The challenges of energy transition. Comparing China’s Belt and Road Initiative and the European Union

Participants

Mehdi Amineh (IIAS; University of Amsterdam) m.p.amineh@uva.nl
Wang Yongzhong (DIC-IWEP-CASS) wangyzcass@163.com
Tian Huifang (DIC-IWEP-CASS) tianvicki@163.com
Wei Wei (DIC-IWEP-CASS) xxwei2002@163.com
Zhou Yimin (DIC-IWEP-CASS) zhouymmt@pku.edu.cn
Lin Shen (DIC-IWEP-CASS) linshen@cass.org.cn
Anoush Ehteshami (Durham University) a.ehteshami@durham.ac.uk
Ben Houghton (PhD Candidate, Durham University) benjamin.houghton@durham.ac.uk
Jacopo Scita (PhD Candidate, Durham University) jacopo.scita@durham.ac.uk
Wina Crijns-Grauss (Utrecht University) W.H.J.Graus@uu.nl
Laszlo Maracz (University of Amsterdam) l.k.maracz@uva.nl
Rafael Almeida Ferreira Abrão (PhD Candidate UFABC; IIAS) rafael.abrao@ufabc.edu.br
Irina Pătrăhău (junior researcher) irinapatrahau@hcss.nl
Gavan Walsh (junior researcher IIAS) gavan.walsh@ucdconnect.ie

Conference Outline

The purpose of the conference is to present and discuss the progress of research papers in the context of the joint research programme 'Geopolitical Economy of the Belt and Road Initiative and its Reflections' between the Energy Programme Asia at IIAS (EPA-IIAS) and the Institute of World Economics and Politics of the Chinese Academy of Social Sciences (IWEP-CASS, Beijing, China). The conference serves as a platform for knowledge exchange between scholars from China, the Netherlands, the United Kingdom, and Brazil, with the aim of producing new insights for analysing the global activities of the BRI regarding energy issues.

Objectives

Fossil fuels played a key role in the rise and expansion of the capitalist system over the past 150 years. The technological advancements that made it possible to use machine power in production induced a transformation towards urban-based industrial capitalist societies as well as global political economy that generated unprecedented levels of power and wealth. At the same time, the technologies that were developed relied on fossil fuel energy sources. The requirement of fossil fuel resources and their increasing consumption for economic growth and development has created three major challenges: (1) fossil fuel scarcity, (2) dependence on fossil fuel imports, and (3) environmental degradation due to rising levels of greenhouse gasses, mainly CO2. To greatly alleviate these problems, a transit towards renewable and alternative energy sources is necessary. The main advantages of renewable and alternative energy sources are their abundant availability in each country and significantly lower emissions of greenhouse gasses in the production and consumption of energy.

Nevertheless, both China and the EU’s dilemma in expanding fossil fuel production and consumption to meet the energy needs of their massive economic activities and economic growth occurs concomitantly with practices aimed at reducing pollution and reaching agreement with its partners on international efforts to limit climate change, along with the development and implementation of alternative and renewable energy sources.

As this conference will clarify, both China and the EU (the world’s largest fossil fuel importers) are cooperating to escape the fossil fuel trap by developing clean energy sources. Within the context of the BRI, China has increased its involvement (via trade, finance, and investment) in energy and infrastructure sectors around the world. The conference presents research on and discusses China and the EU’s approach to fossil fuel supply security, their policy regarding the transition to renewable energy, and the challenges associated with moving to a clean energy-based economy.

The issues and problems to be addressed at the conference include:

• Theoretical and conceptual frameworks to understand the emergence, activities and the challenges of the Belt and Road Initiative.
• China and the EU energy policy and policy challenges regarding fossil fuel supply security from resource-rich countries in the Middle EastandCentralEurasia, including Russia (among others).
• China’s energy supply shortages/concerns, and the reliance of domestic supply chain stability on secure sources of electricity.
• The geopolitical and geo-economic significance of China’s ‘Comprehensive Strategic Partnership’ with the United Arab Emirates, and emphasis on the cooperation on (renewable) energy, as China considers the role of renewables in securing its energy supply.
• BRI investment activities in Brazil’s energy sector, and China’s significant role in the expansion of renewable energy sources (such as wind, solar, biofuels, and hydrogen) in Brazil.
• The challenges and opportunities of Chinese economic activities in Europe.
• BRI/China and EU policy challenges regarding the transition to a renewable and clean energy-based economy.
• Research and investment activities in China and the EU regarding renewable electricity technologies.
• The role of hydrogen in China’s energy transition and the challenges associated with the future role of hydrogen in domestic and global energy mixes.
• China’s insufficient domestic production levels of uranium, the possibility of import dependence, and the role of nuclear energy in global energy consumption.
• The role of nuclear energy in relations between Russia and Hungary.
• The geopolitical and geo-economic implications of rapidly increasing demand for critical minerals(such as copper, lithium, nickel, cobalt, and rare earth elements), arising as a result of the transition to renewable energy.
• The increasing demand for lithium as a key resource in the growth of energy storage capabilities, and the geopolitical/geo-economic considerations regarding the global distribution of reserves and production: comparing investment policies in Argentina, Chile, and Bolivia.

