As the Biden administration attempts to steer its massive ‘American Jobs’ plan through Congress, it’s pushing one key selling point: That it will be central to U.S. efforts to “out-compete China.”
But experts warn that if the U.S. is to achieve the plan’s goals of rebuilding America’s infrastructure — all while achieving carbon neutrality by 2050 and creating millions of jobs — it will have little choice but to rely heavily on its biggest economic rival.
That’s partly because the U.S. won’t be able to develop many of the industries involved at the speed or scale necessary. In addition, several of the clean energy industries the government hopes to encourage require materials where China is set to dominate production for years to come.
“This idea that you can rapidly decarbonize while having this project done in competition with China ignores the fact that we’re completely dependent on Chinese supply chains,” says Jonas Nahm, a professor at Johns Hopkins who researches clean energy transitions in the U.S. and China.
Nahm and others say the industries where the U.S. will likely struggle to separate from China are not those where jobs have previously been lost due to offshoring, such as apparel and automobile manufacturing. Rather, the country will face its greatest challenges in several high-tech industries that have never existed in the U.S. at scale.
“The U.S. might limit its ability to build out infrastructure if it tries to avoid Chinese inputs altogether,” says Ali Wyne, a senior analyst at Eurasia Group. “You might not be able to develop at the speed and scale you’d like,” he adds.
The Biden jobs plan, which may end up with a lower price tag than the originally touted $2.3 trillion, has a laundry list of goals, from modernizing 20,000 miles of highway to renewing the electric grid and revitalizing U.S. manufacturing.
Experts point to four major areas of energy infrastructure in which the U.S. will have to invest heavily to transition away from fossil fuels: solar panels, wind turbines, batteries for energy storage and electric vehicles (EVs). Critical supply chains for each of these run through China.
This idea that you can rapidly decarbonize while having this project done in competition with China ignores the fact that we’re completely dependent on Chinese supply chains.
Jonas Nahm, a professor at Johns Hopkins
Building a climate-friendly energy system will rely on a simple tenet, says John Helveston, an engineering professor at George Washington University: “Make everything run on electricity, and make sure the electricity is clean. That gets you two thirds of the way to decarbonizing.” Taking a hard political line will derail this agenda, he warns: “We can’t really electrify everything without China in the time frame needed to rapidly decarbonize.”
Take solar panels, where the vast majority of supply chains run through China. Chinese solar firms became the world’s leading producers earlier this century, spurring the Obama administration to impose tariffs. That move simply led many Chinese companies to reroute their sales through third countries. And China still accounted for more than 70 percent of global solar module production by 2019, the latest year for which International Energy Agency data is available.
Such specialization has arguably benefited the U.S., reducing the country’s solar installation costs by an estimated $56 billion in the decade ending in 2018, GWU’s Helveston has estimated in a working paper he is currently preparing.
Meanwhile, solar panel manufacturing has become highly automated, with the majority of the industry’s revenue now coming from installation and maintenance — areas that could provide many jobs for American workers.
“We could develop a local solar [panel manufacturing] industry. But we would be putting a lot of effort into something that isn’t necessary” says Greg Nemet, a professor at the University of Wisconsin-Madison and author of How Solar Energy Became Cheap, adding that it would drive up costs and make it difficult to roll out clean energy on the Biden administration’s aggressive timeline.
The degree of reliance on China is even starker for electric vehicles, wind turbines and batteries. These technologies require rare earth elements like neodymium, which are essential to power the high-performance magnets they use. China currently supplies 85 percent of such refined rare earths globally.
Government officials are already concerned about this dependence, since rare earths are vital to technologies from the iPhone to F-35 fighter jets. But experts warn the transition to clean energy will make rare earths important on a still larger scale.
“If you model out the amount of batteries, EVs and wind turbines we’ll need to reach these sort of goals [in the Biden plan], you’re talking about an exponential growth in the deployment of rare earths,” says Lachlan Carey, a fellow at the Center for Strategic and International Studies who researches energy security. The International Energy Agency projects global rare earth demand could increase up to sevenfold by 2040.
The U.S. is investing in developing a rare earth supply chain that runs outside of China, but experts are skeptical it will be able to meet domestic demand soon.The outlook is similar for the elements vital to high-performance lithium-ion batteries, like lithium itself, nickel, cobalt and manganese, which are mined across the world but mostly refined in China. Such batteries are not only a widely-deployed alternative to fossil fuels, but are also crucial in storing power from renewable energy sources like wind and solar.
The U.S. has a growing battery assembly industry, with major Japanese and South Korean battery makers, such as Panasomic and LG Chem, partnering with U.S. companies like Tesla and General Motors. But industry experts are skeptical that the new rare earth supply chains the U.S. is promoting would be adequate if local companies started trying to build batteries from scratch, notes Scott Yarham, associate director for metals at S&P Platts, a commodity consultancy.
Not every aspect of the Biden agenda relies on China. It will be relatively easy for the U.S. to repair its infrastructure without Chinese steel, says Cicero Machado, principal steel analyst at energy and commodities consultancy Wood Mackenzie, as the U.S. produces most of the steel it consumes and only a very minor share of imports come from China.
The potential for more jobs to emerge in areas such as solar panel installation and maintenance illustrates one way the Biden administration could enable a transition to cleaner energy while raising employment. Experts say that would be better than pushing for more jobs in manufacturing industries which can be highly polluting and which are often already highly automated.
“We don’t value enough in this country all the jobs in the service industry. For offshore wind, there’s a lot of jobs in installation and maintenance, there’s a harbor industry. There are good jobs to be had in a lot of these industries,” says Nahm, the Johns Hopkins professor. “We don’t talk about them because we have this illusion that manufacturing jobs are so much better. They used to be, but they’re not any more. And service jobs can’t be outsourced.”
Other experts question the logic of decoupling from China for political reasons if it means losing the clear benefits of global specialization.
“We can’t just abandon all the success we have had bringing down prices to the point where we can envision a future of low carbon technologies,” says Michael Davidson, a professor at University of California at San Diego’s School of Global Policy and Strategy. “I am worried that we will embrace a decoupling strategy that’s much more aggressive than is necessary to meet the real challenges posed by China and as a result will make decarbonizing in the U.S. very difficult.”
Eli Binder is a New York-based staff writer for The Wire. He previously worked at The Wall Street Journal, in Hong Kong and Singapore, as an Overseas Press Club Foundation fellow. @ebinder21