Categories
Climate Change

The Moment for EVs: Strategies to Transform American Roads

Read the article published by the Brookings Institution here.

Categories
China Climate

Climate Trade Wars: China’s WTO Dispute with the E.U.’s Carbon Border Tax

Background

In July 2021, the European Union proposed to implement a Carbon Border Adjustment Mechanism (CBAM), otherwise known as a carbon border tax. The goal of the CBAM is to increase the cost of importing six categories of carbon-intensive goods from foreign nations: steel, iron, cement, aluminum, fertilizers, and electricity generation. This policy was introduced as part of the E.U.’s legislative mandate to reduce 55% of its emissions by 2030 and reach carbon neutrality by 2050[1].

After the announcement, several countries complained that the measure created discriminatory barriers for World Trade Organization (WTO) members to access the E.U. market. The nation most affected is China – the E.U.’s biggest trading partner, and the world’s largest exporter[2].  

When questioned about the CBAM proposal, Liu Youbin, a spokesman for the Chinese Ministry of Ecology and Environment, said that it was “essentially a unilateral measure to extend the climate change issue to the trade sector. It violates WTO principles … and will seriously undermine mutual trust in the global community and the prospects for economic growth.”[3]

If the CBAM enters into force on January 1st, 2023, as is currently proposed[4], China could choose to retaliate by imposing their own tariffs against European goods and sue the E.U. through the WTO’s Dispute Settlement Body to acquire legal relief from complying.

China’s Own WTO Compliance and its Legal Case Against CBAM

Despite valid concerns about the CBAM, China does not have much credibility to levy accusations of unilaterally flouting international trade law. Since joining the WTO in 2001, China’s compliance has been popularly described as “mixed” or “complex.”[5]

Though they have liberalized the economy in some areas, there remain a range of issues where China has not met its commitments, including industrial subsidization, intellectual property protection, forced joint ventures and technology transfer, and market access to the services industries[6]. Between 2009 and 2015, China-related complaints accounted for 90% of the cases brought to the WTO by the U.S., E.U. and Japan[7].

There are three issues where China could allege the CBAM violates the WTO[8], but its own practices also run afoul of those same trade principles.

First is Article I’s most-favored-nation treatment rule, which requires that any advantage granted to an imported product from one WTO member must be granted to all other members.

China could argue that the E.U. is discriminating against them by selectively choosing an arbitrary set of products it must buy emission certificates for based on how dirty its manufacturing process is compared to other countries.

At the same time, China has spent decades selectively treating intellectual property (IP) owned or developed by other WTO members in a different way from IP developed in China. The result is coerced joint ventures with Chinese firms which result in involuntary IP transfer and a siphoning of technology and trade secrets from other countries[9]. A 2019 report found that one in five North American companies had their IP stolen from China just that year[10].

Second is Article II’s tariff schedule which lays out the maximum level of tariffs that a country can apply against another country’s exports.

If the cost of the CBAM emission certificates exceeds the ceiling on customs duties that the E.U. agreed to, also known as the bound rate, then China could argue this would be a violation of Article II. While the final certificate costs have not yet been finalized, it’s likely that the price will rise over time to meet the E.U.’s ambitious emission targets.

However, Chinese tariffs on U.S. imports today already exceed the bound rate on more than 128 products, breaching its obligations under Article II[11]. Moreover, China’s expansive use of subsidies effectively undermines its tariff reduction commitments by offsetting the cost of domestic production.

Last is Article III’s national treatment rule which requires that imported products not be given less favorable treatment than domestic products.

Today, almost 43% of the E.U.’s emission certificates are given for free to the manufacturing, power, and airline industries[12] – sectors which are harder to abate, but whose free allocations are expected to decline and be phased out. European industries are lobbying hard to keep their free allocations, but if they are not phased out before the CBAM goes into effect then China can argue its products are at a competitive disadvantage by paying a carbon price that the E.U.’s manufacturers aren’t paying.

