mitigate corruption, and thwart Russian meddling, thereby setting examples for the EU aspirants in the Western Balkans. The European Commission should therefore press the Bulgarian government to:

• Encourage the Bulgarian government to end subsidies for coal-fired electricity and instead support increased use of natural gas as a transition fuel to renewable energy, while also creating an operating environment that is conducive to investments in natural gas infrastructure by non-Russian and non-Chinese parties;

• penalize the Bulgarian government for illegal state aid that crowds out the private sector and reduces competition, such as the 400-million-euro loan to Bulgargaz;

• enforce Regulation (EU) 2022/1032 by insisting that the Bulgarian government finalizes and implements its “necessary measure” to protect against significant financial losses incurred by suppliers that injected gas into storage ahead of the 2022–2023 winter heating season, as required by the European Commission;
• and demand the same level of transparency regarding the origins of natural gas at entry points into the EU (such as at the Turkey-Bulgaria border) as the European Commission already requires inside the EU at interconnections between member states.

Taken together, these measures would set a powerful example for political and business leaders across the Western Balkans and stress that they must take seriously the EU’s rules pursuing more transparent, efficient, and competitive energy sectors within its member states, which are are driven by well-governed private companies that invest in the energy transition and are free from Russian influence. Absent such steps in Bulgaria, however, Brussels risks signaling to leaders across the Western Balkans that the reform commitments they make today to secure EU membership can be ignored tomorrow. Such disregard for EU requirements risks undermining the credibility, and eventually even the viability, of the European Union as the world’s premier rules-based organization.

Matthew Bryza was a nonresident senior fellow with the Atlantic Council’s Global Energy Center and the Atlantic Council IN TURKEY. Bryza was formerly the US Ambassador to Azerbaijan. Follow him on X (formerly known as Twitter) @BryzaMatthew.

The Atlantic Council in Turkey, which is in charge of the Turkey program, aims to promote and strengthen transatlantic engagement with the region by providing a high-level forum and pursuing programming to address the most important issues on energy, economics, security, and defense.

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Click to jump to an expert analysis:

Charles Hendry: Russia’s invasion of Ukraine forced the West to confront lessons unlearned

Ellen Wald: US LNG helped keep Europe’s lights on—future resilience isn’t guaranteed

Olga Khakova: Delays in aid to Ukraine could erase energy security wins from the last two years

Robert F. Ichord: Europe reduced Russian energy—but created a solar energy paradox

Joseph Webster: War dims Gazprom’s future as China doubles down on homegrown energy

Jennifer T. Gordon: Nuclear power remains a crucial pillar of global energy security and decarbonization

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Russia’s invasion of Ukraine forced the West to confront lessons unlearned

There’s a Winston Churchill quote for every occasion and as he (supposedly) said about energy: “Security comes from diversity and diversity alone.” That’s as true today as it was more than one hundred years ago. The harsh lesson from Russia’s illegal invasion of Ukraine was that Europe had allowed itself to be overly reliant on a single source of gas supply. The actions by European governments since then—and especially Germany—to end that reliance have been extraordinary, but the clear lesson is that we must never again allow such dependence.

The move in the last two years to bolster energy security had led to greater focus on indigenous sources of power and an accelerated commitment to low-carbon sources of generation. And for once, the answer to the questions of what is best for security, for climate, and for affordability is mostly the same —go low carbon. Our governments are rightly focused on how we can enhance our energy resilience, yet still meet our net-zero commitments.

In the longer term, we can also see where the next threat of over-dependence comes from. It is not healthy for the West to be so dependent on China for so much of the low-carbon supply chain—for example, around 90 percent of the lithium chemicals we need for electric vehicles comes from China. Such overreliance is not good for China either, so we need to act now to build up our own industries, to make sure that we have supply chain security. The United States is leading the way on this through the Inflation Reduction Act, and it is now for the EU and UK to respond accordingly.

–Charles Hendry is a distinguished fellow with the Atlantic Council Global Energy Center, a former member of the UK Parliament, and former UK minister of state for energy.

US LNG helped keep Europe’s lights on—future resilience isn’t guaranteed

The real story behind European energy security post-Russian invasion of Ukraine is the incredible growth of the US LNG industry. According to the US Energy Information Administration (EIA), the United States exported more liquefied natural gas (LNG) than any other country in the first half of 2023. US LNG exports to European countries in the first six months of 2023 more than doubled compared to pre-war exports in 2021. Without this incredible expansion, both in US LNG exports and in regasification terminals in Europe, the continent would not have been able to reduce Russian natural gas and oil, and maintain electricity and fuel supplies as it did. 

The US energy industry’s role in ensuring European energy security cannot be stressed enough—no other LNG exporting country in the world was in the position to expand its exports as rapidly as the United States was when the Nord Stream pipeline was destroyed and sanctions against Russian energy were put into place. For this, among other reasons, the Biden administration’s decision to suspend authorizations for new LNG export terminals must be questioned. If the EU and the US do not foresee an end to the Russia-Ukraine war in the near future, how can Europe continue to secure sufficient natural gas to meet growing energy demands without more LNG from the United States?

Although sanctions against Russian crude oil and petroleum products caused temporary disruptions on the global oil trade, the market has responded in resourceful ways. Without European countries to purchase their crude oil, Russia expanded sales to China and opened a new market in India. According to data provided by TankerTrackers.com, India has become the second largest importer of Russian crude oil and the largest importer of Russian seaborne crude oil. In 2023, India imported an average of 1.7 million bpd of Russian crude oil, whereas prior to the invasion of Ukraine it imported next to none. Countries like India and Turkey have found new business opportunities importing Russia crude oil and refining it into petroleum products that European customers are eager to purchase. Russia has also developed its own shipping fleet and insurance network to work around the US-EU price cap policy that is designed to limit their oil revenue. 

Two years later, it can be concluded that the energy sanctions and price cap policies are not hurting Russian revenue significantly enough to impact its ability to wage war in Ukraine. As US policymakers consider whether to continue aiding Ukraine, the efficacy of these sanctions and price cap policies should also be examined. At the same time, the resiliency of the global energy oil market to accommodate such major changes without incurring serious shortages should be applauded.

–Ellen R. Wald is a nonresident senior fellow at the Atlantic Council Global Energy Center and the president of Transversal Consulting.

Delays in aid to Ukraine could erase energy security wins from the last two years

For two years, Russia has carried out indiscriminate, exceptionally cruel attacks on Ukraine’s civilian energy infrastructure. Included in these attacks have been acts of ecocide, such as the destruction of the Kakhovka Dam. However, Ukraine’s energy system and the sector workforce have showcased unparallel resilience and innovation in withstanding Moscow’s aggression, with robust technical, financial, and capacity support from the allies.  

Beyond Ukraine, the war also profoundly and rapidly reshaped energy throughout Europe. Europeans have optimized homegrown production and efficiency measures to reduce reliance on imports, built out additional interconnectors to secure alternative energy supplies, and spent billions to minimize economic hardships on businesses and households. 

As the war drags on, the West must learn to see Ukraine not as a charity case—but as a symbiotic energy partner contributing to European energy security and decarbonization. Ukraine offers important lessons in repelling cyber security attacks, fixing destroyed energy infrastructure, operating energy markets under volatile conditions. It also has valuable expertise in oil and gas, renewables, and civil nuclear energy. Ukraine has integrated into the European electricity market in record time, houses a critical gas storage system that is currently utilized by European gas traders, and is taking bold steps on reform and regulatory changes necessary for EU integration. However, these advantages are at high risk. War and political uncertainties are keeping new large-scale investments away; human capital shortages are placing additional strains across all levels of Ukrainian systems; and the delay in aid from the United States is impacting the recovery and defense of Ukraine’s energy generation. Western support is needed more urgently now than ever to ensure that Ukrainians can continue defending European territories, democratic values, and energy security. 

–Olga Khakova is the deputy director for European energy security at the Atlantic Council’s Global Energy Center.

Europe reduced Russian energy—but created a solar energy paradox

The war in Ukraine has spurred profound changes in Europe’s energy system and fostered concerted efforts like REPowerEU to improve energy security. Not only has it reoriented and reduced dramatically Europe’s gas supplies from Russia and cut gas consumption, but it has boosted Green Deal transition efforts to develop renewable and zero-carbon energy (including nuclear) and improve energy efficiency. It has motivated the forging of stronger energy links both among European countries and with the United States, which supplied about 50 percent of the EU’s LNG imports in 2023.

But in doing so, these overall efforts have created a paradox. The rapid growth in solar energy that is reported to be 40 per cent higher in 2023 than the 41 GW of solar added in 2022, has made the EU dependent on China for over 95 percent of its solar photovoltaic (PV) modules and threatens domestic EU manufacturers due to the much lower price of Chinese modules. Renewables constituted 23 percent of the EU primary energy consumption in 2022, of which solar was about 6 percent and was the fastest growing share providing 12 percent of EU electricity in the summer months. The EU Council has raised the binding target to 42.5 percent in 2030 with the ambition to achieve 45 percent. The EU Solar Strategy aims to increase solar PV capacity to 320 GW by 2025 and up to 600 GW by 2030, compared with 260 GW in 2023.

The EU and its member governments are debating various options to increase domestic solar PV production and limit imports from China. There is some consensus on setting a 40 percent non-binding self-sufficiency target but there are divergent interests between the domestic manufacturing companies and installers and assemblers of systems. Faced with a similar situation, the US placed high tariffs on Chinese modules, diversified suppliers and temporarily waived tariffs on imports from Southeast Asia and provided credits for solar PV manufacturing under the Inflation Reduction Act. Such an approach by Europe would be expensive for Europeans, who are already experiencing high costs of energy. In his February 12 speech to the European Parliament, EU Council President Charles Michel stressed the importance of energy affordability in efforts to improve EU energy security, noting that EU energy prices were 4.5 higher than its main competitors.

But there is a path for reducing dependence on China’s solar supply chain. The market is currently flooded with solar PV panels as Chinese manufacturers overproduced in 2023 and European companies imported more than they installed. Stockpiling panels, for example, could be part of a less expensive strategy for reducing vulnerability to market manipulation or politically inspired supply cutoffs. Although the energy security implications from this growing dependence on Chinese solar panels are quite different from Russia’s use of gas as a political weapon against Europe, current overall geopolitical and trade tensions with China suggest that China’s global market monopolization of this important energy technology requires serious consideration and coordination among Western allies.   

–Robert F. Ichord, Jr., is a nonresident senior fellow with the Atlantic Council Global Energy Center.

War dims Gazprom’s future as China doubles down on homegrown energy

Russian gas giant Gazprom will never recover from Putin’s invasion of Ukraine. Gazprom’s exports to Europe stood at just 28 billion cubic meters (bcm) in 2023, down from 200 bcm in 2019, before the invasion and COVID. The Russian pipeline export monopolist is exceedingly unlikely to offset this loss of demand via other markets, including China, as its long-planned Russia-to-China Power of Siberia-2 pipeline has gained little traction since the invasion despite Gazprom’s desperation to clinch a deal. The reasons for the delay are manifold and include high interest rates, financing disagreements, elevated steel costs, and geographic realities. 

Perhaps more importantly, Putin’s invasion and the resulting shock to global energy prices reinforced Beijing’s energy security anxieties. China is constructing massive amounts of renewables while also doubling down on coal plant construction (although throughput across its coal fleet will likely decline in future years). China added nearly 300 gigawatts of wind and solar capacity in 2023 and could very well replicate that pace—or even accelerate it—for another decade. Chinese deployment of clean electricity generators, paired with batteries, heat pumps, hydrogen (eventually)—and, incongruously, coal—is sharply reducing its need for Russian natural gas. In sum, while Putin may yet prevail in Ukraine, Gazprom’s exports will almost certainly never approach pre-war volumes.

–Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and editor of the China-Russia Report. This article represents his own personal opinion.

