"I am nicer than you." "No, I am nicer than you," "right, let's have a fight to see who is the nicest." And that above storyline in a nutshell is how the BofA Global Research report sees the political battle for supremacy between the US and China. Except, of course, nice isn't really the right word. Not many people would refer to China as 'nice.' Or indeed, the US, for that matter. But this is how BofA put it, "Imagine if 'wars' were fought over who could make the world a better place!"
It is something of an oxymoron, of course. You don't fight literal wars over who is being the kindest to the planet. Presumably, BofA, was using the word wars in a softer sense. Not so much tanks and bombs as dollars and yuans.
But it reckons that the "next round of political tensions between the US and China is likely to be fought over climate action."
It says that over the last decade: "China spent two times more than the US on climate action."
It's a contentious point, of course. China is also responsible for more carbon dioxide emissions than the US. Still, whether that is a fair criticism of China when you factor in the cumulative amount of carbon emissions emanating from the US, (and indeed Europe) the size of China's population and its role as the world's factory, maybe the climate case against China is a moot point.
BofA said that pressure points will be "manufacturing policies, human rights-related laws and carbon-related trade tariffs."
It added: "Let's not forget about Europe either, a leader in climate policy and home to eight of the ten of largest cleantech companies in the world. There is the potential for a four-fold increase in cleantech capacity this decade, with more money chasing companies leading the climate transition. The climate race might also bring peak oil closer as we see further headwinds in fossil fuels and traditional autos."
Of course, it's not just about saving the planet. As BofA said: "We believe climate strategies offer a route to global supremacy, as much more is at stake here: the economic impact of climate could reach $69 trillion this century, and energy transition investment needing to rise to four trillion per year. Energy independence and supply chain control are also at stake with the geopolitical balance of power and peak oil in 2030.
So what are the opportunities for China, the US and Europe?
BofA said: "China's wind and solar capacity is set to increase three times and four times respectively, by 2030, versus two times and three times in the US."
It's a similar tale with batteries for electric cars. It expects China's production of batteries to quadruple by 2030, but only see a three-find rise in the US. Although, given how learning rates work and spill over into economic impact, Techopia suspects that it underestimates the growth in batteries on both sides of the Pacific — and indeed on both sides of the Atlantic.
But it said: "Whilst US-China relations have been at the forefront of the geopolitical stage in the past decade, Europe fell behind. But this looks set to change as Europe is already a leader in climate policy, with 70 per cent of ESG mutual fund assets, the most advanced green regulation and a significant head-start on decarbonisation. As a result, climate wars could facilitate a European revival. Already, 8/10 largest global cleantech companies are European today."
And what does this mean?
"The net result is likely to be more money chasing companies leading the climate transition, while climate laggards could face financing hurdles or lower valuations."
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