Again, China provides massive subsidies to its domestic industries including semiconductors, solar panels, steel, aluminum, glass, and auto parts. That also provide an unfair advantage to its domestic products. For example, 95% of Chinese technology firms received R&D subsidies in 2015 accounting for almost a quarter of their total R&D investment[13]. Since joining the WTO, subsidies have financed nearly 20% of China’s manufacturing capacity every year[14].

CBAM and China’s Approach to International Law

The contradictions between China’s potential legal case against the CBAM with its own trade practices fits into its larger approach towards international law: a set of norms and practices to be obeyed when practicable and overlooked when they cannot[15]. By accusing the E.U. of doing that which it is also guilty of, China would continue a trajectory of acting as a “selective revisionist” in the international system looking to promote its own economic interests through exceptions and special conditions[16].

If the CBAM is taken to court, the E.U. could seek justification under Article XX’s general exceptions, arguing that the CBAM is “necessary to protect human, animal or plant life or health,” by tackling climate change[17]. But even if the WTO rules in favor of the E.U., China has a long history of either failing to adhere to decisions or creatively interpreting them in way that thwarts thwart the purpose of the ruling itself[18].

In the context of CBAM, this could look like Chinese manufacturers obfuscating or falsifying the total extent of carbon emissions for their products, as has been done before[19], and artificially buying a lower number of emission certificates.  These actions would further reinforce the tension between China’s desire to promote its own interests and its desire to be seen as a responsible member of the multilateral order.

Conclusion

The E.U.’s CBAM would be the first carbon border tax implemented at an international level, but it has already set off discussions in Germany, Japan, the U.S. and Canada about implementing similar policies. In response, it looks likely that China will contest CBAM policies as unilateral actions that violate international trade law, if nothing to buy time as they hopefully push Chinese firms to quickly decarbonize their manufacturing processes.

While China could make a number of valid legal arguments against the CBAM, it will be throwing stones from a glass house. Given China’s complex track record of compliance with past WTO rulings and conditions for entry, many of the complaints China could allege would apply to several of its own trade practices.  

Contradictions notwithstanding, the WTO represents the only arena of international relations where China has agreed to resolve foreign conflicts through an international court[20]. Thus, how the China-E.U. CBAM dispute gets settled will have significant ramifications on the ambition of future carbon reduction policies and the cooperation of the world’s largest trader and carbon emitter to support these efforts.


[1] Council of the European Union, “Council agrees on the Carbon Border Adjustment Mechanism (CBAM)”, March 15th, 2022, https://www.consilium.europa.eu/en/press/press-releases/2022/03/15/carbon-border-adjustment-mechanism-cbam-council-agrees-its-negotiating-mandate/ .

[2] Eurostat, “China-EU – international trade in goods statistics,” February 2022, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=China-EU_-_international_trade_in_goods_statistics.

[3] Muyu Xu and David Stanway, “China says EU’s planned carbon border tax violates trade principles,” Reuters, July 26th, 2021, https://www.reuters.com/business/sustainable-business/china-says-ecs-carbon-border-tax-is-expanding-climate-issues-trade-2021-07-26/.

[4] Ibid. 1.   

[5] Timothy Webster, “Paper Compliance: How China Implements WTO Decisions,” Michigan Journal of International Law, Volume 35, Issue 3, 2014, https://repository.law.umich.edu/cgi/viewcontent.cgi?article=1064&context=mjil.

[6] Stephen Ezell, “False Promises II: The Continuing Gap Between China’s WTO Commitments and Its Practices,” Information Technology & Innovation Foundation (ITIF), July 26th, 2021, https://itif.org/publications/2021/07/26/false-promises-ii-continuing-gap-between-chinas-wto-commitments-and-its.

[7] Mark Wu, “The ‘China, Inc.’ Challenge to Global Trade Governance,” Harvard International Law Journal, vol. 57, no. 2, Spring 2016, https://harvardilj.org/wp-content/uploads/sites/15/HLI210_crop.pdf.

[8] James Bacchus, “Legal Issues with the European Carbon Border Adjustment Mechanism,” CATO Institute, August 2021, https://www.cato.org/briefing-paper/legal-issues-european-carbon-border-adjustment-mechanism.