Nuclear power remains a crucial pillar of global energy security and decarbonization

From the earliest days of Russia’s brutal invasion of Ukraine in February 2022, nuclear energy has been a flashpoint in the war. Russia shelled and subsequently occupied the Zaporizhzhia Nuclear Power Plant, and a key part of the response from the US government and non-governmental organizations has focused on efforts to provide relief to Ukrainian nuclear power plant workers.

Even while under attack, Ukraine has recognized that the nuclear energy sector is a crucial part of its power sector, its ability to rebuild its industrial sector, and its long-term economic prosperity. Even with the loss of the Zaporizhzhia Nuclear Power Plant, roughly “55 percent of all electricity production in Ukraine is still from [nuclear reactor] units at Khmelnytskyi, Mykolaiv and Rivne.” Furthermore, Ukraine has ended imports of nuclear fuel from Russia and has relied on US-based Westinghouse Electric Company for its nuclear fuel needs. With an eye toward eventual reconstruction in Ukraine, US Special Presidential Envoy for Climate John Kerry and Ukraine’s Minister of Energy German Galushchenko announced in November 2022 “a two-to-three-year pilot project aimed at demonstrating the commercial-scale production of clean hydrogen and ammonia from small modular reactors in Ukraine using solid oxide electrolysis.”

Ukraine’s regional partners—especially Poland and Romania, which are deeply involved in Ukraine’s energy future—also understand the extent to which the nuclear energy industry must play a crucial role in Ukraine’s reconstruction. Romania is currently the only country in Central and Eastern Europe that is operating North American reactors, with its Canadian CANDU reactors having generated electricity since 1996. Romania also plans to build a first-of-a-kind small modular reactor, in partnership with the United States. Poland is dedicated to establishing a civil nuclear program, with plans for large lightwater reactors and small modular reactors.

Finally, Russia’s unprovoked war in Ukraine has had a major impact on the global nuclear energy industry. Problems that may have been papered over prior to February 2022 have been brought to the fore. For example, US and global dependence on Russian enrichment and conversion capabilities for nuclear fuel is finally being addressed as the US has started ramping up domestic capacity for enrichment and conversion. However, more remains to be done. As Russia continues to make inroads into emerging markets for nuclear energy technologies, the United States and its allies must redouble their efforts to outcompete Russia, in order to ensure that new-to-nuclear countries are able to uphold the highest standards of safety, security, and nonproliferation.  

–Jennifer T. Gordon is director of the Atlantic Council Global Energy Center’s Nuclear Energy Policy Initiative.

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Public Event Tue, February 13, 2024 • 1:30 pm ET

Maroš Šefčovič on US-EU collaboration towards a transatlantic green marketplace

AN #ACFRONTPAGE EVENT— European Commission Executive Vice-President Maroš Šefčovič on building more resilient, green transatlantic economies.

Energy Markets & Governance Europe & Eurasia European Union Geopolitics & Energy Security

Event transcript

Uncorrected transcript: Check against delivery

Speaker

Maroš Šefčovič
Executive Vice-President for the European Green Deal, European Commission

Moderator

Ana Swanson
Trade and International Economics Reporter, the New York Times

Opening remarks

Landon Derentz
Senior Director, Global Energy Center, Atlantic Council

LANDON DERENTZ: Well, good afternoon. I’m Landon Derentz, senior director of the Atlantic Council Global Energy Center and Morningstar chair for global energy security. Very excited to welcome our in-person audience and those joining us around the world virtually to AC Front Page. The AC Front Page is the Atlantic Council’s premier platform for live conversations with world leaders tackling today’s greatest challenges.

To that end, it’s my distinct pleasure to introduce you to a leader that has been an absolute stalwart of the transatlantic relationship and, as we had an opportunity to discuss earlier, across many, many administrations (so bipartisan support, opportunities to build partnership for many years). Maroš Šefčovič is executive vice president for the European Commission for the European Green Deal, and today’s featured speaker. We’re also joined by Ms. Ana Swanson, trade and international economic reporter at the New York Times, who will be moderating this conversation.

Later this week, the Atlantic Council will launch its flagship energy publication, The Global Energy Agenda. It’s a moment for us to reflect on what’s been accomplished in the year prior, in 2023, and an opportunity for setting new ambitions for the year ahead. Moments like today help us inform and drive forward with that outlook. And while geopolitics weighed heavily on the prior year, the European Union, through policies like the European Green Deal, like Repower EU, has demonstrated that you can be a champion for climate ambition while also prioritizing energy security and competitiveness. It’s kind of a major balancing act.

Whether navigating joint procurement of natural gas supplies or elevating the EU’s greenhouse gas emissions benchmarks, Executive Vice President Šefčovič is a central figure in shaping and transforming the future of our energy system. In a year dominated by democratic elections, it’s critical that we leverage partnerships like this and forge forward our international relations in a way that strengthens the transatlantic cooperation and helps us achieve our shared energy and climate goals. Executive Vice President Šefčovič, we’re very thankful you joined us today.

And with that, it’s my pleasure to turn the floor over to our moderator, Ana Swanson, to begin this conversation. Ana, the floor is yours.

ANA SWANSON: Thank you so much. And, as Landon mentioned, I’m Ana Swanson. I’m the trade and international economics reporter for the New York Times. Really delighted to be here. And thank you so much for joining me.

MAROŠ ŠEFČOVIČ: Thank you. Thank you for the invitation and your always very kind remarks. That’s why I’m coming back all the time, you know?

ANA SWANSON: I do want to mention up top that this event is live and on the record, and for those in the audience watching virtually you can submit questions using the “Ask AC” function, or you can submit questions on X, formerly Twitter, using hashtag #ACFrontPage. For those in the live audience, you will have the opportunity to raise your hands and ask some questions later on in the program.

So let’s dive right in. This month the EU announced climate targets for 2040 that included a 90 percent reduction in greenhouse gas emissions from 1990. How does that build on or differ from previous goals? And, obviously, the conflict with Russia has forced a reexamination of some energy policy. How is the need to shift away from Russian natural gas influencing European plans?

MAROŠ ŠEFČOVIČ: Well, thank you very much for that question to open our conversation with, because it’s, I think, very fundamental for, it was really correctly said by Landon, to find that sweet spot to do this balancing act. So for us, we have it in our climate law we should be climate neutral by 2050. So we want to be the first climate neutral continent. I think we share that ambition also with the United States of America. But we kind of enshrined it in the law.

So what is—what was very important in this communication was to launch the debate, how to get from 2030, where we wants to reduce our greenhouse gas emission by 55 percent, to 100. So what is the trajectory? How can we get there? And we wanted to launch this discussion based on very thorough impact assessment, different scenarios. What do we need from the technological development point of view? How to factor in, I would say, this absolutely new situation if it comes to the—to the energy supplies, which was one of the, I would say, most fundamental energy shifts Europe did since probably the 1970s. That from one year to another you shift away from Russian gas, from 150 billion cubic meters to a little bit more than 40 [billion] right now.

And here, I want to really do think, appreciate it, and use it as a, I would say, pattern for the future that what that good allies should do to each other. I mean, we, of course, as you know very well, we carry really the burden of having two very serious military conflicts close to our borders. And, on top of it, on helping the almost ten million refugees, in certain point of time. On opening our markets, opening our labor market, providing health care, providing the schooling for the refugees, and also providing 150 billion euros of the financial and military assistance to Ukraine. On top of that, we had to shift away from Russian fossil fuels. And we did it with great success, thanks to the excellent, outstanding cooperation with the United States of America, and the fact that the LNG sector was able to supply us with 56 billion cubic meters, again, from one year into another.

And that will be of course, for us a top priority for the next years, because we want to be climate neutral by 2050. But we know that without gas, as a very important transitional fuel, it will not be possible for us. And I think that, speaking of the global responsibility of US—and US became, indeed, the global guarantor of energy security—the responsibility goes also beyond Europe. I mean, if you want to decarbonize Southeast Asian countries, like India, but also Africa, Latin America. So simply there will be a need for this half of the carbon intensity fuel, like gas, comparing to coal, and to phase out—phase out coal. So the cooperation here is very essential. And for us, it was absolutely crucial to get the US LNG in time, despite the fact that we paid a lot for it. But, of course, the crucial was to keep the lights on, economics powered on, and really focusing how to deal with the crisis which was generated by Russian invasion of Ukraine.

ANA SWANSON: I understand that some of your recent conversations in Washington have focused around President Biden’s recent executive order about natural gas exports. Tell me about those conversations. How do you think that, you know, this order—which obviously does pertain to US environmental concerns—could impact the European economy or US-EU relations?

MAROŠ ŠEFČOVIČ: I mean, we had very good conversations on this topic yesterday at the White House, State Department, Department of Energy. And I appreciated that it was very open and constructive discussions. And what was of course very important for me was reassurance that if it comes to the next two or three years there should be no impact whatsoever on the supplies of US LNG to Europe. Then I think my interlocutor has been quite clear that, despite this announcement, what is expected in US is that export capacity of the LNG would double between now and 2030. So they should be able to accommodate also the big demand from Europe. And on top of it, there is a kind of emergency clause that if things will really go, you know, in the wrong direction, that there is a possibility to kind of adjust the measures which are currently under the discussion.

I have also the understanding for the description of the situation as it was presented to me that when the last type of this, let’s call it, inventory was done by the US government, it was in 2019. And it was well before, I would say, this shale LNG revolution started. So, I mean, to check the pipelines’ capacity, the tankers traffic, the ports, the ability to transport all that, I think it’s important. At the same time, what I was underscoring, it’s also very important, how the US government now and also in the future would approach the fact that now, indeed, you have the responsibility for the global developments in energy security.

So if you kind of make the statement, something is said in Washington, DC, about the gas and LNG, immediately it’s kind of transmitted, in a sense. I would say this has a ripple effect all over the world. We kind of felt it a little bit for a couple of—for a couple of days now. I think it’s stabilized because, indeed, the contracts are there, supplies are coming, we increased dramatically our regasification capacity to more than 230 bcm per year. So, I mean, the conditions are there that everything should follow well. But, of course, we will be continuing our discussions with the US administration, but also with the LNG sector. And we had very good meeting this morning with all LNG managers of United States.

ANA SWANSON: Mmm hmm. The shift away from Russian gas has been, you know, such a huge undertaking. I was curious if you could share, you know, maybe an obstacle that you’ve seen firsthand in that process. And then, are there any, you know, opportunities that you’ve seen in there, too?

MAROŠ ŠEFČOVIČ: I think that obstacles—there have been many, of course. The first one was that for decades, and today we can say mistakenly, we believed that through trade and good relations you can democratize the society of Russian Federation. That was, I would say, a belief which was there for a very, very long period. Very often when I was responsible five years ago for the project which was called the Energy Union, we—in Central and Eastern Europe—we remembered extremely well the lessons of 2009, the gas crisis, when simply from one day to another the gas supplies had been switched. And in our countries, including mine, Slovakia, we just had the energy left for just couple of days, and we had to completely shut down the industry and channel the remaining parts of energy to hospitals and households.

So for me, a priority at that time was that we had to diversify our energy supplies, to have at least three different sources. And I was working a lot to get there, and to build that pipeline from Azerbaijan, from increasing the capacity for LNG, to work with the Norwegians, simply to have a more diverse portfolio. But, nevertheless, if you look at it, the major flows—the major flow has been clearly coming from the east to the west. And suddenly you’re now in a situation that is a big flow, which was like almost—at certain point, almost 40 percent of gas coming from Russia through Ukraine to Europe—you had to reverse these flows.

And the good thing was that we’d been investing over the last years a lot into building of interconnectors, LNG terminals and introducing the reverse flows. But still it was—at that time we, and also I, perceived it as an emergency capacity if something goes wrong. And it’s completely different thing. Like if you now tell the whole industry, OK. This huge quantity which was coming from the east will come from the west, from the north, from the south. And you figured out how to do it. So the major problem was infrastructure, to build and complete the regasification fleet.