The conference consists of three sessions, specific to each area of focus:

1. Renewable Energy in China and the European Union part I
   The first session will focus on the challenges China currently faces in securing its power supply and supply chain stability. The session will also focus on the opportunities and challenges of hydrogen and nuclear energy in both China’s energy transition and indeed future energy mix.
    
2. Renewable Energy in China and the European Union part II
   The second session will look at the importance of the energy transition to China’s security of supply and include a comparison of European and Chinese research and investments in renewable electricity technologies. Also discussed in this session will be the growing importance of key minerals to the energy transition, and the risks associated with increased reliance on such minerals.
    
3. China’s BRI involvement in Global Energy Sectors
   The final session will examine China’s strategic partnership with the UAE, as it looks to renewables in securing its energy supply; the challenges and opportunities of Chinese economic activities in Central and Eastern European energy and infrastructure sectors; and BRI investment activities in Brazil’s energy sector, including China’s significant role in the expansion of renewable energy sources in Brazil. The session will also examine the role of nuclear energy in relations between Russia and Hungary.

Conference format

The meeting will take place via Zoom. The participants consist of the research team members from the Netherlands, China, the United Kingdom, and Brazil. Each presenter has a maximum of 15 minutes to present their research. The conference will be divided into 3 sessions, specific to each area of focus: (1) Renewable Energy in China and the European Union I; (2) Renewable Energy in China and the European Union II; (3) China’s BRI involvement in Global Energy Sectors.

At the end of each session, there will be an opportunity for discussion. Please see below for a list of the participants, their affiliation and presentation title.

Conference Programme

Opening Remarks

9:00 Mehdi Amineh

9:15 Wang Yongzhong

Note: There will be no time for discussion during each presentation. Rather, there will be 30 minutes allocated at the end of each panel for discussion/comments.

Panel I Renewable Energy in China and the European Union: Opportunities and Challenges I

(Chair: Wang Yongzhong)

09:30 Power shortage and supply chain stability in China

Zhou Yimin

09:45 Hydrogen energy under the background of carbon neutralisation: prospects and challenges

Tian Huifang

10:00 Nuclear power, uranium and their role in the energy transition

Wei Wei

10:15 Discussion

10:45 Break

Panel II Renewable Energy in China and the European Union: Opportunities and Challenges II

(Chair: Mehdi P. Amineh)

11:00 Experience of EU and Chinese research and investments in new renewable energy sectors

Wina Crijns-Grauss and Mehdi P. Amineh

11:20 Trend of metals market in the coming age of renewable energy

Wang Yongzhong

11:35 Analysis of international lithium battery energy storage market

Lin Shen

11:50 Discussion

12:20 Lunch

Panel III China’s BRI involvement in Global Energy Sectors

(Chair: Anoush Ehteshami)

13:30 Nuclear energy as renewable energy in the Russian-Hungarian relations and its geopolitical economic challenges.

Laszlo Maracz

13:45 PRC-UAE Comprehensive Strategic Partnership

Anoush Ehteshami, Ben Houghton, Jacopo Scita

14:05 Challenges and opportunities of China’s Belt and Road Initiative in Central and Eastern Europe - China’s activities in infrastructure and energy sectors

Mehdi P. Amineh, Irina Pătrăhău, Gavan E. Walsh

14:25 The impacts of the Belt and Road Initiative on Brazil’s energy sector: Chinese activities on Brazil’s energy sector

Rafael Almeida Ferreira Abrão

14:40 Discussion

Closing Remarks

15:10 Mehdi Amineh and Wang Yongzhong

Abstracts

Towards theoretical and conceptual frameworks for the emergence, activities and the challenges of China’s Belt and Road Initiative

Mehdi P. Amineh
University of Amsterdam and International Institute for Asian Studies, The Netherlands

This presentation introduces a conceptual framework to study the Belt and Road Initiative (BRI). The objective is to bring together a series of interrelated theoretical concepts to study the totality of the BRI and to find answers to the following two questions: (i) Why did the Chinese leadership set up the BRI?; and (ii) What are the impacts of the BRI on host countries and regions, and on the global political economy and its governance?

