How The UN Xinjiang Report Will Impact The Cleantech Industry (Part 2)

Energy
Tuesday, September 27th, 2022 12:00 pm EDT

In Part 1, I gave readers some very quick historical background on how the situation in Xinjiang came to be, and what the UN Human Rights office found in its investigation into the human rights violations. Now that readers have some familiarity of what exactly we’re dealing with, it’s time to explore how this affects clean technologies globally.

The Shrinking Benefits Of Doubt

One of the biggest immediate effects of the UN report’s release is that it makes it harder to doubt that bad things are happening in the region. When a few activists who left the region speak up, it’s just some accusations. When the media interviews former detainees and tells their stories, that’s still just accusations, even if more detailed. Now, we’ve got the weight of a major international organization saying that these things are all happening, so it’s harder to just dismiss.

This shrinking doubt puts the pressure back on companies doing business in not only the Xinjiang region, but also businesses doing business in China more generally. Questions of whether it’s moral and ethical to support those businesses will become more prominent than they have been. Many automakers have been under fire for years over their factories and the factories of their suppliers in the area, which have reportedly used forced labor. Studies continue to find links to forced labor.

Even Tesla has faced controversy when it opened a retail store in the area, with people accusing the company of doing business with the people oppressing Uyghurs. A former CleanTechnica writer (in an opinion piece) called this “fake outrage,” which is definitely true for at least some people who weren’t mad about Xinjiang until Tesla was involved, but the wider point here is that nearly all auto companies have at least some business happening there, and nobody is immune.

Prior to this point, the Chinese government has denied the allegations, and companies have taken an “everybody’s doing it” attitude, but as more reputable organizations take a side here, it’s going to be harder and harder for a company to distance itself from allegations of using forced labor or benefiting from it in some way

Rare Earths & Lithium

The UN report briefly points out something that has much broader implications:

“China’s largest region, covering one-sixth of its total territory, with a population of 25.85 million. It is rich in resources such as coal, gas, oil, lithium, zinc and lead, as well as being a major source of agricultural production, such as of cotton.”

On top of this, an unknown amount of rare earth minerals come from the region, with fake accounts (known as 五毛, “wumao,” or “50 cent party” government propaganda accounts) from China attacking US rare earths companies on social media any time Xinjiang gets into the news. While I don’t have exact figures, it’s clearly important if it’s getting money spent to defend it in the context of rare earths.

As we’ve pointed out before, China already has the global rare earths supply, and a good chunk of the battery lithium supply, by the shorts. For other geopolitical reasons, the United States government chose to exclude vehicles with too much battery mineral content from “foreign entities of concern,” which means battery supplies for the lowest-priced cars (which qualify for the subsidies) will be restricted until friendly countries can make up the difference in supply, and for a growing industry. This could lead to more plugin hybrids, but it also shows how averse the US government is to continued reliance on China for battery minerals, as they were willing to challenge an important market and climate change initiative to avoid China.

Now, on top of the geopolitical considerations (which have shifted from being in China’s favor during the War on Terror to being against them), the human rights concerns make it that much more difficult for companies to source cleantech minerals, components, and whole devices/vehicles from China, even for more expensive unsubsidized vehicles.

The Impacts Are Too Much To List Here

This will upend a variety of businesses. Ford had plans to source batteries from CATL to catch up with Tesla. Many other companies have or had similar plans. Everybody selling in China buys at least some of their batteries from CATL.

While not tied directly to Xinjiang (that we know of), CATL does appear to get a lot of help both in terms of cash and in terms of regulatory favors from the Chinese government. It appears that the company is a central component of the country’s plans to dominate clean energy and electric vehicles, and it’s working.

With US subsidies crimping the lower end of the market and keeping it away from China, the higher end of the market that could have used Chinese battery minerals and/or whole battery cells are going to face challenges in the public eye and perhaps with future government regulations aimed to punish Beijing for human rights abuses.

We Have To Decide What This Is Worth To Us

It’s probably tempting, especially if you’re heavily invested in an EV company, to say that you’d rather ignore the human rights abuses in Xinjiang. I mean, if the problem could just stay on the back burner for a few more years, the battery supply situation will stabilize and then we can stop buying so many EV components from them, right?

But, that’s the whole point. By keeping the world dependent on Chinese resources and infrastructure, it’s possible to exert pressure on the world instead of having the world exert pressure on them. This isn’t some unfortunate accident. It’s all part of a plan to increase the Party’s power on the global stage.

Personally, I’m concerned about the long-term implications of playing this game. Letting authoritarian governments hold resources over our heads allows their influence to spread for that much longer, and perhaps turn our own governance systems into authoritarian nightmares as they have less and less choice in more matters.

And that’s all only from a selfish perspective. People who are suffering far away matter. We can’t just ignore that like we did in the past.

Featured image provided by Tesla.

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