[9] Ibid. 6.   

[10] Eric Rosenbaum, “1 in 5 corporations say China has stolen their IP within the last year: CNBC CFO survey,” CNBC, March 19th, 2019, https://www.cnbc.com/2019/02/28/1-in-5-companies-say-china-stole-their-ip-within-the-last-year-cnbc.html.

[11] United States Trade Representative (USTR), “CHINA – ADDITIONAL DUTIES ON CERTAIN PRODUCTS

FROM THE UNITED STATES,” May 2nd, 2019, https://ustr.gov/sites/default/files/enforcement/DS/US.Sub1.(DS558).(public).pdf.  

[12] European Commission, “Free Allocation,” https://ec.europa.eu/clima/eu-action/eu-emissions-trading-system-eu-ets/free-allocation_en.  

[13] Ibid. 6.  

[14] Ibid. 6.  

[15] Michael J. Mazarr, Timothy R. Heath, Astrid Stuth Cevallos, “China and the International Order,” RAND Corporation, 2018, https://www.rand.org/content/dam/rand/pubs/research_reports/RR2400/RR2423/RAND_RR2423.pdf.

[16] Ibid. 16.

[17] Gary Clyde Hufbauer, Jisun Kim, Jeffrey J. Schott, “Can EU Carbon Border Adjustment Measures Propel WTO Climate Talks?” Peterson Institute for International Economics, November 2021, https://www.piie.com/publications/policy-briefs/can-eu-carbon-border-adjustment-measures-propel-wto-climate-talks.

[18] Ibid. 5.  

[19] Muyu Xu and David Stanway, “China slams firms for falsifying carbon data,” March 15th, 2022, Reuters, https://www.reuters.com/world/china/china-slams-firms-falsifying-carbon-data-2022-03-14/.

[20]Gregory Shaffer and Henry S. Gao, “China’s Rise: How It Took on the U.S. at the WTO,” Singapore Management University School of Law Research Paper No. 14/2017, March 20th, 2017, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2937965.

Categories
China Climate

The Geopolitics of China’s Energy Future

Abstract

China is the world’s largest consumer of energy and emitter of CO2 emissions – nearly double that of the United States[i],[ii]. Amidst global pressure to decarbonize its economy, China is concurrently ascending as the world’s pre-eminent industrial superpower. The Chinese Communist Party’s (CCP) 14th Five Year Plan (2021-2025) makes binding directives to shrink carbon emissions while also forecasting new energy requirements for “high-quality” development and economic growth[iii]. China made a monumental 2060 net-zero pledge that stands as an ideal vision rather than a detailed roadmap, with specifics that will take years to formalize, much less implement[iv]. Along the way, China will have to reconcile its pledge with being the world’s largest consumer of coal and second-biggest consumer of oil and gas.

These contradictions in China’s energy strategy are explained by the imperative for China to maintain economic growth in order to sustain the CCP’s legitimacy. The Party set a very optimistic GDP growth target of around 5.5% this year which they seem unlikely to meet[v]. This will continue a trend of year-on-year growth slowing. If China wants to be the world’s dominant power, it needs to continue to grow. And a growing economy, one on pace to become the largest in the world by the next decade[vi], will require much more energy. Indeed, China’s GDP growth remains tightly coupled with its energy consumption which puts pressure on the CCP to acquire as many sources of energy as it can.

Source: Michael Meiden, “Unpacking China’s 2060 Carbon Neutrality Pledge,” The Oxford Institute for Energy Studies, December 2020.

The fundamental constraint for the Chinese today is that they are energy insecure. A near term forecast as indicated by Figure 1 sees the CCP continuing to get these sources from coal, oil and natural gas. China’s energy portfolio today is highly dependent on both high polluting and imported energy sources – a vulnerability that has been well acknowledged by Chinese policymakers for years. This has driven many of China’s flagship geostrategic projects including the Belt and Road Initiative (BRI) which aim to secure maritime trade routes and transportation infrastructure across Africa, Asia, and Europe to guarantee energy access[vii]. However, a green transformation is in the cards over the next 40 years. China’s overall economic diplomacy and foreign policy will increasingly include discussions of energy and can help relieve some of their constraints for relying on fossil fuels.  The government has a familiar playbook of interventions that is used to shore up its actual growth metrics and perceptions of its strengths, using its economic heft for both business leverage and geopolitical gain. 

