How will the transition to clean energy change the global landscape of energy dependence and energy as a form of soft power?
By Catie Schernecker
Markets in any good as essential as energy have the power to shape the global geopolitical landscape. Historically, the market in energy has been dependent on oil supply. The oil supply crisis of the 1970s when conflicts in the Middle East resulted in shortages demonstrated just how dramatically energy supply could impact the global economy. Today, European reliance on energy from Russia has prevented their imposing some sanctions as Russia launched war against Ukraine.
Research has shown that oil-rich countries are more likely to have conflict with neighboring countries than if there were no oil in the region. However, there are also ways in which energy markets can strengthen global politics such as by trade and diplomacy.
Looking forward to the clean energy transition, there will be a dramatic shift in the global energy supply landscape. Currently the U.S., China, Russia, Iran, Canada, Australia and Saudi Arabia (among others) are major producers of energy and therefore have a lot of power in the global market. Meanwhile, countries that are winning the race for renewables in terms of policy and investment include China, Germany, the U.S., Japan, and broadly the EU. The shift to clean energy is not solely based in technology and investment, however, and countries will depend on mineral supplies to achieve their clean energy goals. The supply of these minerals puts countries in Africa, Asia, the Americas and Australia in an important position in the renewable energy market. There is, however, a caveat in this idea of natural resource abundance corresponding to power in the global market; the concept of the “resource curse” is that countries rich in natural resource do not always reap the benefits of these natural riches due to the corruption of authoritarian governments, among other hurdles.
A clear leader in building renewable energy resources is China. Not only are they leading in renewable energy patents, as pictured in the graph below, but they also have expansive international investments in clean energy projects. This is both an economic and political move, as their investments in Kenya, Argentina, and Scotland also strengthens their diplomatic efforts. In tandem with these investments, that other key global players such as the US and Japan have comparatively few international investments in renewables puts China in a strong position in the market.
While the US, Japan, and EU are lagging behind in international investment, these are wealthy countries that have strong innovation and will not be left behind in the transition. Major fossil fuel producing countries will continue to play a significant role in the transition as those which are most self-sufficient, such as Australia, will be resistant to changing their energy supply and will continue to wield power by determining prices for fossil fuels to keep them competitive and drive down renewable investment for as long as possible. One dynamic that will clearly shift is reliance on Russia, which has long wielded its energy supply as a form of soft power throughout Eastern Europe and the EU broadly. Russia lacks innovation in renewables. As the EU and the West shift away from fossil fuels, Russia’s ability to wield power via energy will decline. The conflict in Ukraine may accelerate the process of lowering energy dependence on Russia as it has been a central issue in the EU’s response to the war.