And, here, I would say that Germany did miracles, I would say, in very short period of time. Poland’s been very strategic in building the Baltic connectors straight from Norway, with Azeri gas help as well. The Southern Europe also, the Balkan countries building up their regasification capacities. So we’ve been kind of dealing with that in a lightning speed, I have to say. But then you had the second problem where US came in.

When you came to the global markets, everyone was telling you: Market is tight. Meaning, there is no gas for you guys, yeah? So, I mean, and then it resulted, of course, in these very high prices in certain bottlenecks, when we were getting the LNG. But I think here, again, the decision of President Biden, and that agreement which was found with my boss, Ursula von der Leyen, the president of the Commission, to focus on 50 billion cubic meters from the US to Europe was absolutely crucial. And I’m very impressed that it was even exceeded to 50 billion, because it kind of sends that calming effect. And we could then, in a more peace, look for other supplies from other corners of the world, just to have the energy we needed. So the infrastructure and the tightness of the market, that was, I would say, the major, major challenges.

ANA SWANSON: I want to shift to asking a bit about critical minerals. What kind of transatlantic cooperation are you pushing for when it comes to critical minerals? I understand this was—you know, is always and was a topic of the US Trade and Technology Council meetings last month. You know, how do you see—you know, where are those initiatives right now, and how do you see things moving forward?

MAROŠ ŠEFČOVIČ: I think we have—we have quite, quite intense, I would say, diplomatic activity around the critical minerals or critical raw materials. But I think that we are still kind of waiting and working on how to translate the diplomatic activity into the concrete projects. Because I’m a project driven person. And I think the good thing is that we understand each other, that we cooperate. But I would like to see one or two major projects which we would execute together and show, you know, how can we kind of push for the common solutions, develop the mine, or get the critical raw materials to you and to us.

Because if it comes to critical raw materials, we in Europe are much more dependent on China that we’ve ever been on Russia, if it comes to the fossil fuels. And any future energy technologies, electrolyzers, wind turbines, photovoltaic panels, chips—I mean, for all that you need the critical raw materials, rare earth, magnets and all these things, which are—we need to kind of get from outside. And simply, we are concerned that any dependency could be weaponized. And therefore, we adopted this Critical Raw Material Act, through which we want to explore everything what we have in Europe, what we have in our neighborhood, and work with our friends like United States of America on the projects in the in the third countries.

My ideal solution would be that we would advance or eventually complete our agreements on the critical raw materials, because it would—it would set the framework. And we are discussing it. We are—hopefully, we will—we will find the solution for that. And I think it will also help from the perspective that EU would finally get the FTA status, as Japan did, and it will help us in many other aspects, kind of consolidate our EU-US relations. So yesterday we also discussed the fact that we have very similar philosophy if it comes to critical raw materials.

So what I want to say is that when we would be working on some projects in a third country, we would like to make sure that it would not just be extraction of the critical raw materials, putting it on the ship, leave with the raw materials and leave the mess behind. What we want to do is develop the project, create big value added in the country, create new jobs, share the revenues and profits, and make sure that all of us would benefit. Because I think that’s the approach we would like to see in cooperation with the third countries who have the critical raw materials, and need the funding, need the expertise to make sure that these critical raw materials would be not only available but also extracted according to the highest sustainability standards.

ANA SWANSON: You mentioned Europe receiving free trade agreement status from the United States. That’s been a hurdle to European companies have been benefiting under the Inflation Reduction Act, of course. Where do those discussions stand right now? And you were just mentioning, you know, a partnership with relation to third countries. I understand that that was kind of a major hurdle in those discussions so far.

MAROŠ ŠEFČOVIČ: Yeah. I mean, there have been—I mean, yesterday with Mr. John Podesta we kind of agreed that, of course, a lot of things is going on. And, I mean, this is, like, a very, I mean, difficult time. And obviously what’s happening on the global scale, I fully understand how overwhelmed we are with the dynamics of day-to-day management, and permanent crisis management. But we also agree that let’s have another look where our critical minerals agreement was struck, why it was stuck, and what we can do to kind of intensify this negotiation. So we’re going to do that. And we gave ourselves rather, let’s say, short term, you know, to looking into it.

And at the same time, with Amos Hochstein and Jose Fernandez, we also focused on, that would be my preference, let’s select two or three projects, maybe one per continent—Africa, Latin America, Southeast Asia—and try to put our experts, our financial institutions—like EIB, like World Bank, like IMF—our development agencies together so we can actually learn how to use our experience from these territories, our financial firepower, to execute one of these projects. Because it would create, I would say, the know-how, it would create, I would say, the teams which would be dealing with these issues. And this would be, I would say, such an important topic for the future economic development both in the United States and in Europe. That we simply need to learn how to work together and execute this project.

Maybe one more thing. I am very hopeful about potential of Ukraine, because I was there many times before the war started. I was—as you probably know, I was working on this EU-Ukraine-Russia negotiations at the time, on transit of gas through Ukraine. But we’ve been also signing together with the Prime Minister Shmyhal agreement on cooperation in the field of critical raw materials. So geological surveys, mapping up of the, you know, reserves, which they have there. And to put it simply, I think Ukraine has everything what we need and what we’ve been getting from Russia. So I see the potential for critical raw materials, but also potential for low-carbon energy in Ukraine as huge, as very, very, very complementary to us.

We are already today using the huge underground gas storage to kind of beef up the energy security on Central and Eastern European front. And that would be, I would say, the one area where, again, I think EU-US can come together as a part of our reconstruction efforts to kind of build this potential Ukraine clearly has.

ANA SWANSON: That’s interesting. You were talking about looking into projects in other parts of the world, in Africa, South America. Because, you know, I think the United States and the EU are clearly very aligned on values when it comes to critical minerals, but they both tend to be, you know, really kind of consumer—net consumers, right? Big consumers of these minerals, and will both have a large demand for it. So I was curious at what point you kind of bring other countries into the—you know, your conversation, your partnership. And then how you see that dynamic kind of working, you know, vis-à-vis China, and China’s efforts to move around the world for this industry as well?

MAROŠ ŠEFČOVIČ: I think that you’re right, from that perspective, that it’s not only, let’s say, to us talking to each other because there is lots of, I would say, movement in this front, under the [Group of Seven], even [Group of Twenty]. We set up different so-called clubs for cooperation in the field of mineral extractions. And so therefore, I would say that the understanding, the intent, and this diplomatic work is, to great extent, done. Now what we need are the, let’s say, most promising projects, and go through this planning, and hopefully execution phase. So we would see how this, let’s say, diplomatic understanding is translated into the concrete projects execution. So that’s, I think, what should be the next phase.

And I think if it comes to China, indeed, that’s a huge challenge. I think 80 percent of the global critical raw materials extraction and processing is with China right now. I think we in Europe, we have only 1 percent of critical raw materials for our economy from Europe. So clearly, we need to diversify. And how to do it? I think we have to be much more agile, and we have to offer the better alternative. And the alternative is that if you are with us, I mean, we are ready to create high value added, we are ready to share, and we are—we are ready to make sure that community where these projects are, and a country where these projects are, would clearly benefit.

And we in Europe are the biggest development aid providers. We are the biggest climate finance provider. I mean, just to put this, I mean, two figures on the table in climate finance, if we put together public and private financial transfers in the realm of more than forty billion euros. And more or less the same figure goes for development aid. So I believe that we have financial firepower to kind of support these projects, and to do it with philosophy of sharing, not just extracting and taking it away, and not even creating the local jobs, and leaving with a material, and lots of debt for the local government.

So, I mean, we started a project, which is called Global Gateway. We had huge turnout in Brussels, I think it was two months ago. And I have to say that it resonated well with the countries whom we invited. But I would say that it’s a success when I will see the first project is being executed, and that we are actually delivering on this political intention with practical, concrete projects.

ANA SWANSON: I know there had been a lot of, you know, sort of heartburn and upset in the EU with regard to the Inflation Reduction Act last year. What is the status of that now? I mean, are you still, you know, worried about the inflation Reduction Act worrying certain industries away? And have internal discussions in the EU—has there been kind of a resolution about how much to subsidize green industry in response to the Inflation Reduction Act?

MAROŠ ŠEFČOVIČ: I think—well, of course, our systems are different. And I have to say that Inflation Reduction Act came to us as a surprise. I understand that it was kind of surprising conclusion also for quite many people in US. But the fact is that because of Inflation Reduction Act, some of the projects—and several of them been projects upon which I was working, like building up the battery ecosystems in Europe, building up the gigafactories. All these projects being slowed down, or postponed, or transferred to US. And for us, it came at this difficult moment which I was referring to—the energy crisis, and coping with all the, I would say, consequences of the war in Ukraine.

Of course, we are discussing this with our American friends. Therefore, I think that if we can find a way through this mineral agreement to kind of look into what we can do better together, and also use this cooperation for the FTA status for the EU, I think that would be very welcome. Very welcome development. And the next stage, which is, let’s say, my proposition I’m pitching for in all the meetings I have in US, is that we should kind of move onto the next level of cooperation. And I call it creation of the transatlantic green tech market.

So I know that it’s not the free trade agreement. But I think that we would benefit hugely if we would create, I would say, this marketplace from the perspective of, you know, common standards, from the perspective that we would inform each other about, you know, the sort of subsidies policies, or as we call it in Europe, state aid. If we kind of would push for building bridges across the Atlantic in the form of joint venture mutual investment so we can use the economies of scale for these new technologies in a way that would be beneficial not only for US and EU, but also for the third countries.

Because if you want to be serious about really dealing with the climate change, and I think that fact that we are now over the 1.5 degrees Celsius is kind of telling that the time is pressing. So Africa, Southeast Asia, Latin America, all of them would need this clean and green technologies. And sooner we develop them, sooner we develop them at scale so they’re affordable, the better it would be for the planet. So I see this transatlantic marketplace as a recipe for making our cooperation even closer, stronger, but with a very positive impact it might have on, I would say, sharing these kind of technologies with the rest of the world, and helping us to also tackle overheating of our planet.

ANA SWANSON: One area I had been following with interest was the green steel negotiations, what the US calls the Global Arrangement on Sustainable Steel and Aluminum. I was curious, you know, what happened with that negotiation? Do you think that the United States has kind of an adequate methodology to measure carbon emissions? Was that an issue? And then just kind of more generally, do you think the United States is ready for the European Carbon Border Adjustment Mechanism to come into force? Or could that be a new source of trade friction in the future?

MAROŠ ŠEFČOVIČ: I think we have—we have, I would say, two different approaches and philosophies, which kind of stem from our traditions. So we—because we’re twenty-seven different member states. So for us to work together and for our single market to perform, we, of course, have to work a lot with the legal frameworks, with the regulation, with a uniform application of the laws. So there is a guarantee that when you produce something in Slovakia, it will be produced according to the same standards as in Denmark, or Italy, and nobody needs to check it anymore, because we are kind of following the same rules. So that’s, I would say, the tradition upon which you build the European Union.

So we use the same approach to the Green Deal. We kind of look at it comprehensively from all sectors, from energy, through industry, down to the agriculture. And I think that when I talk to my American friends, nobody questions that we have probably the most advanced and most sophisticated legal framework for the Green Deal. But the issue is that the parameters of the Green Deal has changed so much because of these two crises—COVID-19, war in Ukraine, this energy spikes, high inflation—that they need to work much harder on how to translate this legal framework into reality by creating business case for the Green Deal in Europe. Because you cannot fund everything with public money. And you need this entrepreneurial energy and entrepreneurial—I would say, this entrepreneurship to bring this, I would say, new project into fruition.

In US, I mean, the approach is different. Here you—I mean, we have the same goal, to be climate neutral, to tackle the climate change. But in US, you will drive more, I would say, the projects which generate the revenue. And whatever the technology who can do it, so they do because it’s good for business and, of course, if it’s good for environment, it’s a plus. And we just discussed yesterday that now we need more of this kind of attitude and business case from US, but probably in the frame of five to ten years. Also, yes, we would need some kind of regulatory framework to know how to push the—I would say, tackling the climate change to the next stage. So we had, I would say, the different cycles. But this is, I mean, where we are. And I think we can just only learn from each other.

