How China’s Solar Domination Challenges the World

America and its allies must leverage trusted networks to counter Chinese 'greenwashing' of human rights abuses

Workers install solar panels at the construction site of 40MW photovoltaic on-grid power project in Huai an, China, on June 11, 2018. (VCG/VCG via Getty Images)

Commentary

To appreciate how China’s technological authoritarianism threatens the world, consider solar energy. What’s seen as a clean, modern and relatively high-tech alternative to fossil fuels has become another example of the Chinese Communist Party’s (CCP) strong-arm approach to bullying other countries and dominating an industry. Worse yet, many American investors are willfully blind to Beijing’s monopolistic tactics and use of slave labor, prizing their “green” portfolios over U.S. energy security and human rights.

Here’s the good news: economies of scale have enabled cost reductions that many experts predict will lead to solar energy comprising 60 percent of the world’s energy needs by 2050. This will help reduce greenhouse gas emissions and go a long way to address climate change.

But here’s the bad news: the inconvenient truth is that the manufacturing of solar cells is an energy—and labor-intensive process. Large Chinese companies—several of which are listed on U.S. stock exchanges—dominate the entire solar supply chain controlling between 80 percent to 90 percent of nearly every stage.

Since 2017, these firms have been heavily incentivized by the CCP to locate their facilities in the Xinjiang region of China, which is not only home to the world’s two biggest coal-fired power plants but also ground zero of the CCP’s genocide of the Uyghurs. A major element of that genocide is the widespread use of forced labor, in which nearly every major Chinese solar firm has been implicated.

Even as Chinese manufacturers have off-shored panel assembly and other later stages of the supply chain across Southeast Asia to avoid U.S. sanctions, China’s domination of the production of polysilicon—the base of the global photovoltaic (PV) solar supply chain—and the centralization of polysilicon production in Xinjiang means that the problem of forced labor remains endemic in PV panel production. There is growing evidence that China’s aluminum production is also heavily implicated in forced labor as well—an extremely consequential development given the role of aluminum in manufacturing a wide range of products, including solar panels.

Over the past decade, China’s share of the global production of polysilicon increased from 26 percent to 82 percent, while the U.S. share plummeted from 35 percent to 5 percent. This did not happen by accident. The Chinese regime has dumped state subsidies into solar production and engaged in regulatory arbitrage, undercutting rivals with lax worker and environmental protections.

Many American investors have been unwittingly complicit in financing China’s drive to market domination as BlackRock and other institutional investors championed the inclusion of Chinese solar firms in lucrative “ESG”—environmental, social, and corporate governance—portfolios, prioritizing easy-to-measure environmental considerations at the expense of human rights concerns.

Confronting a Bully

As we have witnessed recently at the gas pump, energy security is national security. Unless drastic action is taken, we will find ourselves at China’s mercy for our energy needs, just as Germany found itself at Russia’s.

Beijing has a history of trying to bully its way to the top of industries by deploying the “Power Principle” of duplicity, intimidation, retaliation, domestic oppression, coercive economic practices, and grave human rights abuses. Fortunately, as recent history of 5G wireless competition demonstrates, the CCP has a fatal weakness: no one trusts it.

To counter authoritarian predators, like the CCP, our team at the State Department developed the “Trust Doctrine” rooted in democratic values, such as respect for the rule of law, human rights, labor practices, and the health of our planet. The deployment of the “Trust Doctrine” turned the tables on the CCP by promoting exclusive collaboration with entities that can be trusted to play the rules.

In less than a year, the trust-based Clean Network Alliance of Democracies succeeded in bringing together 60 Clean Countries representing two-thirds of the world’s GDP, 200 Clean Telcos, and dozens of industry-leading Clean Companies committed to only using trusted 5G vendors. Former Defense Secretary Leon Panetta observed that this trust-based alliance created an enduring, replicable model for all areas of techno-economic competition.

A Model for Diplomatic and Economic Cooperation

The same trust-based model that helped thwart China’s wireless hegemony can loosen its grip on global solar production. Just as like-minded countries and companies rallied to exclude malign actors from advanced wireless networks, so can the “Trust Doctrine” behind the Clean Network be applied to our ESG (environmental, social, and governance) standards.

For example, we should exclude Chinese-domiciled firms from ESG-designated funds, urge the Securities and Exchange Commission to define a company’s domicile in China as a “material risk,” and rationalize our existing sanctions regimes to ensure that companies that are implicated in human rights abuses or national security threats lose unfettered access to U.S. capital markets.

The world’s democracies, led by the United States, have the moral legitimacy and economic power to stop a bully in its tracks. And now, we have a model to do it. Alliances built around shared values—fundamental to what is now known as “Tech Diplomacy”—are vital to both our economic self-interest and to the moral leadership we must summon toward a freer and fairer world.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.