Despite the fast growth of scholarly literature on the BRI, these studies largely approach the BRI either through “realist” or “liberal” lenses. Describing and conceptualizing the BRI requires a conceptual foundation that supersedes the traditional divide between political power, society, and markets. The conceptual tools discussed in this presentation aim to relate the national, regional, and system-level global political economy. State, society, and market actors are decision makers, while the system level refers to structures and outcomes. The national level policies are inputs into the global system and transform the structural features of the system. We therefore speak of “state, society, and market complexes”, “state-led capitalist industrial development” and its challenges, and “geopolitical economy” to better understand the logic and forces behind the creation of BRI and its impact on the member countries and regional as well as global politics.

Power shortage and supply chain stability in China

Zhou Yimin
Division of International Commodity, Institute of World Economics and Politics, Chinese Academy of Social Sciences, China

The main reasons for the current domestic power shortage in China include the tight supply and demand of domestic coal, the great increase of power demand in high energy-consuming industries, the limited domestic production capacity, the decrease of foreign imports, the increase of import freight, the high price of coal, the power generation cost of coal-fired power plants exceeding the break-even point, and the low energy inventory and the coming winter in the northern hemisphere. Besides the year-end exam of "double control goal" is approaching, and some areas in China have introduced power limiting measures. As the world’s factory, China's supply chain stability is very important, and the core of supply chain stability lies in the stability of domestic energy consumption. At a time when the situation of power supply and demand is tense in many parts of the country, China is taking measures, such as stabilizing prices, increasing production capacity, expanding imports, rationing energy use and protecting people's livelihood, to ensure the supply of coal.

Hydrogen energy development under the background of carbon neutralization prospects and challenges

Tian Huifang
Division of International Commodity, Institute of World Economics and Politics, Chinese Academy of Social Sciences, China

As a feasible technical route to promote global energy transformation, hydrogen energy has gradually become a hot topic in world energy development. From European and American governments to important international organizations such as the International Energy Agency, they have high hopes for a hydrogen energy economy. In the main tasks of the national economic and social development plan, China also proposed for the first time to formulate a national strategic plan for the development of a hydrogen energy industry. Although the potential of hydrogen energy in energy transformation has attracted more attention, the main raw material for hydrogen production in the world is fossil energy. The technology of hydrogen production from fossil energy is relatively mature, but there is a problem of carbon emissions. To solve this problem and give full play to the great potential of hydrogen energy in the global energy transformation, there are still many practical problems and challenges to be solved, including top-level design, infrastructure, technical difficulties, development costs and public awareness, etc.

Nuclear Power, Uranium and Their Role in the Energy Transition

Wei Wei
Division of International Commodity, Institute of World Economics and Politics, Chinese Academy of Social Sciences, China

Electrification is the inevitable trend of future energy transition. As a kind of baseload power, the role of nuclear power in the process of energy transition cannot be ignored, especially in developing countries, and the proportion of nuclear power in global energy consumption will increase. The impact of the Fukushima nuclear crisis in Japan is gradually disappearing, and the global demand for uranium ore will increase too in the future, which will promote the rise of uranium prices. It is expected that before 2030, the demand of China’s uranium resources will be 20113tU，China's nuclear power will remain at the peak of construction and commissioning, but insufficient domestic production will make China more dependent on foreign imports. In the future, investment in uranium mines will be increased to meet global nuclear power demand. At the same time, technological innovation, the reuse of spent fuel, and the proper resolution of spent fuel disposal issues will provide a guarantee for the development of nuclear power.

Experience of EU and Chinese research and investments in new RE sectors

Mehdi Amineh
University of Amsterdam and International Institute for Asian Studies, The Netherlands
Wina Crijns-Grauss
Utrecht University, The Netherlands

Fossil fuels have played a key role in the rise and expansion of the capitalist system over the past 150 years. The incumbent wealth-power system based on continuous growth and increasing fossil fuel consumption is unsustainable, producing three major challenges: import dependence on fossil fuels, fossil fuel scarcity and environmental deterioration. These problems could be greatly alleviated by transitioning to a renewable energy (RE)-based economy. There are many promising RE technologies that could increase the contribution of renewable energy sources in the energy supply, but which are not yet commercially available. The development rate of new RE technologies depends on many factors such as R&D efforts and policies. Previous studies have shown that China has stepped into the RE sector later than the EU, yet it has become a big player in mainstream renewable electricity technologies. For new renewable electricity generating technologies, China is mainly involved in solar energy and – in comparison to the EU – less so in other new technologies. In this research we will expand the current knowledge by diving deeper into RE sub-sectors to assess how the approach to technology development differs in the EU and China and determine the relationship and degree of cooperation between the two. The sectors currently considered are solar PV and geothermal power generation based on binary systems. The first will focus both on solar PV on land (as an established technology) and floating PV (as an innovative technology). We will focus on past trends and current projects and developments.