And therefore, I think—again, coming back to this green marketplace—would be good bridge over the Atlantic and over these two different approaches to the policy, because we share the same goal. And on CBAM, we see it clearly as an environmental measure. It’s a mechanism which should prevent the carbon leakage from Europe. More or less what I want to say is that we are looking for the ways how to reward those companies which have low carbon footprint, which have sustainable production, which treat their employees decently. And we want to avoid the eventual punishment that because of the public procurement now we go for the cheapest alternative. Often, that is somewhere from faraway—Asian countries.

Because we want—the Green Deal will be, of course, linked with our growth strategy, with creating new jobs and, of course, with bringing economic advantage as well. And I think that if I look at also the figures, what would be the effect on US exports, I think it’s like 0.5 percent, something like that. But, of course, we are working on it. We are discussing that. For me—I know that we are running out of time, but this last point.

For me, the best solution for creating level playing field on the global scale would be to have the global carbon price. I know that it’s not going to happen tomorrow. So we are working very closely also with Canadians on linking up the carbon pricing mechanism. Because I think that would help us a lot to kind of have a level playing field, that carbon has a price. And if the price is the same everywhere, then lots of problems of this kind would be avoided.

ANA SWANSON: Great. It’s time to open it up for Q&A. I do have some questions submitted online. If you’d like to submit a question in the audience, I believe someone can bring over an iPad to you, or perhaps you can ask them in the room. So let me start with one of the online questions. Someone asks: How can Europe ensure the Green New Deal does not exacerbate or confirm fears regarding deindustrialization in the EU? What can the EU do to tame electricity prices? Is there a structural fix?

MAROŠ ŠEFČOVIČ: I think, I mean, it’s very clear. I can tell you that I’m—as was kindly highlighted by Landon, on the EU affairs for probably more than two decades. But I never seen such emphasis put by the European leaders—I’m talking about presidents and prime ministers and, of course, the institutional leaders—on the competitiveness as right now. Because I think that the two crises—war in Ukraine, high energy prices—and that fear of eventual deindustrialization kind of focused the minds of the leaders that this is under no circumstances are going to happen in Europe.

And therefore, now you see the flurries of activities focused on the competitiveness. I mean, we are working on energy prices. And I will tell you in a second how. We are having very intense interaction with the business leaders. We are talking, of course, to our agriculture sector, which is very, very restless these days, because they basically lost a lot of income over the last two or three days. And we are we are really working very closely with all the sectors of the industry which are the most affected by the by the green transition, how to help them to build on the advantages and pluses we have in Europe, and not to suffer from, let’s say, unfair competition from outside.

So for us, clearly we want Europe to be green and clean, but industrial. And revenue from the industry is absolutely crucial for sustaining our European social model, which is, I mean, something what our citizens would not even think that, I mean, could be—could be changed. So it’s absolute political priority. And if it comes to energy prices, that’s of course, the big challenge. And for us, it’s a big priority. So we changed the so-called electricity market design. What it means in colloquial language is that we changed the way how we can trade electricity in Europe, where we are going back to the possibility of long-term contracts, so-called power purchase agreements, where we are looking for the way and how we can allow the companies to invest in the long term. And we are using also governmental power to kind of limit the worries of the eventual fluctuation and eventual loss, if you invest in the right technologies.

So over time, I believe it would lower the energy prices. What would help us, of course, would be if we would have even more LNG on the market, because it hopefully would help us to lower the price. Because despite the fact that we generated more electricity from renewables than from fossil fuels last year, still in our gas—in our energy system, the gas is so-called what they call the last marginal fuel. So it means that—it’s a little bit technical—that you have to calculate the overall energy price based on what is the cost of these marginal fuels.

So let’s say if you don’t have enough sun and enough water, you still need that baseload. And the baseload is coming mostly by gas. And therefore, you have to buy—you have to pay the gas price if they are producing or idling, because they’re just there on standby. And that will be there for a long time. So for us to have a competitive price of gas would help us to lower the prices in Europe for electricity.

ANA SWANSON: OK. If there are any questions in the room, there’s a microphone stand here. Happy to take some questions from inside the room. I’ll give you just a minute to get over there. Great.

Q: Hi. Good afternoon. Sophie Hamer, I’m the climate counselor here at the German embassy in DC. And thank you very much for your remarks and your very interesting input.

I was wondering, what role do you see for The Climate Club when it comes to a transatlantic green marketplace, and in setting some standards?

MAROŠ ŠEFČOVIČ: I think that—thank you very much for that question. Of course, it’s also very important because from the perspective of the generational challenge, clearly tackling the climate challenge is the more difficult one. Very often, and I know that this is difficult for every politicians because you have to deal with the crisis managing, and unfortunately you have too many crises, I would say, these days. But, I mean, from the perspective of the scale of the task, from the perspective of the importance of the task, and I would say how you would hand over the planet to the next generation, clearly tackling the climate change and have a clear roadmap how we are—how we are going to make it possible for our children and their children. I mean, in this century, it’s absolutely crucial.

And I think we’ve been working very well with Secretary Kerry. In Dubai, I think that EU-US cooperation was absolutely crucial to, at a certain moment I would even use the word, unblock the negotiations on the final document. It will be very crucial this year for climate finance COP in Azerbaijan. And, of course, absolutely topical when the Brazil will take over in the next year. So I think that work on a—in the form of Climate Club I think would be very important for the future. Because it helps you to kind of adjust the approaches, to exchange the best practices, and look for the—for the common solutions.

ANA SWANSON: Great. Maybe another here.

Q: First off, thank you so very much for your time today, your excellency. My name is Alex. I’m from Georgetown University.

And recently I had a discussion with His Excellency Enrico Letta. And we were talking about that one of the key issues about the Green Deal right now is how to finance it. And especially looking at the farmer protests right now, one of the questions is how to integrate all the mechanisms of the EU to try and finance the green transition, especially the common agricultural policy. Because right now, it seems like the Green Deal is relying a lot on NextGenEU, which is set to end soon and probably won’t continue afterwards. So how do you see this possibility of integrating the common agricultural policy, and the budget that’s allocated to that, to try and integrate into the Green New Deal—with the Green Deal? Thank you.

MAROŠ ŠEFČOVIČ: Thank you very much. I will start with the last part of your question, because, of course, agriculture is very much on the mind of every single politician in Europe. And if you look at, I would say, the situation of our farmers and foresters, you have seen that over the last couple of years, especially if it comes to farmers, their incomes dropped, in some cases significantly. One of the examples, just for you to see the scale, is that, I mean, from one year to another, let’s say, the revenue they had from cereal production and sale dropped from eighty billion euros to sixty billion euros. So, I mean, you suddenly—you have kind of loss of twenty billion euros, which is a lot of money for the farming community.

Then, of course, they suffer a lot because of the high gas prices and energy prices, because they use fertilizers, they use tractors. And simply I mean, the econometrics of the agricultural production have significantly changed over the last couple of years. And therefore, from one side when you talk to them they have lots of understanding and, I would say, they support the measures which we proposed under the Green Deal, because they know that we need to treat the soil in respect—in respectful way, that they need the biodiversity for pollinators, that we have a big problem with the droughts in parts of Europe. And I was talking to, you know, Spanish regional leaders from Andalusia, from Catalonia. I mean, their reservoirs already now, I mean, you have—at least in Brussels, we have an impression it’s raining all the time, which it is. But there, I mean, you have the water reservoirs filled like between 4 to 20 percent. And they are in the middle of what we would call in Europe the rainy season. So they understand all that.

But of course, they’re telling us that: Look, our incomes dropped. So if you want to kind of work with us on all these measures, we have to look at new sources of revenues for agriculture. Of course, one of the—one of the idea which we are testing, and we’ll see how it will be in the future. I, again, believe that we can use much more the concept of carbon removal certificates. So if you are the responsible forester, and if your forest serves as important carbon sink, or if you’re going to do what they’re going to do in Andalusia, as I heard from the—from the first minister of Andalusia—that they’re going to reforest part of the field, just to keep the water in the system, I think you should be rewarded for that.

I think—I mean, because you’re removing the carbon from the environment. So I think you should be—you should be rewarded for that. Like, you have to buy your emission allowance when you’re going to pollute. So I think you should be rewarded when you’re actually removing the carbon from the system. But for that, you need to discuss the methodology. That’s a little the same, like with the green steel and with other things. But I think that’s, I would say, one concept which we have to work.

And concerning the financial instruments, you are right that we are kind of funding the Green Deal projects from basically, I would say, two major sources. One is the seven years budget, what we call in EU-speak multiannual financial perspective. And there, it’s in the realm of 1.2 trillion euros. And like 40 percent of that is devoted to, I would say, climate-related projects. And then the NextGenerationEU, which is in the realm of eight hundred billion euros. So, again, I would say that more than 40 percent was devoted to this type of the project. But, of course, the scale of demand and change is much bigger than what you could fund from the, I would say, public funds, or through grants.

So, we are talking very intensively with the new management of the European Investment Bank, with the financial industry, because we need to work more with leveraging, with blended finance, and especially to bring also private investors, private equity investing into this transition, because it makes sense. We have to build, coming back to what I said earlier, the business case for this Green Deal project. And we are now figuring out, with the capitals of the European industry, how to achieve that.

ANA SWANSON: OK, well, we’re all out of time for today. But thank you so much for a great discussion. Thank you to everyone who joined us, both online and in the room today. And as a reminder, this event will be available both on YouTube and the Atlantic Council’s website. So thank you.

MAROŠ ŠEFČOVIČ: Thank you

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Maroš Šefčovič on US-EU collaboration towards a transatlantic green marketplace

AN #ACFRONTPAGE EVENT— European Commission Executive Vice-President Maroš Šefčovič on building more resilient, green transatlantic economies.

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Global Energy Agenda

Nov 30, 2023

The 2024 Global Energy Agenda

By Landon Derentz, Christine Suh, Paul Kielstra (Editors)

The fourth edition of the Global Energy Agenda kicks off with a collection of essays by energy leaders that are rolling out during COP28. Rounding out the Agenda in early 2024, the Atlantic Council Global Energy Center will release the results of its annual survey of experts that takes the pulse on the geopolitical risks affecting energy markets, the future of fossil fuels, and the transition to clean energy.

Energy & Environment Geopolitics & Energy Security

The post Global Energy Agenda full survey results appeared first on Atlantic Council.

Public Event Tue, February 13, 2024 • 1:30 pm ET

Maroš Šefčovič on US-EU collaboration towards a transatlantic green marketplace

AN #ACFRONTPAGE EVENT— European Commission Executive Vice-President Maroš Šefčovič on building more resilient, green transatlantic economies.

Energy Markets & Governance Europe & Eurasia European Union Geopolitics & Energy Security

Last week, the European Commission released its newest climate targets, aiming to cut greenhouse-gas emissions by 90 percent by 2040, compared with 1990 levels. “We want to be climate neutral by 2050,” explained Maroš Šefčovič, executive vice-president of the European Commission for the European Green Deal. “But we know that without gas… it will not be possible for us.” 

Šefčovič spoke at an Atlantic Council Front Page event Tuesday hosted by the Council’s Global Energy Center and Europe Center. There, he explained that liquefied natural gas (LNG) is “a very important transitional fuel,” but also in short supply in Europe, after the European Union (EU) began to shift away from Russian gas—imports from Russia declined from 150 billion cubic meters (bcm) in 2021 to just over 40 bcm in 2023. Imports from the United States increased from 19 bcm to 56 bcm. 

Šefčovič—who is also the European Commission executive vice-president for interinstitutional relations and foresight—was in Washington, DC, this week to speak with Biden administration officials about a recent White House executive order that halted new approvals of LNG exports to countries that don’t have free trade agreements with the United States. “We had very good conversations on this topic yesterday,” Šefčovič said, adding that the US officials who attended the meeting were able to give him “reassurance” that in the next two to three years, “there should be no impact whatsoever on the supplies of US LNG to Europe.” 