Thus, this paper sets out to answer the question: how can China’s energy policy help them meet their growth aspirations and achieve energy security while working towards their emission reduction targets? There are four dimensions of China’s current plans for their energy mix that will be analyzed to answer this question along with their geopolitical implications: clean energy, critical minerals, oil and gas, and coal. These represent the principal levers through which China will control their energy future. After framing the current state of these energy sectors, policy recommendations are provided on how best they can leverage the clean energy, critical minerals, and fossil fuel portfolios to achieve their triple aim of energy security, economic growth, and emission reduction.

Presentation


[i] Center for Strategic and International Studies, “How Is China’s Energy Footprint Changing?”, March 17th, 2022, https://chinapower.csis.org/energy-footprint/.  

[ii] Ritchie, Hannah, Roser, Max “CO2 Emissions”, Our World in Data, 2020 https://ourworldindata.org/co2-emissions/.  

[iii] Murphy, Ben “Outline of the People’s Republic of China 14th Five-Year Plan for National Economic and Social Development and Long-Range Objectives for 2035”, Georgetown Center for Security and Emerging Technology (CSET), May 12th, 2021, https://cset.georgetown.edu/wp-content/uploads/t0284_14th_Five_Year_Plan_EN.pdf

[iv] Meidan, Michal “Unpacking China’s 2060 carbon neutrality pledge,” The Oxford Institute for Energy Studies, December 2020, https://www.oxfordenergy.org/publications/unpacking-chinas-2060-carbon-neutrality-pledge

[v] Yao, Kevin and Woo, Ryan “China targets slower economic growth as headwinds gather,” Reuters, March 5, 2022: https://www.reuters.com/markets/asia/china-cuts-2022-gdp-growth-target-around-55-2022-03-05/

[vi] Rapp, Nicolas and O’Keefe, Brian, “This chart shows how China will soar past the U.S. to become the world’s largest economy by 2030,” January 30th, 2022, https://fortune.com/longform/global-gdp-growth-100-trillion-2022-inflation-china-worlds-largest-economy-2030/

[vii] Bassler, Christopher and Noon, Ben, “Mind the Power Gap: The American Energy Arsenal and Chinese Insecurity”, Center for Strategic and Budgetary Assessments (CBSA) , August 25th, 2021, https://csbaonline.org/uploads/documents/CSBA8274_(Mind_the_Power_Gap)_FINAL_web.pdf

Categories
Climate

Managed Retreat from Climate Change

Abstract

Within the next 30 years, the United States can expect to see a one-foot rise in sea levels even if CO2 emissions went to zero overnight[i]. This is because more than 93% of the heat humans have already generated is trapped in the oceans where it will linger for centuries[ii]. Over the next seventy to eighty years, sea levels may go up by 7 feet based on how quickly the warming waters melt the Arctic ice sheets, rates of land loss, and ocean circulation changes[iii].

For every foot of rise, roughly 100 feet of shoreline will be flooded[iv]. The consequences could be catastrophic for many of the 130 million people who live in a coastline community – more than 40% of the U.S. population[v].  They should expect more than ten disruptive flooding events per year by 2050[vi].

A similar fate is in store for communities living in the American West. Almost 60 million homes are within less than a mile of a wildfire-prone area[vii]. Those numbers will continue to grow as the increased intensity and duration of heatwaves and drought conditions create a risk of bigger, more frequent blazes.

These communities can respond in one of three ways: they can resist, accommodate, or retreat. Resist options include hard infrastructure like seawalls, levees, and dikes. Accommodate options include elevating homes, building reinforcements, or early warning systems. Retreat entails physically moving people away from the source of risk, like moving out of forested areas or away from coastlines and further inland to a more elevated surface. While the three options can be complementary, there is little time to act and limited resources.