Trend of metals market in the coming age of renewable energy

Wang Yongzhong
Division of International Commodity, Institute of World Economics and Politics, Chinese Academy of Social Sciences, China

Currently, the carbon emission peak and carbon neutrality campaign has significantly accelerated the energy transition from fossil fuel to clean and renewable energy, and which creates an exponentially growing demand for critical minerals such as cooper, lithium, nickel, cobalt and rare earth elements. These rapidly growing markets for key minerals could be subject to price volatility, resource nationalism, geopolitical competition and even disruptions to supply. First, the paper tends to analyse the growing demand for minerals and metals based on the forecasts of International Energy Agency, World Bank and other research institutions. Second, it will list the behaviours of resource nationalism for mineral exporters, such as, increasing tax burden, renegotiating contract terms, and nationalization. Third, it will discuss the fierce competition for key minerals between great powers, such as the US, EU, China, and Japan. Fourth, it will identify the risks to key minerals and metals that could make global progress towards a clean energy future slower or more costly, and therefore hamper international efforts to tackle climate change.

Analysis of International Lithium Battery Energy Storage Market

Lin Shen
Division of International Commodity, Institute of World Economics and Politics, Chinese Academy of Social Sciences, China

Electrochemical energy storage based on the lithium battery is the main form of increase in the energy storage system. The rapid development of new energy generation and new energy vehicles drives the demand for lithium resources, which is of great significance to carbon neutrality. This paper focuses on the following: first, analysing the application scenarios and development status of the lithium battery energy storage system; secondly, analysing the distribution of global lithium reserves and production; thirdly, comparing the investment policies and market status of lithium resources in Argentina, Chile and Bolivia, which are major lithium reserves countries, and comparing the application policies and market status of lithium battery storage applications in China and the United States; finally, forecasting the supply and demand situation of lithium, cost curve of lithium and price trend of lithium batteries. The results show that: the exploitation potential of lithium resources in South America is not fully tapped, and many new energy vehicle enterprises begin to acquire lithium mines in South America; in the future, lithium resources hold a tight balance, and the price of the lithium battery energy storage system is expected to continue to decline driven by technological progress.

Nuclear energy as renewable energy in the Russian-Hungarian relations and its geopolitical and geo-economic challenges

Laszlo Maracz
University of Amsterdam, The Netherlands

Nuclear energy as renewable energy is a contested topic in the European Union. However, some of the member-states consider nuclear energy as renewable energy that should be included in the Union’s green deal. One of these countries taking this stance is Hungary challenging criticism of partners in the EU which argue for a cancellation of nuclear energy. The other, rather, geopolitical challenge for Hungary bringing the country into conflict with its European and Transatlantic allies is that its main partner in its nuclear energy project is Russia.

Hungary as a part of the former Soviet bloc inherited the energy policy of the former communist regime, including its gas dependency on Russia and the Russian-built Soviet type nuclear power plant near the city of Paks. The Hungarian government has decided in 2014 to renew its nuclear power plant with Russian support to extend its capacity. The construction will be facilitated, i.e. built and financed by the Russian state atomic cooperation Rosatom. The Russian partner company will provide a substantial part of the costs in the form of an advantageous credit. The construction has started in 2020 and will be operative in 2026/2027.

In this paper, we will concentrate on the following two interrelated research questions concerning this Russian-Hungarian nuclear energy deal: (1) Why has Hungary, although it had to challenge criticism of some of its EU partners, opted for nuclear energy; and (2) Why has Hungary chosen to remain dependent on energy supplies from Russia, a country that is considered a definitive risk due to political involvement of the state in recent energy deals? The paper will argue that these questions are illuminated by the objectives of Russian and Hungarian foreign policies driven by (geo-)economic and geopolitical factors.