“What is expected anyways is that export capacity of the LNG would double between now and 2030,” Šefčovič added. “On top of it, there is a kind of emergency clause that if things will really go in the wrong direction, that there is a possibility to kind of adjust the measures.” 

Below are more highlights from the event—moderated by New York Times reporter Ana Swanson—which touched upon US-EU cooperation on critical minerals, trade, and climate. 

Cooperation on critical minerals

• Following the 2022 passage of the US Inflation Reduction Act, Šefčovič said that some projects (including projects focused on strengthening Europe’s battery manufacturing industry or building gigafactories) have “slowed down” or are being “transferred” to the United States.  
• Šefčovič said he would welcome a US-EU agreement on critical minerals and would like to see cooperation result in a free trade agreement for the EU. He said that the EU and United States “understand each other” and have a similar philosophy on critical minerals, in that they want to make sure that any critical mineral project in another country creates added value for citizens there in the form of jobs, revenue, and more.  
• With China dominating the extraction and processing of raw materials, Šefčovič said that the EU and United States need to “offer the better alternative.” The EU and United States, Šefčovič argued, “have [the] financial firepower to support these projects and to do it with this philosophy of sharing, not just extracting.” He argued that such critical minerals sharing could benefit Europe in the long run, since it is currently dependent on China and “we are concerned that any dependency could be weaponized.” 
• Šefčovič also is bullish about a source of critical minerals (and low-carbon energy) closer to home: Ukraine. “To put it simply, I think Ukraine has everything we need,” he said. “I think [the EU and United States] can come together as part of our reconstruction efforts to kind of build this potential.” 

A transatlantic green marketplace

• Šefčovič argued that “the next level of cooperation” between the United States and EU should be a transatlantic green tech market that not only permits free trade but also sets the stage for common standards, a shared vision on subsidies, and improvements in investment flows.    
• Šefčovič said such a marketplace would allow the EU and United States to put their combined economic weight behind the development of new technologies, which would also benefit developing countries that need access to green technologies to mitigate and adapt to climate change. The “sooner we develop them… at scale so they are affordable, the better it would be for the planet,” Šefčovič said. 
• “So I see this transatlantic marketplace as a recipe for making our cooperation even closer, stronger,” Šefčovič said, “[and] with a very positive impact.” 

The United States’ inescapable responsibility

• The increase in US LNG exports to Europe as the bloc underwent its energy shift was “absolutely crucial”—despite the fact that the EU “paid a lot for it,” Šefčovič said. It had a “calming effect” that allowed EU countries time to “look for other supplies from other corners of the world” and to focus on how to deal with Russia’s invasion of Ukraine. 
• Altogether, the EU’s energy shift, Šefčovič said, is a “pattern for the future, of what good allies should do [for] each other.” 
• Šefčovič noted that the Biden administration’s executive order on new approvals on LNG exports, which was released last month, sent “ripples” around the world. That, he said, shows just how much the United States has become a “global guarantor of energy security,” and that Washington’s responsibility extends far beyond Europe—it also lies in developing countries across Southeast Asia, Africa, and Latin America. Cooperation on reducing carbon emissions in these countries “is very essential,” Šefčovič argued. 

Katherine Walla is an associate director on the editorial team at the Atlantic Council. 

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While the United States is well on its way to building the next generation of facilities to produce the integrated circuits, solar panels, and batteries needed to supply its digital and green transitions, the EU is struggling to connect its companies with state financing. In theory, the EU’s 27 members have matched US efforts through the European Commission with the NextGen EU recovery fund, a debt-funded program worth around $880 billion. However, because the commission lacks a permanent fiscal union with centralized taxation and borrowing powers, it has had to rely on member states to design and implement plans for NextGen funds. This decentralized approach, in conjunction with stipulations attached to its disbursements, have made it far harder for EU companies to access funding. 

NextGen EU funds are contingent on governments meeting performance targets set by the Commission. As of early 2024 just 18 percent of the Commission’s targets have been met, meaning that only about 30 percent of available grants and loans have been released to member states. Some member states, such as Poland and Hungary, have been blocked from accessing a bulk of their allocation because of the Commission’s rule-of-law concerns. Others, like Germany, have been stopped by their own constitutional court from releasing the funds to industry. These funding lags and uncertainties have stymied EU manufacturers’ investment at home. In contrast, the scale and accessibility of funding in the United States has meant that some major European manufacturers such as Volkswagen, BMW, Enel, and Norwegian battery group Freyr, are opting to instead prioritize investments in the United States.

What’s driving the US manufacturing construction boom

In line with IRA and CHIPS and Science Act priorities, construction is overwhelmingly concentrated in the computer, electronics, and electrical manufacturing sectors. This broad sector covers manufacturers producing computers, communications equipment, similar electronic products, as well as products that generate, distribute, and use electrical power. In other words, the goods needed to facilitate the green and digital transitions. Since the start of 2022, spending on construction for this sector has approximately quadrupled.

This surge in spending has transformed the computer and electronic segment into the dominant driver of US manufacturing construction. In 2023, the sector contributed some 64 percent of all construction manufacturing spending. Just five years earlier, its share stood at a meager 11 percent. The growth in computer and electronic manufacturing has not come at the expense of other sectors. Chemical and transportation manufacturing construction spending is also up 4 and 21 percent respectively from 2022 to 2023, and food and beverage manufacturing construction spending has remained steady.

While this historic expansion in US manufacturing construction is the first step to the reshoring of domestic production, concerns remain over whether the framework will be able to deliver the manufactured products. Labor force bottlenecks remain as the most immediate risk to the Biden Administration’s success. The US Bureau of Labor Statistics’s Job Openings and Labor Turnover Survey (JOLTS) notes that there were 601K open manufacturing jobs and 449K open construction jobs in December 2023. With US unemployment currently sitting at 3.7 percent, well below the average rate of 5.8 percent of the past two decades, the Biden administration’s main challenge will be to find workers to build and staff these new manufacturing facilities. One way to do this will be to support the transition of workers away from declining industries through the upskilling domestic workers. However, this alone will likely be insufficient. The US will also need to bring in skilled workers from abroad through reforms of its immigration system. 

With US industrial policy implementation well underway, the White House should now shift attention toward how it can best bring along the US’ allies and partners. Delays around NextGen EU, the elevated energy costs and economic uncertainty stemming from Russia’s invasion of Ukraine, and structural differences between the the US and EU’s governance structure mean that the Commission will not be able to galvanize investments in manufacturing production facilities at the same scale or speed as the United States. This is further complicated by the EU’s surging green goods imports originating from China as Beijing attempts to export its production overcapacity abroad. If Washington wants to ensure the European green and digital transition is built by friendly manufacturers, it should aim to do more to directly support its partners in Brussels, Berlin, and beyond. 

Niels Graham is an associate director for the Atlantic Council GeoEconomics Center where he supports the center’s work on China’s economy and US economic policy.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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Geoffrey R. Pyatt is the US assistant secretary for energy resources at the US Department of State. This essay is part of the Global Energy Agenda.

As assistant secretary of state for energy resources, my team and I focus on two key, complementary goals: energy security and energy transition.

In nine years as a US ambassador in Europe, I witnessed time and again Vladimir Putin’s use of energy as a tool of coercion. I saw it as ambassador to Greece when Russia cut off gas supplies to neighboring Bulgaria, and as ambassador to Ukraine when Russia tried to pressure Ukraine and the EU by altering gas transit, upending the reliable flow of energy.

Since Russia’s full-scale invasion of Ukraine failed on the battlefield, Putin has unleashed a wave of brutal attacks against Ukrainian civilians and the energy infrastructure that keeps their lights on and their homes warm.

Ukraine’s power generation capacity has been degraded by almost 50 percent since February 2022. Despite this, Ukrainian energy workers, supported by a Group of Seven-plus (G7+) coalition, have done all they can to repair, restore, and harden the grid and generation facilities.

This work has, so far, prevented large-scale blackouts this winter. Ukraine has even been able to store Europe’s excess gas and help address European concerns about shortages.

Nevertheless, this war has highlighted how malevolent actors can weaponize energy resources, and the importance of diversification.

It also has demonstrated how US national security, and the security of our friends and allies, depends on energy security, and how America’s energy abundance can contribute to our alliance relationships.

The European Commission’s rapid response through its RePowerEU package and US-EU cooperation, including through the US-EU Energy Council, has helped drive new energy efficiencies to bring down demand, while the amount of US liquefied natural gas (LNG) sent to Europe has surged. Russian piped natural gas exports to Europe, which had been receding since 2020, plummeted drastically after 2022 to a new low of around 27 billion cubic meters in 2023. Making up for this significant drop in supply, US LNG producers stepped up to deliver supplies to Europe, with some 70 percent of US LNG exports last year going to the continent. Our partners have turned away from Russia as an energy source, I believe, permanently. Since 2022, US exporters have supplied the EU with approximately 90 million tons of LNG, three times as much as the next largest supplier.

The safest source of energy is what we generate ourselves, and what we can build or share with our allies and partners globally.

While the United States has met Europe’s immediate supply challenges going into this winter, the urgency of the energy transition is increasingly clear. The safest source of energy is what we generate ourselves, and what we can build or share with our allies and partners globally.

This effort starts at home. The multiplier effect of the US Inflation Reduction Act, the Bipartisan Infrastructure Law, and the CHIPS and Science Act is tremendous. The United States has entered a clean energy manufacturing renaissance, driven by public-private partnership, which has unleashed the private sector to help meet domestic and global energy needs.

These pieces of legislation have built the platforms upon which US and international companies can build value and launch the infrastructure and technologies of tomorrow.

Since the beginning of the Biden-Harris administration, private companies have announced $628 billion of investment in the industries associated with the energy transition: clean power, heavy industry, biomanufacturing, clean energy manufacturing, electric vehicles, batteries, carbon capture utilization and storage, and semiconductors.

During my meetings with energy ministers, private-sector executives, civil society, and stakeholders around the world, everyone has demonstrated their understanding that energy access affects agriculture, business, communications, education, food systems, healthcare, and transportation.

Energy security means energy access and supply without threat of coercion, and without concern over dependencies. It means a country has choice and the opportunity for growth.

The energy transition has been and will continue to be an important element in ensuring our long-term energy security. But for the energy transition to succeed, it must be just.

We have created the tools to achieve this. The Minerals Security Partnership (MSP), for example, has served as a catalyst for public- and private-sector investments to build the diversified, secure, and responsible global critical minerals supply chains that underpin the minerals and metals essential to the energy transition. Everyone agrees that market dominance by a single supplier is unhealthy.

The MSP was created to offer producer countries a better deal than our adversaries. This means opportunities for local communities and value for our partners—from extraction all the way through recycling—pursued with high environmental, social, and governance standards.

The United States has also anchored the Just Energy Transition Partnerships with South Africa, Indonesia, and Vietnam, a G7+ effort to help each of these countries accelerate their energy transition with the support of multibillion-dollar assistance programs.

Additional programs like the Partnership for Global Infrastructure and Investment, an initiative to leverage over $600 billion in sustainable infrastructure financing, including for energy security and transition, are also means by which the United States and our partners have been working to help countries around the world grow at a faster pace.

The United States recognizes that nations don’t just want to decarbonize. They want to prosper.

This is a global effort. In Dubai at the 2023 United Nations Climate Conference, COP28, nearly 200 governments called on the world to transition away from fossil fuels in a just, orderly, and equitable manner. Corporations and nations pledged to significantly reduce methane emissions. The United States helped win pledges by more than one hundred countries to triple renewable energy capacity by 2030 and by twenty countries to triple deployment of safe, secure, and reliable nuclear energy from 2020 levels by 2050. The United States joined Canada, Japan, France, and the United Kingdom to mobilize billions of dollars of investment in fuel for our nuclear power plants and move away from dependence on Russian nuclear fuel supplies.

