The development, manufacture and trade of renewable energy technologies will be as central to the geopolitics of the 21st century as fossil fuels were to the geopolitics of the 20th.

That might seem like a brave claim considering the stream of headlines about oil supply and about disruptions to the Strait of Hormuz, or the importance of oil revenue in underwriting Russia’s war on Ukraine. But these are the last gasps of an era when access to fossil fuels was a fundamental pillar of economic development and energy security (and security full stop).

Not that the current US administration has realised this. Whereas the energy transition became the pretext for a massive wave of green industry policy initiatives under former president Joe Biden, Donald Trump’s administration has pulled out all the fiscal and regulatory stops at its disposal to slow the adoption of renewable energy in the United States. Trying to understand this strategy from a technocratic or even a political economy perspective misses the point: ideology, and specifically an inane masculinist identity politics, is at the core of it. As Paul Krugman put it, the MAGA energy policy boils down to: ‘Real men burn stuff and don’t worry if the process is dirty’.

The contrast with China could not be more stark. Beijing has embraced leadership in green tech not only for the economic opportunities its offers, but also as a way of mitigating the security risks of depending on imported hydrocarbons that would be highly vulnerable to disruption in the event of war. China’s innovation in green technologies and its willingness to supply the finance and infrastructure that foreign governments need to take advantage of them is going to be a central plank of its geopolitical influence in the coming decades.

Of course the fossil fuel era is not quite over — definitely not so in China’s own neighbourhood. For decades, East Asian energy geopolitics were shaped by the dependence of Northeast Asia’s industrial powerhouses — China, Taiwan, Japan and South Korea — on imported fossil fuels.

That dependency shaped the foreign policy of every state in the region, but no country provided a more vivid example of how energy insecurity reshaped grand strategy than Japan did.

Once a power that tried to build a continent-spanning empire to secure its supplies of oil and other natural resources, postwar Japan turned its strategic interest in addressing energy insecurity into an international strategy that had positive spillovers for the whole region, championing technological innovation and institution-building.

Its choices in the coming non-carbon energy era will be similarly consequential. After going all-in on liquefied natural gas (LNG) as an energy source in the aftermath of the 1970s oil crisis and the nuclear energy fallout from Fukushima in 2011, Japan was central to restructuring the global LNG trade as we know it today, with long-term supply contracts providing the foundation of huge innovations and investment in extraction and logistics technologies.

As Walter James writes in this week’s lead article, Japan is now central in global LNG markets for a different reason.

With Japanese energy companies’ heavy international investment in LNG production and falling demand for gas in the home market, Japan has now become a global hub for the LNG trade. This ‘metamorphosis from buyer to merchant’, writes James, ‘has far-reaching implications for decarbonisation and the Asia Pacific energy transition’ — and not for the better.

The prevalence of long-term supply contracts in sustaining the flow of LNG to Japan became a potential liability as a global glut emerged and Japanese demand fell short of anticipated supply. The result is that ‘[w]ith the Japanese government’s blessing, these companies are encouraging other countries to use more gas and LNG’ — such that Japanese investment in gas energy abroad now dwarfs Japanese investments in clean energy projects, with the bulk of Japanese gas power financing heading to Southeast Asia.

The reselling of Japanese firms’ excess LNG capacity onto global markets has not gone unnoticed in Australia, historically Japan’s biggest source of natural gas. For their part Australian households and industry face soaring gas prices in the face of domestic shortfalls with so much supply locked into export via long-term contracts.

For Australians, being a partner in Japan’s energy security is one thing. Underwriting Japanese energy firms profit from their increasingly important role on the supply side of the global LNG market, as the Japanese state colludes to boost demand by locking other countries into dependence on gas power, is another thing entirely.

If not dealt with, the issue seems likely to make the important work that needs to be done between both countries on how decarbonisation must reshape their bilateral energy trade and economic relationship more difficult.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Law, Policy and Governance, The Australian National University.

https://doi.org/10.59425/eabc.1753084800