This paper looks more deeply at the option to retreat. A burgeoning area in emergency response and disaster relief planning is the concept of “managed retreat” or “managed relocation” – the purposeful and coordinated movement of people and assets out of harm’s way.

This concept has been applied in environmental relocations that have occurred throughout American history, including in response to Californian acid spills and flood damage across the Gulf Coast in Florida, Louisiana, and Texas.

I set out to answer the question: what are the most efficient and cost-effective methods to encourage state and local governments as well as at-risk households to proactively retreat?

I begin by characterizing the most common environmental threats posed by climate change that communities will be retreating from and what the barriers are to successful managed retreat. Then I will conduct four case studies of cities or counties implementing managed retreat programs against sea-level rise, coastal erosion, and flooding: (1) King County, Washington, (2) Charlotte-Mecklenburg County, North Carolina, (3) Austin, Texas, and (4) Queens, New York.

A comparative analysis will be done on these case studies to assess their outcomes, cost-effectiveness, and policy tradeoffs. Finally, I conclude with recommendations and next steps for policymakers who are looking at implementing managed retreat policies.

Ultimately, certain areas will be under water or smoldering in ashes no matter what we do. People in those areas are already, and will inevitably, retreat. Whether or not it is done in a managed and coordinated way is a different question. Despite the name, “managed retreat” should not be thought of as accepting defeat. Rather it is a chance to live to fight another day. In the words of Marine Corp General Oliver Smith, “Retreat, hell! We’re not retreating, we’re just advancing in a different direction.”[viii]

Presentation


[i] National Oceanic and Atmospheric Organization (NOAA), “U.S. coastline to see up to a foot of sea level rise by 2050”, February 15th, 2022, https://www.noaa.gov/news-release/us-coastline-to-see-up-to-foot-of-sea-level-rise-by-2050

[ii] Patterson, Brittany. “How Much Heat Does the Ocean Trap? Robots Find Out,” Scientific American, October 18th, 2016, https://www.scientificamerican.com/article/how-much-heat-does-the-ocean-trap-robots-find-out//

[iii] Ibid. 1.

[iv] Albert, Mark. “Why a 1-foot rise in sea level has a bigger impact than you think,” WCVB Boston, February 25th, 2022, https://www.wcvb.com/article/sea-level-rise-forecasting-our-future/39135613#.

[v] National Oceanic and Atmospheric Organization (NOAA), “U.S. coastline to see up to a foot of sea level rise by 2050”, https://oceanservice.noaa.gov/facts/population.html.

[vi] National Oceanic and Atmospheric Organization (NOAA), “Global and Regional Sea Level Rise

Scenarios for the United States”, February 2022, https://aambpublicoceanservice.blob.core.windows.net/oceanserviceprod/hazards/sealevelrise/noaa-nos-techrpt01-global-regional-SLR-scenarios-US.pdf.  

[vii] Sommer, Lauren, “Millions Of Homes Are At Risk Of Wildfires, But It’s Rarely Disclosed,” NPR, October 21st, 2020, https://www.npr.org/2020/10/21/924507691/millions-of-homes-are-at-risk-of-wildfires-but-its-rarely-disclosed#:~:text=Almost%2060%20million%20homes%20were,blazes%20in%20the%20American%20West.

[viii] HistoryNet, “‘KEEP PUNCHING’: SIX MILITARY QUOTES TO GET YOU THROUGH THE WEEK,” March 27th, 2020, https://www.historynet.com/keep-punching-six-military-quotes-to-get-you-through-the-week/#:~:text=%E2%80%9CRetreat%2C%20Hell!,the%20Battle%20of%20Chosin%20Reservoir.

Categories
Climate Change

Geo-engineering: The Last Hope to Save The Planet

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

Read More:

Categories
Climate Essay Review

Can Integrated Water Resources Management Increase Adaptive Capacity to Climate Change?