These agreements, commitments, and ambitions will shape our geopolitics for decades to come. No one country can fulfill these goals alone.

Secretary of State Antony J. Blinken, in remarks to university students at the Johns Hopkins School of Advanced International Studies last September, said that US domestic and foreign policy are more aligned than ever, and that they must be able to face the “defining tests of this emerging era.”

We face these tests in the United States, in Ukraine, in Dubai. Everywhere. It is a historic moment. To be a diplomat, working with allies and partners, you must be optimistic. When I consider our shared energy future, both its challenges and its promises, I certainly am.

We have an opportunity to transition energy systems globally and an imperative to change them now.

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Von der Leyen’s election and her development of a European Green Deal came on the eve of multiple crises that would shape not just Europe’s trajectory on decarbonization, but its strategic defenses as well. Mere months after her election, the European Union (EU) began to face the COVID-19 pandemic’s health and economic crises. After pandemic recovery plans were shifted toward clean energy-oriented growth under instruments such as NextGenerationEU in 2021, Russia launched a full-scale invasion of Ukraine and weaponized European gas supplies the following year. Russia’s aggression led to a severe energy crisis across the continent, with electricity prices soaring and observers worried that all these factors were combining into existential threats that Europe had not faced since 1945. Compounding matters, Europe was squeezed in an intensifying competition between the United States and China, with Washington passing the Inflation Reduction Act (IRA) in 2022 with potentially significant effects for European industry and competitiveness.

In this context of exponentially growing danger to Europe, the von der Leyen Commission achieved an impressive record for progress toward the clean energy transition. The European Green Deal is the first comprehensive plan to make an entire continental union achieve net-zero emissions by 2050. To achieve the transition to net-zero emissions, the European Green Deal pushed emission reduction targets, expanded Europe’s Emissions Trading System, and launched a series of clean technology programs, especially on hydrogen, offshore wind, and energy storage. The subsequent reorientation of NextGenerationEU funding from pandemic recovery to clean energy investments in 2021, as well as the concurrent (and ongoing) drafting of the Green Deal-linked Fit for 55 legislative package that introduced the Carbon Border Adjustment Mechanism, have already accelerated Europe’s emission reduction policies. After Russia launched its full-scale invasion of Ukraine, the Commission introduced the REPowerEU Plan to reduce European consumption of Russian fossil fuels, notably doubling solar capacity and heat pump installations and prioritizing other investments into renewable energy sources. By the metrics released by the Commission in mid-2023, there has already been at least a 20 percent reduction in energy consumption across the bloc because of increased energy efficiency and lowered demand (partly due to government intervention). There was an additional 39 percent of the energy produced in the EU coming from renewable sources as well.

Despite these achievements, significant work remains on reducing EU carbon emissions. For one, out of the seventy-five pieces of Fit for 55 legislation, only thirty-two have been adopted, with another sixteen in final negotiations. A further twenty-one are still up for debate in the European Parliament, with six not even tabled for discussion. Other projects have failed to take off entirely, such as the Sovereignty Fund that the Commission floated as one of several responses to the IRA. In fact, as net-zero policy becomes an increasingly competitive economic race, the EU has yet to fully define its stance toward China and the United States. So far, it is unclear how, where, and when Europe should protect its industries. 

Given such a record, if von der Leyen were to launch and win a re-election bid, Europeans should expect more of an emphasis on executing all these existing proposals, rather than the announcement of new ones or any U-turns. The European Climate Neutrality Observatory has argued that much of the new legislation and reforms the von der Leyen Commission introduced have created the institutional framework for vital climate action, but that their implementation remains far too slow, partially due to a lack of financial support for a larger-scale adoption of clean energy technologies. Von der Leyen herself seems aware of this shortcoming; in her September 2023 letter to the incoming European Commissioner for Climate Action Wopke Hoesktra, her primary instruction was clear: implement, implement, implement. Even the Green Deal, the first major proposal of the von der Leyen Commission, is far from being finalized, as the ongoing legislative processes attest. Recent agreements on electricity market reform, industrial emissions, and new rules for hydrogen investments are necessary steps in that direction. 

On trade and the protection of Europe’s industries, the European Commission will have to outline more specific plans beyond the recent probes into Chinese practices the Commission just announced. However, the Net-Zero Industry Act, one of Europe’s answers to the IRA, has yet to put any new funding on the table. 

The next Commission will have to navigate another momentous challenge: enlargement. As Ukraine and ten other countries vie for EU accession, Europe’s unity, resolve, and ability to see its decarbonization goals through could once again be challenged as new members join the fold, even though this enlargement will likely not happen before 2030. On top of that, the EU’s existing enforcement of climate targets and other key decarbonization deliverables is lacking as well, leading to inconsistent approaches between the existing EU members themselves.

The final, and possibly most difficult, predicament will be staying the course. Even as pressure continues to build on the European Commission to retain its momentum, policymakers should not underestimate the continued strength of climate-skeptic populist movements in European politics. The anxieties of continued economic decline and worries over increasing migration remain prevalent among significant parts of the European electorate, which could politically bolster the populists and threaten existing momentum on decarbonization and the energy transition.

Consequently, only two things can be said for certain about the next European Commission. The first is that it will have its work cut out for it, with these crises unlikely to dissipate within the next five years. The second is that whoever succeeds von der Leyen, whether it be in 2024 or in 2029, will have large shoes to fill when it comes to making progress toward reaching net-zero emissions.

Francis Shin is a research assistant in the Atlantic Council’s Europe Center.

Théophile Pouget-Abadie is a nonresident fellow with the Atlantic Council’s Europe Center and a policy fellow with the Jain Family Institute, focusing on decarbonization, the energy transition, and European policy.

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The danger created by Houthi attacks

The Houthi movement, or Ansar Allah, is a Shia Islamist group that seeks to maintain control of critical territory in Yemen. It operates as a proxy group for Iranian influence, especially the Islamic Revolutionary Guard Corps. The Houthi movement has ramped up attacks on merchant vessels transiting the Red Sea since November 19, 2023, according to US Central Command. 

The United States’ response to the attacks, Operation Prosperity Guardian, concentrates naval assets and command-and-control bandwidth on the Bab el-Mandeb Strait, wedged between the Horn of Africa and the southwestern corner of the Arabian Peninsula. It is a key choke point for commercial traffic transiting between the Arabian Sea and Red Sea toward the Suez Canal—another choke point through which more oil is flowing than ever before.

Due to Russia’s invasion of Ukraine and the subsequent trade diversion, the Suez Canal is increasingly used for Middle East-to-Europe flows of energy, as well as Russia-to-India shipments. About 8.8 million barrels per day of oil and oil products utilized the Suez transit in the first half of 2023, or about 12 percent of maritime oil trade. 

Operation Prosperity Guardian has engaged Houthi drones, surface-to-ship ballistic missiles, small combatant vessels, and other arms in defense of merchant traffic and naval assets. However, the operation has thus far failed to deter further Houthi attacks and provide assurance of safe passage to commercial vessels transiting the Red Sea. 

In order to restore deterrence, the United States and the United Kingdom are conducting airstrikes against Houthi military infrastructure. These actions are not only necessary to restore the safety of trade through the Suez Canal, but to assure the principle that maritime trade cannot be disrupted by force. 

The waves rule energy trade

Freedom of navigation matters deeply for preserving the security and efficiency of global energy markets. Forty percent of maritime trade by weight consists of oil, coal, gas, or petrochemical products, per the United Nations Conference on Trade and Development.

Thus far, the Houthis have largely not targeted vessels engaged in energy trade, perhaps stemming from a desire to avoid an environmentally catastrophic oil spill along Yemeni shores, which was only narrowly avoided in August as the oil tanker FSO Safer, abandoned off of Yemeni shores, was successfully drained of its contents. 

The Houthis are also likely to avoid drawing Arabian Gulf states deeper into the conflict. Most Gulf economies are deeply dependent on maritime energy trade—hydrocarbon exports are responsible for 40 percent of Saudi and Qatari gross domestic product (GDP), and 50 percent of Kuwait’s GDP. 

Additionally, the Houthis’ Iranian patrons wish to avoid antagonizing major oil importers China and India, or partners such as Russia. Last week, a Houthi spokesman told a Russian news channel that Chinese and Russian cargoes would not be targeted. 

The prospect for escalation, and the potency of the threat which the Houthis have displayed, is substantial. Major oil traders such as BP, Shell, and Trafigura have now suspended shipments through the Red Sea completely. 

Although the United States conducts limited oil and liquefied natural gas trade through the Suez Canal, the risk of a supply disruption in this critical choke point matters to US economic security, as oil prices are set globally. Moreover, the United States must ensure that its European allies retain access to energy supplies amid Russia’s invasion of Ukraine. Regardless, it is the threat of escalation, in the Red Sea or other choke points such as the Strait of Hormuz, and the broken principle of freedom of navigation that most acutely threatens US interests. 

US energy trade rules the waves?

For the United States, free maritime commerce has long been central to its economic prosperity, from the nation’s founding as a merchant power to the modern era, when maritime vessels account for 40 percent of US international trade by value and 70 percent by weight. 

The United States’ rising oil exports underscore how its economic competitiveness is intertwined with the global maritime commons. The United States has emerged as the world’s leading producer of oil, as US exports of oil and oil products have consistently been above ten million barrels per day since early 2023, with seaborne exports often accounting for more than seven million barrels per day of this trade.

Global maritime trade of oil is estimated to be approximately forty-three million barrels per day, according to commodity services firm Kpler, and the US export share of maritime oil trade has expanded dramatically since the crude oil export ban was lifted in 2015. 

While the Red Sea is not a major transit point for US oil exports, which primarily traverse the Atlantic crossing or Panama Canal, it is not in the US national interest for any waters to be closed to energy trade. If energy vessels are required to reroute amid security threats and a fragmented global commons, shipping costs and energy prices will rise, lowering world economic growth. Secondly, although some US energy companies will benefit temporarily from rising prices, overall US energy and economic security suffers, as the US remains a large oil importer, typically receiving over six million barrels per day due to domestic refinery configurations. Moreover, disruptions to global supply chains would reverberate across other sectors of the US economy that rely on international trade.

It is in the economic interest of the United States to ensure that the global maritime commons remains free from disruption.  

Threats to freedom of navigation are also threats to net-zero emissions goals

Maritime security does not only affect fossil energy. If freedom of navigation is no longer secured—if merchant vessels can be disrupted or even sunk by armed groups—then the clean energy transition will face disruption. Shipping costs and insurance rates will rise sharply amid greater uncertainty. 

Additionally, the inputs for clean energy supply chains often transverse many different maritime nodes across the globe, from mine to factory to final installation. For instance, cobalt that is mined in the Democratic Republic of the Congo may be refined in Finland, assembled into a battery in Japan, and shipped to an electric vehicle factory in the United States. With maritime supply chains facing greater uncertainty, firms will require greater redundancy and inventory stockpiling. 

These dynamics will lower efficiency and increase inflation. The snarling of supply chains and resultant inflation will also necessitate higher interest rates, all things being equal. Higher interest rates, in turn, will pressure capital-intensive clean energy projects by raising financing costs. The global clean energy transition will be slowed considerably if freedom of navigation is no longer a reasonable assumption of seaborne trade. 

In sum, a world without freedom of navigation would represent a disaster for not only the world economy but also squash any aspiration of reaching net-zero emissions by 2050.

Will Tobin is an assistant director at the Global Energy Center.

Joseph Webster is a senior fellow at the Global Energy Center.

This article represents their own personal opinion.

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The United States desperately needs to hasten the development of supply chains for critical minerals that don’t involve China and Chinese companies for both commercial and national security interests. Unfortunately, current policies, including regulations from the Inflation Reduction Act (IRA), are doing exactly the opposite. They are hurting demand for electric vehicles, the very products that will incentivize the development of these supply chains. Instead, Washington needs to unleash the power of the US market by removing barriers to accessing capital, fast-tracking manufacturing, providing high-level diplomatic support, and promoting domestic demand.