PRC-United Arab Emirate - Comprehensive Strategic Partnership

Anoush Ehteshami
​​​Al-Sabah Programme, School of Government and International Affairs, Durham University, UK
Ben Houghton
Al-Sabah Programme, School of Government and International Affairs, Durham University, UK
Jacopo Scita
Al-Sabah Programme, School of Government and International Affairs, Durham University, UK

Having only been formalised in 1984, PRC-UAE relations have grown and matured unrecognisably, growing in new ways and directions since the early 2000s. Indeed, in 2018 China showcased the high importance that it places on relations with the UAE that it upgraded their bilateral relations to a ‘comprehensive strategic partnership’, a status only bestowed previously on long-term regional heavyweights of Iran and Saudi Arabia. Why the UAE, this small country in the Persian Gulf, is in itself an important question, which we will also address in our paper. For reasons that this paper will explore, over the last two decades ties between the PRC and the Emirates have grown substantially to encompass a wide and rich array of fields, spurred on more recently by the latter’s involvement in the Chinese mega-project, the Belt and Road Initiative. Among the many areas of cooperation sits the emerging field of renewable energy cooperation. Building on China’s 2016 Arab Policy Paper, in which it outlined three core areas for engagement with Arab states with energy as the cornerstone, trade and infrastructure as the second priority area, and nuclear, space, and renewables as the third, PRC-UAE relations have progressed well in the field of renewables. As such, this paper will consider the significance of this partnership and its many dimensions, and then critically address the current state and potential development of Chinese-Emirati cooperation in the area of renewable energy, suggesting that renewables are a key indicator of the advancement of the partnership.

Challenges and opportunities of China’s Belt and Road Initiative in Central and Eastern Europe - China’s activities in infrastructure and energy sectors

Mehdi P. Amineh
University of Amsterdam, International Institute for Asian Studies, The Netherlands
Irina Pătrăhău
The Hague Centre for Strategic Studies, The Netherlands
Gavan E. Walsh
The Hague Centre for Strategic Studies, The Netherlands

Since its establishment in 2012, the 16+1 format has sought areas of cooperation between China and Central and Eastern European (CEE) countries. This cooperation was accelerated by the emergence and activities of China’s Belt and Road Initiative (BRI). The main objective of this investigation is to study China’s economic activities, focusing on development and investment in CEE infrastructure and energy sectors between 2014 and 2021. In this study we will subsequently make a distinction between two groups of 16 CEE countries: those with high investment levels, sufficient political relations, and efficient cooperation with China (such as Hungary, Poland and Serbia); and those who are more critical of China (such as Romania, Lithuania, and more recently Slovakia).

Following this main objective, the central question is: how do Chinese energy and non-energy companies entering into relations with national and local institutions affect those institutions, stakeholders and societies, and how do Chinese companies and institutions respond to the demands, challenges and problems raised by the receiving countries?

Answering the abovementioned central question requires three levels of investigation. Descriptive and classificatory. Which patterns of involvement by Chinese companies in receiving countries’ local institutions can be distinguished? How have they evolved over time as trade, investment, and finance activities have intensified? To what extent are these companies embedded in and supported by a larger Chinese political and economic framework differing from existing Western ones? What are the local responses to Chinese involvement? How is local society affected by Chinese investments? Descriptive and analytical. Who have been the main actors in Chinese trade, investment, and finance, both in China and overseas? What has driven their decision-making processes? How responsive have they been to (changes in) local political conditions and international markets? What are the mechanisms of interaction and problem-solving? Analytical and conclusive. What are the geopolitical and geo-economic outcomes of China’s 16+1 activities for the EU in general, and CEE in particular?

The impacts of the Belt and Road Initiative on Brazil’s energy sector: Chinese activities on Brazil’s energy sector

Rafael Almeida Ferreira Abrão
PhD Candidate in World Political Economy at the Federal University of ABC (UFABC), Brazil; Research Fellow at the International Institute for Asian Studies (IIAS), Leiden University, The Netherlands

The last two decades have consolidated China as the country with the greatest influence in the Brazilian economy in terms of trade, investment, and finance. Several Chinese companies are making large-scale investments in Brazil, with the support of Chinese banks. In 2021, oil exports were 16% of the total exported from Brazil to China, only behind iron ore (33%) and soybeans (32%). Between 2007 and 2021, Chinese investments in Brazil accounted for US$ 66.1 billion. Almost half of the Chinese investment stock was directed to the electricity (48%) and oil and gas (28%) sectors. In finance, Chinese banks lend US$ 28.7 billion to Brazil between 2007 and 2017. Of this amount, 90% of the resources were allocated to energy projects. This article aims to analyze Chinese activities in the Brazilian energy sector. We focus on the growing challenges amid the context of the global energy transition and questions imposed by the Belt and Road Initiative. We use data from Brazilian oil company Petrobras, Brazil’s Ministries of Economy and Energy, the Brazil-China Business Council, the China Global Investment Tracker, and the China-Latin America Finance Database. We argue that China may be fundamental to the development of the pre-salt's oil and gas reserves, but also to the expansion of renewable sources such as solar and wind power, biofuels, and hydrogen.