Whether it was Oscar Wilde or George Bernard-Shaw who said it first, one of them observed of America and Great Britain: “two countries divided by a common language”. The context was not only spelling, pronunciation and vocabulary, but meaning. Even when the same words are used.
Today, as the diplomatic circus moves to Munich for the annual global Security Conference (think of it as a Davos for defence), the divisions run deep. Much deeper than how to pronounce “tomato” or spell “humour” or the location of the “first floor”. When it comes to diplomacy even the common language is fast evaporating, not least because President Trump has his own unique language for international relations.
Nothing divides like energy policy
If defence and security are points of friction, energy strategy is one where common ground and common language have disappeared altogether. Nothing divides quite like climate change and energy policy.
In the UK, committed to the Paris Climate Accords and our own domestic legislation enforcing a legal obligation to be carbon net-zero by 2050, it is Energy Secretary Ed Miliband’s insistence that the electricity grid will be fully decarbonised by 2030 following which 85% of our total demand will be met by renewables, principally from variable-output wind and solar sources. Transport policy is consistent, with substantial annual incremental levies placed on vehicle manufacturers designed as a disincentive to sell combustion-engine vehicles in favour of electric or alternative models with the aim of achieving the complete prohibition of new conventional ICE vehicle sales from 2030 and hybrids by 2035.
Trump tilts at science
Contrast with America. Having withdrawn the US from international protocols on climate change in January, Donald Trump has overturned a US domestic ruling enacted by President Obama that greenhouse gases endanger public health. This paves the way towards the withdrawal of what Trump sees as unnecessary and uncompetitive climate change levies charged to industry and consumers. Without any empirical substantiation, he reckons that taken in totality across the transport, energy and industrial sectors, the saving to the US economy will be a nice round $1 trillion dollars. The price of a new petrol-powered car will immediately fall by $2,400, a direct saving to consumers.
The ideological tensions and opposing viewpoints are obvious. Trump sees this from three perspectives: First, such deregulation is a key part of his commitment to addressing the cost of living crisis by eradicating what he sees as egregious and unjustified frictional costs imposed on industry and consumers; second, it removes legal impediments to his “unleashing energy” policy based on hydrocarbons (“drill, baby, drill!”); third, he has always found the out-of-sight-out-of-mind approach to deindustrialisation by subcontracting production to “dirtier” places such as China and India for the US to be able to claim it is cleaning up its environmental act, to be hypocritical.
His opponents see his actions as nothing less than a moral deceit, a humanitarian defeat, a repudiation of climate change science and a return to flat-earth ideology.
The distinction between energy strategy and energy policy
In the US, “Drill, baby, drill!” is a fully formed, in “progressive” circles deeply unfashionable national energy policy forcibly expressed in two words and one repetition. He makes it explicit in his National Security Strategy of the United States of America, published last November, that he is “Unleashing energy” as a competitive and strategic asset and the engine of growth and technological innovation. Control of its sources and raw materials is vital to national security and resilience. As we have referenced before, Trump fully and correctly recognises four aspects underpinning economic wealth, growth, technological innovation and development: the needs for 1) permanent, consistently available energy capacity; 2) lots of it; 3) full control over it; 4) to invest in even more of it (or in his case, appropriate it). He is also investing massively in nuclear alongside gas and oil; unreliable windmills are being “uprooted” and “torn down”.
The US is self-sufficient in electricity. It is said to be self-sufficient in hydrocarbon fuels, whether through on- and offshore oil and gas or from its vast shale resources (based on its geology, the reality is that it sells grades of which it has a surplus and imports others in which it is naturally short but the net is roughly in balance).
China on the same energy security path as America
The same has not been true of China, the other great global economic powerhouse. China has been reliant on imported fuels of which it either has none of its own or insufficient to meet domestic demand.
But the landscape is changing. China is metamorphosising from a low-value-added imitator and component sub-contractor to a global powerhouse of innovation. It leads the world in new technologies such as solar energy and electric vehicles; in the military sphere is the clear leader in operational hypersonic missile technology. If not leading, it is fast catching up with innovation in sectors such as aerospace, pharmaceuticals and artificial intelligence. Its defence budget is approaching America’s when measured on a purchasing power of parity standpoint and its sophistication fast improving. A communist society, its economic structures are obviously different to those in the capitalist west; however, its preoccupation with energy security is at least as acute as Trump’s. Together with the transformational change in industrial sophistication, China too is undergoing its own AI and quantum computing revolution. Demand for power is rising. The challenges are the same as America’s: achieving energy security and having sufficient capacity.
Discovering massive shale gas reserves in the Sichuan Basin, and perfecting the technology of fracking, China has rapidly risen to be the second largest shale gas producer globally. Determined to reduce the reliance on imported gas (from countries such as Russia, vulnerable to sanctions disrupting supply) and coal, nevertheless China has 100 new coal-fired power stations coming on stream in 2026, with a further 400 already under construction (coal is a dirty secret: because in the UK we don’t burn it, we tend no longer notice it, but such is demand that leaving aside the energy inflation bubble of 2022-23, today at $115/ton, coal is 20% more expensive than a year ago and more than double the average price in the year before the pandemic). In a programme beginning in 2020, China also aims to have completed the construction of a new fleet of 150 nuclear power stations by 2035 and is investing heavily in solar energy. China aims to be a net-exporter of energy, rather than a net-importer of its sources and fuels.
Energy policy is fundamental to geostrategy. The US and China, two titanic economic forces, between them 45% of global GDP, are much more in tune with each other in their thinking about energy while ploughing their own separate ways towards global domination. India too is on a strategic path towards energy independence; while investing heavily in non-hydrocarbon alternatives, its target of carbon net-zero is 2070. Most of the rest of the world including the UK is on a divergent path in which energy security is far from assured.
Oil and the mid-terms
Finally, energy and politics are inextricably bound. The US mid-term elections are a mere nine months away. According to the Economist Approval Tracker, Trump’s approval rating stands at -18; at the comparable point in his first term it was -11; in Biden’s equivalent, -9. If anything sinks Trump’s Congressional prospects for the second half of his term, it will be the failure to address the cost of living crisis.
Aside from geopolitical reasons, his urgency to resolve the Ukrainian conflict and to reach an agreement with Iran over its nuclear weapons, ballistic missiles and armed proxies programmes, has a political sub-text. He wants to be able to relax or remove sanctions that allow Russia and Iran to resume uninterrupted supplies to global oil and gas markets. If the price of Brent Crude today is in the high $60s per barrel, when sanctions are removed forecasters estimate it possibly falling as low as $50 per barrel. For Trump, that is as good as giving the US public both a tax cut and an election present of lower household bills.
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