An issue of national security

The erosion of the US manufacturing industry and its outsourcing to factories in Asia is a well-known and well-studied phenomenon. The risks of completely outsourcing the production of key goods, such as antibiotics, have recently come to light. The US military could face similar situations with battery and semiconductor supplies, threatening the security and safety of US interests around the world.

The global lithium-ion battery industry is dominated by China. Chinese companies supply 80 percent of the world’s battery cells and account for nearly 60 percent of the EV battery market. Even some US companies that produce batteries rely on lithium-ion cell components produced by Chinese manufacturers.

But not all lithium-ion batteries are the same. The US military needs specialized batteries that are larger, of higher quality, greater power density, and packaged to withstand significantly more rough treatment than those needed for commercial purposes. Should the US military suddenly find itself in need of more specialized batteries, the Pentagon might not be able to obtain them because foreign lithium-ion cell producers have little incentive to stop producing lithium-ion batteries for their commercial customers and divert production to the specialized products that US military battery manufacturers need. If these suppliers are controlled by Chinese government interests, they may even be incentivized not to provide military products for the United States, even if offered financial incentives. These risks have been known for some time—in fact, an unclassified report by the Interagency Task Force in Fulfillment of Executive Order 13806 described these vulnerabilities in 2018.

China controls access to critical minerals

China’s supremacy over the lithium supply chain is no accident. China purposefully and through insidious methods engineered control over the global lithium supply chain. According to a 2021 White House Report, the Chinese government funneled $100 billion in subsidies, rebates, and tax exemptions to Chinese companies and Chinese consumers between 2009 and 2019 to dominate the global lithium refining industry, before global demand for lithium soared. China then used its position as the top consumer of unrefined lithium and top producer of refined lithium to keep others from entering the market. This included anti-competitive practices such as subsidizing production when demand was not high enough and dumping products at below-market prices onto the international market.

Chinese investments in lithium mines around the world also ensure that Chinese companies have primary access to this important element. Beijing has engaged in similar practices with other critical minerals, such as cobalt, graphite, and nickel. 

Electric vehicles and national security

According to a recent study by McKinsey, global demand for lithium-ion batteries is forecast to grow from about 700 gigawatt hours (GWh) in 2022 to 4,700 GWh by 2030. This is in large part due to clean-energy policies that promote the adoption of electric vehicles. The United States and Europe are expected to experience the highest rates of growth.

China is not only primed to make hundreds of billions of dollars in revenue, but it is also positioned to restrict access to lithium-ion batteries to certain countries or companies as it wishes. This puts the national security of the United States and its allies at risk. In the event of a war or sudden need to supply an ally or strategic partner with military aid, the United States could face severe shortages of key defense products, such as drones, F-35 fighter jets, surface-to-air missiles, and even radios.

Current policy impediments

There are alternatives to lithium-based batteries under development, but these are likely many years away from entering the market. A better solution is to develop new supply chains that don’t depend on China or Chinese companies for critical minerals, including lithium. Though the process seems daunting because China dominates the market now, it is possible if the United States makes it not just a matter of environmental or energy policy, but a national security priority, as well. It is vital to get the energy transition right, without threatening national security in the process. Unfortunately, current policy is doing the opposite. 

The IRA acknowledged the problems posed by China’s domination of critical minerals supply chains and tried to address it through tax incentives for electric vehicles. In order for vehicles to qualify for the full tax credit ($7,500) a certain percentage of the value of the battery component cannot originate in China and must be produced or manufactured in North America. Lawmakers hope that consumer demand for vehicles that qualify for the maximum tax credit will drive manufacturers to open supply chains for these components that do not involve China or Chinese companies. 

The problem is that these regulations take effect this year, with even more stringent regulations set to take effect in 2025. But critical mineral mining, refining, and battery manufacturing cannot be developed in this time frame while also adhering to the environmental, safety, labor, and financial regulations that US and European companies must respect.

As battery and automobile manufacturers struggle to source battery components from domestic and free-trade partner sources, consumer demand for electric vehicles is sitting on the precipice. Many electric or plug-in hybrid vehicles are, at the point of sale, more expensive than otherwise similar cars that run on gasoline. But a $7,500 federal tax credit provided at the time of purchase, especially when combined with some state tax credits, brings many more vehicles into the range of affordability. 

Now that many electric or plug-in hybrid models aren’t eligible for the full tax credit, consumer demand will fall. Without robust consumer demand, car manufacturers will quickly lose the incentive to produce and market EVs to American drivers. In fact, they are already seeing weakening demand and responding by slashing production. In December 2023, Ford said that it would reduce the production of its all-electric F-150 Lightning pickup in 2024 to half of its 2023 output, for example. The policy intended to incentivize new lithium-ion battery supply chains is now more likely to disincentivize it by wounding consumer electric vehicle demand.

How to supercharge a lithium industry

US policymakers need to respond quickly, because it is much easier for the market to cut the supply of EVs to match slowing demand than it is to build up new supply chains for critical minerals and build battery factories. Below are three steps to address this situation.

First, suspend implementation of the IRA EV battery regulations for battery components for 2024 and 2025. It is not feasible to offer tax credits that can only be applied to a handful of vehicles. The market for electric vehicles is already problematic as consumers realize that fully electric vehicles still suffer from range issues as batteries start to degrade, don’t perform at full range when subjected to extreme temperatures, and cannot always be reliably charged in reasonable amounts of time away from home.

Most consumers may continue to conclude that an EV just isn’t worthwhile for the price tag. But more consumers might be enticed with the full federal tax credit. If the federal government really wants to see new supply chains for lithium-ion batteries, it needs to give the market time to invest in them, and stimulating consumer demand is a key component.

Second, support lithium and other critical mineral refining in the United States. The United States is never going to be able to mine enough critical minerals to satisfy all of its demand. However, discoveries of deposits of important critical minerals in countries that China has not penetrated are growing. The problem is that China totally dominates the refining process. Even some critical minerals mined in the United States are sent to China for refining.

Government loans and grants are helpful for big, established companies, but the industry needs diversification. Smaller companies working on innovative refining processes face too many barriers to access the capital they need to build manufacturing facilities, both from the government and from private sources. The government should elevate the development of lithium refining businesses in the United States to a national security priority and eliminate barriers that prevent smaller entrepreneurial operations from accessing federal funds.

If the government wants lithium refining in the United States to succeed, private capital will also start to see it as an industry to invest in. The United States can and should become a hub for innovation in critical mineral refining because the applications go much farther than the rechargeable battery industry. Robust and diversified domestic lithium refining will ensure that the US military will always be able to procure the supplies it needs on the free market.

Third, support the development of mining, transportation, and refining of critical minerals and the manufacturing of products in friendly countries. The United States should work with its North American neighbors, Canada and Mexico, to support these supply chains. There are also several countries with significant lithium deposits in the Western Hemisphere, including Brazil, Chile, Argentina, and Canada.

Canada does not currently produce much lithium, but the potential there is significant. US trade initiatives could help establish a supply chain for lithium that exists entirely within North America. This would benefit both countries’ economic and national security endeavors.

In South America, US diplomats can help US companies negotiate rights to mine critical minerals in safe and environmentally secure ways, just as they worked to help US oil companies develop foreign oil supplies in the twentieth century. During the Cold War, this was considered a top national security priority. In the twenty-first century, critical mineral mining and refining should receive the same considerations from the US State Department.

Ellen R. Wald is a nonresident senior fellow with the Atlantic Council Global Energy Center and the co-founder of Washington Ivy Advisors.

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As the EU maneuvers toward a leading role in climate action and decarbonization, an EU-UK partnership based on accelerating the clean energy transition would be a logical step forward for their relations. This is especially needed as the United Kingdom has recently made several worrying U-turns on carbon emission reduction goals, including postponing the deadline for selling new gas and diesel cars and delaying the phaseout of gas boilers. At the same time, the EU has begun wavering on its own objectives, including on its previously made pledge to increase its greenhouse gas reduction goal beyond 55 percent below 1990 emission levels.

To keep the energy transition on track, a UK-EU partnership should focus on four areas: growing energy infrastructure connections between the United Kingdom and EU, aligning carbon pricing policies, the EU inviting Britain to join the EU-led Critical Raw Materials Club, and developing means of safeguarding against worker exploitation by critical mineral exporters.

Leaders and high-level officials have consistently expressed interest in alignment between the United Kingdom and EU on climate action. During his 2023 state visit to Paris, for example, King Charles III proposed to French President Emmanuel Macron a British-French “sustainability entente” as a means of strengthening UK-France relations. Shortly after, Germany and the United Kingdom announced that they were in preliminary talks to construct a four-hundred-mile hydrogen pipeline under the North Sea. The purpose of the pipeline would be for “green hydrogen” generated from UK offshore wind farms to enter Germany’s energy supply mix. The project is ambitious, estimated to cost a staggering twenty billion euros and be completed by 2032, and the amount of power generated by UK offshore wind farms would need to increase significantly to both decarbonize the UK power sector and export green hydrogen.

These UK-France and UK-Germany proposals are still in their early stages, but there is still greater potential for EU-UK cooperation on renewable energy development and adoption. The concept of the sustainability entente with the United Kingdom should be broadened to encompass the entirety of the EU, and it should form the basis of a decarbonization-based alliance.

Growing connections

To begin with, Britain and the EU should aim to further connect their renewable energy infrastructure. This is partly because the United Kingdom has made impressive strides toward transitioning to renewable sources of energy, even though it still remains overly reliant on fossil fuels. The UK Department for Energy Security and Net Zero reported that 41.5 percent of electricity generated in Britain in 2022 came from renewable energy sources, with wind-based energy alone composing an impressive 24.7 percent of the country’s total energy supply. Meanwhile, 22.5 percent of electricity consumed in the EU across the bloc in the same time period came from renewable sources. This is not to say that the transition to renewable energy sources has been even across the EU, though, as member states like Sweden, Latvia, and Finland already boast higher percentages of renewable energy in their electricity supplies compared to Britain. Regardless, the United Kingdom could increase the amount of renewable energy going into the EU energy mix, while adopting technologies and expertise from leading decarbonizing states, such as Sweden, Latvia, and Finland, to accelerate Britain’s own clean energy transition.

Aligning pricing

For UK renewable energy exports to the EU to occur on a wider scale, it will be essential for the EU and United Kingdom to align on carbon pricing mechanisms. The carbon border adjustment mechanism (CBAM), which would levy taxes on imports linked to significant carbon emissions from 2026, is ironically poised to hinder the operation of UK-based renewable energy because it is designed to levy taxes based on the carbon-intensity of the importing country’s entire electricity grid if their carbon pricing does not match the EU’s. Hence, a decarbonization partnership needs to set the terms for the reduction of CBAM tariffs on UK renewable energy sources to both grow their exports to the EU and to encourage the United Kingdom to increase its supply of renewable energy.

Joining the club

Additionally, the EU is in the process of establishing the Critical Raw Materials Club, an EU-led group that would enable members to secure minerals critical for renewable energy technologies. The EU has already invited several allies to become founding members, including the United States, but not Britain. While the United Kingdom has already noted that critical minerals are of strategic value, has partnered with Japan on critical mineral supply chains, and has declared its intent to negotiate a similar agreement with the United States, it has not openly worked to bolster critical mineral supply chain resilience with the EU. This is a mistake, as Britain may find itself beginning to compete with the EU for critical minerals. The United Kingdom joining the Critical Raw Materials Club would reduce the possibility of competition, and it would become another avenue for Britain to strengthen the resiliency of the country’s critical mineral supply chains.

Safeguarding against exploitation

The EU and United Kingdom are likewise in a strong position to jointly promote workers’ rights with critical minerals exporters. Some, but not all, critical minerals exporters, such as the Democratic Republic of the Congo, employ child and slave labor in their mines. For critical raw material exporters that use forced labor, the EU and the United Kingdom must discourage these practices, and both already have legal mechanisms that could hold exploiters accountable. They should employ “Magnitsky” sanctions, but only in a targeted way against some of the worst offenders. That is because an overzealous enforcement-based approach risks pushing such regimes toward China, which is already looking to cement its existing dominance of global critical mineral supplies.

