A common interest in combating climate change could be catalyst for the Biden Administration to re-engage with China.
The U.S.-China relationship is at a low point and is expected to continue to be strained. The two countries are likely to remain at odds over key national security issues, like cyber espionage, Hong Kong sovereignty, human rights and China’s ambitions toward Taiwan and the South China Sea.
The outgoing administration of President Donald Trump had an increasingly contentious relationship with China, as it took steps to end what it saw as the unfair acquisition of sensitive U.S. technologies and a system of trade inequalities.
President-elect Joe Biden is expected to continue to take a hardline on China technology transfers and intellectual property theft, but instead of trade wars, he is expected to instead pursue a more traditional, diplomatic route.
“I think agenda No.1 is to repair the relationships with our traditional allies. That will be job one. At the same time, China is viewed by both sides of the aisle as a strategic rival, a strategic competitor,” said Jimmy Chang, chief investment strategist at Rockefeller Asset Management. “If you think about the areas where the two sides have common interests, climate would be one of them. It’s one of the low hanging fruits, where Biden can get a better relationship.”
Biden has pledged to rejoin the Paris Climate Accord, an agreement adopted by nearly every country in the world in 2015. But it was abandoned by Trump, who said the accord put unfair economic burdens on the U.S. and would cost the U.S. jobs, due to energy restrictions and the impact on manufacturing.
The Biden administration has made climate a cornerstone of its policy goals, and it is apparent across multiple cabinet nominees. The President-elect has also named former Secretary of State John Kerry to a new position of special presidential envoy for climate with a seat on the National Security Council. Kerry helped steer negotiations of the Paris agreement.
“It’s the first time where climate is not just given lip service. It’s at the top of the agenda,” said Ed Mills, Washington policy analyst at Raymond James. “You have an administration that is in line with the consensus of the scientific community.”
Assuming Congress remains split after Georgia’s Senate races in January, it would be difficult for Biden to push climate issues through Congress with a Republican Senate.
“It is clear that appointing Kerry as the climate czar is a recognition of political realities across multiple areas,” said Mills. “A climate czar does not need to be confirmed by the Senate. You can instantly have him doing his work in a non-confirmed position. Where you will see most of the climate agenda will come from international agreements that do not need the Senate involved. If the Senate is involved, it’s basically a non-starter when it comes to climate agenda.”
The Chinese quotient
But strategists also say it will be a difficult dance with China in particular. Kerry will be focused on climate collaboration, and the U.S. would still be at odds with Beijing on a host of issues.
“Like it or not, we’re the two largest emitters and important players ... that are going to make or break where we end up on climate,” said Mindy Lubber, CEO of Ceres, a non-profit working with major investors and companies on sustainability issues.
Lubber said China’s commitment to reach net-zero carbon emissions by 2060 is important.
“I think that could drive practical change in the private sector in inordinate ways, given the size of China and the buying power and what they’re going to need,” she said. China’s choices in terms of what kind of vehicles it produces or what kind of cement or steel it produces would impact other nations.
“That will drive change in demand for low-carbon products that we’ve never seen before,” Lubber said. China is such a big player it will move markets in terms of what kind of products, goods and materials it would demand, she explained.
Dan Yergin, vice chairman at IHS Markit, said climate was one area of agreement between China and the Obama administration, when Biden was vice president. One of the best moments of their relationship was when President Barack Obama stood with Chinese President Xi Jinping in the Great Hall in Beijing and they agreed to push for an agreement on climate at the Paris conference the year later.
Yergin said China is the world’s biggest emitter of greenhouse gases, responsible for 29%, and the U.S. is at 15%, followed by India’s 7%.
“It is an important area of collaboration. I even think climate is where you’re going to have collaboration with the Gulf States as well,” he said.
A lever on trade
Collaboration on climate and clean energy issues could also lead to more cooperation on trade, some experts say. The Trump administration used tariffs as a way to extract a phase one trade agreement with China, but there are still many unresolved issues.
“The deeper layer is if there was a phase two China trade deal negotiated, climate is going to be at the top, where tariffs were at the top for Trump,” said Mills, noting it could help de-escalate some issues. “It might be a trade off, a reduction of tariffs, and a reset of some of these other issues.”
Chang said climate is tied to trade because it involves energy. “You have conventional fossil fuel and you have alternative energy. Currently under the Trump administration, the goal is to make the U.S. a powerhouse in conventional energy, and we are,” said Chang. “That is likely to change in the Biden administration. ... At the same time, we want to accelerate the adoption of alternative energy. On things like solar energy, where China is a big producer, what does that mean for bilateral trade?”
But Mills said the rift with China on technology could still dominate. “It’s early to tell. But the truth of the matter is the clean energy that we would seek to provide China is cutting edge technology. We’re in a cold war with China right now on technology,” he said.
