Climate Security Is Energy Security
If political conditions in the United States and elsewhere require a rebranding of technologies formerly known as “climate tech,” so be it. The larger economic, technological, and geopolitical forces propelling everyone toward cleaner energy remain as strong as ever.
New York – For all the uncertainties generated by Donald Trump’s administration over the past six months, one thing is clear: “climate” technologies are out, and “energy” technologies are in. But while going along with this rhetorical shift may appease some, it should be recognized for what it is: a change in wording. The fundamental economic and technological forces that are pushing the world away from oil, coal, and gas and toward low-carbon, high-efficiency technologies have not abated.
Over the past two decades, climate change has been a leading item on the global agenda, driving efforts to deploy technologies that will reduce carbon dioxide emissions. Those efforts are now facing headwinds, and not just in the United States. Geopolitical developments elsewhere, like Russia’s full-scale invasion of Ukraine, have called attention to the importance of energy affordability and security over other considerations.
Policymakers in the US, Europe, and elsewhere initially responded to the war by doubling down on the shift from fossil fuels, and for good reason. Oil, coal, and gas are commodities whose prices will always be linked to geopolitical vagaries (that goes for not only global oil markets but also regional gas markets, which are increasingly linked by trade in liquefied natural gas).
As a case in point, the summer of 2022 brought massive inflation, largely driven by fossil-fuel price spikes. Europe’s gas prices peaked at ten times their long-term average, and US gas prices at around triple their long-term average. While the US Inflation Reduction Act of 2022 is widely considered a misnomer, history will judge the name kindly: The only permanent way to address such bouts with “fossilflation” is to stop using fossil fuels.
Though the blowback against climate policies has been particularly strong at the federal level in the US, Europe, too, has undergone a retrenchment. This is somewhat understandable, even if it is shortsighted. Germany, Europe’s largest economy, has been in a recession for more than two years, with high energy prices a chief culprit. Climate technologies that are already commercially viable could help, of course. But taking full advantage of the lower prices of solar, wind, and (increasingly) batteries requires a willingness to reform power markets and pass these savings to households and industrial consumers. It also calls for more upfront public investment, an area where climate priorities compete with other priorities like national security that are often perceived to be more immediate.
In grappling with these tradeoffs, the European Union delivered the kinds of efficiency measures that Trump’s “Department of Government Efficiency” (DOGE) had promised but failed to achieve. For example, Europe dialed back its carbon border adjustment mechanism by requiring 90% fewer companies to comply.
On the surface, this seems like a decisive blow to the goal of establishing a carbon tariff for imports, commensurate with Trump’s DOGE hatchet. But unlike Trump and Elon Musk, the EU ensured that the remaining 10% of importers still accounted for over 90% of emissions. This outcome is far from ideal when viewed solely through a climate lens. But viewed from a broader climate-economic perspective, it is exactly the kind of surgical intervention that DOGE promised but never delivered.
Still, fiddling at the climate-policy margins ignores the bigger picture. While Europe and America are taking steps back, China is leaping forward. It alone accounted for over 40% of the record $2.1 trillion of global investment in the energy transition last year – more than the EU, the United Kingdom, and the US combined.
The balance is even more lopsided for specific clean-energy technologies. China produces around 75% of the world’s solar panels and 80% of its lithium-ion batteries. That dominance is the result of a concerted green industrial policy, in which innovation plays a key role. The claim that China only manufactures and assembles is woefully outdated. China’s electric vehicles, for example, are second to none. BYD, the country’s leading carmaker, recently unveiled a groundbreaking charging system capable of adding 470 kilometers (292 miles) of range in just five minutes, putting the company in a league of its own globally.
China’s dominance extends to technologies that are not yet competitive without price support. LONGi, one of the world’s top solar manufacturers, formed LONGi Hydrogen in 2021 to pursue green hydrogen production. It now leads the world in electrolyzer manufacturing capacity.
These are not isolated examples. China’s ambitious industrial policy has helped lift five other Chinese hydrogen companies into the global top ten. Have Europe and the US already lost this race for the future?
While the US now seems hellbent on turning itself into a petrostate, the EU has a chance to revive its clean-energy fortunes. It is even starting with a significant policy advantage: a CO2 price hovering around $100 per metric ton means that most low-carbon technologies – from clean electrons and electrification to clean molecules like biofuels – are already economically viable. Others, like green hydrogen, will need further support to help climb the learning curve and slide down the cost curve. According to Bernd Heid, a senior partner at McKinsey & Company who leads its Platform for Climate Technologies, around 90% of climate technologies will be in the money by 2030 with a $100 carbon price.
While China dominates with six top-ten global players, three of the others are European. The Swedish startup Stegra is building the world’s first low-carbon steel plant using electrolyzers made by ThyssenKrupp Nucera, in which the German steelmaker has a majority stake.
Despite recent political developments, the US, too, has shown that rapid change is possible. Although breaking China’s solar manufacturing dominance will be difficult, the US has made significant inroads just over the past three years. Earlier this year, it exceeded 50 gigawatts of panel manufacturing capacity, a fivefold increase since 2022. These 50 GW in panel supply roughly matched US demand.
True, onshoring the solar supply chain comes with costs that can be justified only by priorities other than the climate, such as national security or promoting domestic manufacturing. But that is the point. If political conditions require stronger emphasis on technologies like geothermal and nuclear, and if technologies formerly known as “climate tech” must be relabeled as more neutral-sounding “energy tech,” so be it. The larger forces propelling us toward decarbonization remain the same.
Gernot Wagner, a climate economist at Columbia Business School.