Along with the stick of sanctions, the EU and United Kingdom could also offer carrots to encourage better standards for workers in critical mineral mines, such as offering to partially sponsor the development of local critical mineral refineries in these states. Yet, the EU should not expect that the United Kingdom will implement such policies through a resurrected UK Department for International Development, which was merged into the Foreign Office in 2020. (Even though the Labour Party has made earlier pledges to separate the department again, Labour Party insiders believe it is now unlikely.)

While there remains some hesitation between Brussels and London on coordination due to lingering issues over Brexit, the need for decisive steps toward decarbonization grows as the climate crisis escalates. The EU and United Kingdom must work together on the net-zero transition because there remains a great deal of potential in decarbonization cooperation. 

Francis Shin is a research assistant in the Atlantic Council’s Europe Center.

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What are China’s economic trends and how do they impact Europe and the United States? Can Europe convince China to stop dumping cheaper exports onto the European market? What was the outcome of the recent EU-China summit? Is the window for action for the EU closing? When it comes to the green transition, will China continue to dominate the green manufacturing market? What does this mean for both US and European green industries? 

On this episode of #AtlanticDebrief, Rachel Rizzo sits down with Atlantic Council’s GeoEconomics Center Associate Director Niels Graham to discuss his report on Chinese manufacturing overcapacity and impacts to EU and global green goods trade.

You can watch #AtlanticDebrief on YouTube and as a podcast.  

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Rachel Rizzo

Nonresident Senior Fellow

Europe Center Transform Europe Initiative

Economy & Business English

The Europe Center promotes leadership, strategies, and analysis to ensure a strong, ambitious, and forward-looking transatlantic relationship.

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A report by the Adrienne Arsht Latin America Center in partnership with the US Department of State. This readout was informed by multi-stakeholder dialogues focused on facilitating greater, constructive exchange among multi-sectoral thought leaders and government leaders as they work to implement Summit commitments.

Executive summary

The main challenges that Latin American and the Caribbean (LAC) countries are facing include infrastructure issues (weak and insufficient transmission lines), and limited uptake of new solar photovoltaic (PV) and wind technologies. Despite these challenges, LAC is on track to capitalize on emerging clean energy technologies, including production and export of green hydrogen (GH2), as well as play a role in supplying the global energy system with critical minerals needed for the energy transition, such as lithium and copper.

LAC countries are facing major challenges in their ability to develop renewable energy projects, expand low-emission energy systems, and fill existing technical and financing gaps that hinder regional energy security. A key takeaway to come out of the Summit Implementation Roundtable was that the US-Caribbean Partnership to Address the Climate Crisis 2030 (PACC 2030) has the potential to advance clean energy goals in the Caribbean and become a blueprint to address similar challenges in Latin America.

Recommendations for advancing the clean energy sector in the Americas:

Report

Nov 8, 2023

Future of the Cities Summit of the Americas

By Willow Fortunoff, Diego Area

The first-ever Cities Summit of the Americas created a new platform for mayors across the hemisphere to build partnerships with civil society organizations–particularly those focused on the region and/or local governance–private sector companies, and one another.

Civil Society Energy Markets & Governance

Summit of the Americas

Amid global uncertainties and new challenges, the ninth Summit of the Americas is a renewed opportunity to bring about hemispheric cooperation and consensus to reach regional prosperity and security.

Public Event Thu, March 17, 2022 • 12:00 pm ET

Road to the Summit: A green and equitable future for the Americas

A conversation to generate strategies for green and equitable economic growth across the Americas.

Americas Climate Change & Climate Action Economy & Business Inclusive Growth

Online Event Thu, January 27, 2022 • 2:00 pm ET

Road to the Summit. Responding to the next disaster: Building health and climate resilience in the Americas

A conversation to generate strategies for creating stronger hemispheric collaboration ahead of the ninth Summit of the Americas.

Americas Caribbean Climate Change & Climate Action Latin America

Online Event Fri, June 10, 2022 • 10:00 pm ET

The joint future of the Caribbean working with Latin America

A series of discussions featuring heads of state and government following the conclusion of the Summit of the Americas.

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Diego Area

Deputy Director, Strategic Development

Adrienne Arsht Latin America Center

Crisis Management Democratic Transitions

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Wazim Mowla

Associate Director & Fellow, Caribbean Initiative

Adrienne Arsht Latin America Center

Caribbean China

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

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With the increase in size, COP’s center of gravity shifted away from the formal management structure of the convention. Instead, the focus was on disparate and scattered initiatives in which nonstate actors—including from the private sector—play a prominent role. There are several ways to interpret this conference: a holy pilgrimage for those who are devoutly green, a new Davos attended by executives of the same corporate giants who frequent the World Economic Forum gathering in Switzerland, a photocall of politicians from around the world, a theater with armies of lobbyists, a mix of consultants and media. “Inclusion” was an oft-repeated theme this year. And although it may seem provocative, the meeting’s most notable decision may have been to include the oil and gas sector, which had been previously sidelined—a decision that spotlighted a larger confrontation at COP28 between ideology and pragmatism.

A new energy era

Strategic ambitions have historically revolved around energy, a substantive battle in international relations. The nineteenth century can be understood as the era of coal, driving the development of the manufacturing industry and rail transportation. World War I marked the beginning of the era of oil. (Controversy surrounded Winston Churchill’s decision, as the civilian head of the British Royal Navy, to switch the fleet to this fuel in 1913.) The current century will witness an “energy transition” intended to move the world toward a sustainable future. However, as “green” ideologies have come to dominate public discourse, the concept of a “transition” is too often lost: specifically, the idea that it will extend over time and require overlap. Countries must invest in renewables while continuing to rely on fossil fuels, which currently represent around 80 percent of the global energy mix (a figure that has stubbornly persisted since the world began to monitor the consequences of anthropogenic greenhouse gases).

The expectation of continued growth in demand through 2050 further complicates the global trilemma—ensuring a reliable energy supply at an affordable price while also accounting for the environmental dimension. Considering today’s technological framework, any solution to the equation likely involves replacing coal with gas—along with the return of nuclear—which is the most effective way to reduce emissions in situations where alternative sources are not conducive. Provided, of course, that “inclusive” and “equitable” are not just formulaic terms, and that “leaving no one behind” is more than a stylistic clause. In other words, Europe and other wealthy countries can afford to do away with coal or nuclear, or even to bet completely on renewables. But in the rest of the world, if a choice needs to be made between prosperity and the environment, the former will likely win out.

Today there is growing awareness of the urgency of the climate crisis. Far from being a technical dialogue among scholars, the climate conversation has permeated society; ordinary citizens around the world feel involved. Education has become not only positive but essential. Given that development, it is necessary to review the messages being sent; to reconsider the apparent dichotomy between renewable energies (presented as unquestionably good) and coal, oil, natural gas, and nuclear. These have been collectively condemned without considering their different contributions to what should be our only goal: combating the accumulation of greenhouse gases in the atmosphere.

The challenge ahead

The historic language enshrined in the final—although nonbinding—deal of the summit urging countries toward “transitioning away from fossil fuels” reflects a collective commitment to the energy transition that is taking shape. At the same time, there was progress in efforts to align hydrocarbons, and particularly gas, with sustainability goals, in recognition of their continued importance. Two initiatives stand out: a push to abate methane emissions, in particular from venting, flaring, and leaks; and a sharpening focus on the capture, storage, and eventual use of carbon dioxide throughout the gas value chain, starting with extraction. 

Equally transformative is the return of interest in nuclear power, following a long period of rejection that occurred despite it being one of the most efficient and reliable energy sources (even with the challenge of waste from current reactors). The deal reached two weeks ago has opened a horizon that, a year ago, would have been unimaginable: Twenty-two countries have committed to tripling their nuclear capacity by 2050. US climate envoy John Kerry has even emphasized that the world cannot achieve net zero by 2050 without some nuclear energy.

An initiative announced by European Commission President Ursula von der Leyen is also worth mentioning: More than a hundred countries have joined the Global Commitment on Renewable Energy and Energy Efficiency. It sets two goals: tripling installed renewable capacity and doubling the rate of improvements in energy efficiency, both by 2030. This effort must be accompanied by widespread electrification, a transformation that will require the rare earths and other critical minerals that have become indispensable in new energy technologies. Their concentration in certain areas presents a series of challenges, as does the almost monopolistic control of China over their extraction and processing. Currently, there is an effort to replace these minerals with more common, more abundant elements—although the necessary technology is still being developed.

The challenge coming out of COP28 is to consolidate a pragmatic vision, a global objective that values all three components of the energy trilemma. The vision must take into account the heightened energy demand that will accompany the global population growth expected in the next thirty years—an anticipated increase of two billion people—and must understand that for now fossil fuels inevitably will continue to play a significant role in meeting that demand.

The most pressing challenges of our century are clear: The world needs to multiply installed renewable capacity and advance electrification, along with its corollary of a constant supply of necessary critical minerals and rare earths. What’s also needed are efforts to develop a natural gas that is increasingly less polluting. And finally, nuclear skeptics need to make peace with nuclear energy.

A version of this article originally appeared in El Mundo. It has been translated from Spanish by the staff of Palacio y Asociados and is reprinted here with the author’s and publisher’s permission.

Ana Palacio is a former minister of foreign affairs of Spain and former senior vice president and general counsel of the World Bank Group. She is also a visiting professor at the Edmund E. Walsh School of Foreign Service at Georgetown University and a member of the Atlantic Council’s Board of Directors.

The post The takeaway from COP28: Gas and nuclear are part of the energy transition appeared first on Atlantic Council.

The “success” of COP28 was never going to be measured by unrealistic expectations around “phasing out” fossil fuels—a benchmark promoted by the European Union and small island nations severely at risk of global temperature rise. Despite over $3.5 trillion in financing for renewable energy over the past decade, oil, gas, and coal remain stubbornly anchored in the global energy mix, representing around 80 percent of energy consumed. The high reliance on conventional energy resources for their economic growth and political stability unequivocally placed China, India, and Saudi Arabia at the vanguard of a block of countries opposed to  any negotiated outcomes at COP28 that locked in a “phaseout” or “phasedown” of specific energy sources.

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Behind the scenes, however, the feverish and ultimately successful push for a diplomatic compromise temporarily overshadowed what COP28 has already accomplished—a global reduction in energy-related greenhouse gas emissions by 2030 of around 4 gigatonnes of CO₂ equivalent. This achievement is the product of around 130 countries signing up to triple global renewable power capacity by 2030 and double the annual rate of energy efficiency improvements every year to 2030, coupled with commitments by the oil and gas industry to zero-out methane emissions and eliminate routine flaring.

Admittedly, the potential emissions reductions achieved during COP28 fall short of the ambitions outlined in the Paris Agreement (the International Energy Agency assesses commitments at COP28 represent 30 percent of what is necessary to “keep 1.5 alive”), but the fabric of the United Nations Framework Convention on Climate Change process has been permanently altered. Attendance at the conference exploded, growing to nearly 100,000 at COP28—a far cry from the approximately 4,000 participants in 1995 during the first COP and a more than threefold increase since the Paris Agreement was reached in 2015. The vibrant business environment in Dubai represented a growing subtext to the formal climate negotiations and, while met with mixed reviews, the inclusion of industry hints at the fact that the economics of the energy transition are beginning to catch up to policy.   

As one senior European official expressed to me, COP is the “new Davos” for the energy transition. It took only one lap around Expo City Dubai, the venue for COP28, to confirm her intuition. COP28 was brimming with C-suite executives, technologists, financiers, and project developers—those who will have to deploy an estimated $150 trillion necessary to achieve the 1.5 degree Celsius goal by 2050 and whose support is critical in overcoming the infrastructure, regulatory, and workforce challenges inhibiting an accelerated energy transition.