Climate change is increasing pressure on water systems because of extreme drought, heat waves, melting glaciers, rising sea levels, and ocean acidification. Integrated Water Resource Management (IWRM) is the dominant policy paradigm for all levels of government to manage their water resources. Is IWRM up to the task of adapting to climate change and the stresses on our shared water resources?

I summarize a paper in the Journal of Water Resource and Protection which overviews the history of water resource management, the global norms of water security, how we define “adaptive capacity”, and identify the ways IWRM can improve the resilience of our water systems.

What’s needed is for climate planners to develop an integrated form of sustainably managing water specifically at the river basin scale with multi-stakeholder participation, equitable access, and demand management through quotas, tradable water rights, and user charges. 

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Categories
Climate Change

Net Zero Innovation Hubs: Three Priorities to Drive America’s Clean Energy Future

Read the article published by the Brookings Institution here.

Categories
Climate Policy Memo

Geopolitics of Hydrogen: Decarbonization and Disruption

Summary

Hydrogen could be the missing piece to solve the clean transition puzzle[1]. It has the potential to substantially decarbonize transportation as well as hard-to-abate industrial, power, and heating processes. Accordingly, more than 30 countries have developed national hydrogen strategies[2] and agreed at COP26 to accelerate the deployment of green hydrogen[3]. As a result, hydrogen could fulfill a quarter of total energy demand by 2050[4].

This anticipated boom carries significant geopolitical implications. New hydrogen export champions will change the geography of the global energy trade, presenting new trade route vulnerabilities as well as potentially new political alliances. Additionally, a new dimension of global energy competition will unfold over the green hydrogen supply chain where China is already leading. To facilitate the growth of hydrogen in line with net-zero goals, nations will have to protect new trade routes, engage in substantive hydrogen diplomacy, and invest in new capacity for critical technologies like electrolyzers and fuel cells.

Hydrogen’s Role in A Decarbonized Economy

Hydrogen has been used as a staple of the chemical and energy industries for decades. Around 120 million tons are produced annually and used primarily as a feedstock in crude oil refining, synthesizing ammonia for fertilizer, and methanol production which goes into a number of products including plastic[5].

Hydrogen’s decarbonization potential centers around transportation, energy storage, power generation, and heating industrial processes. In fuel cells, hydrogen chemically reacts with oxygen to produce electricity without releasing any greenhouse gases. These fuel cells can be used to power trucks and light-duty cars, like the 2022 Toyota Mirai[6], as well as provide onsite power generation for homes and commercial businesses, like is being done by Adobe, Apple, and Microsoft[7]. For policymakers, hydrogen being storable, dispatchable, and potentially a zero-emission source of energy and heat at any time of the day is especially attractive.

Man in China refills hydrogen fuel cell cars

Even more exciting is hydrogen’s potential to clean up hard-to-abate sectors of the economy. Ammonia synthesized from clean hydrogen, known as e-ammonia, can be used to power shipping vessels, effectively decarbonizing 90% of worldwide trade[8]. Hydrogen can also be burned as a fuel to generate heat at extremely high temperatures (greater than 1,000°C) without emitting CO2[9]. This enables it to decarbonize industrial products like steel and cement which account for 15% of all global emissions[10].

However, hydrogen is an energy carrier not an energy source[11]. The significance of this distinction is that it must be produced from another substance, usually by splitting water molecules or fossil fuels. These extraction methods are color-coded to signify how the hydrogen was produced. 95% of today’s supply is “grey” hydrogen, which is produced from fossil fuels through natural gas steam methane reforming or coal gasification[12]. The two most prominent alternatives are “blue” or “green” hydrogen.

Blue hydrogen is simply grey hydrogen, but the emissions are pumped below ground using carbon capture technology. Green hydrogen is produced with an electrolyzer which splits water into oxygen and hydrogen using electricity generated by renewable energy. This process, known as electrolysis, produces no carbon emissions. Green hydrogen represents only 3% of total hydrogen production[13], but is expected to become the dominant production pathway by 2050 as the cost of solar PV and wind continues to decline[14].

How Green Hydrogen Will Disrupt the Global Energy Map

Today, hydrogen consumption is highly localized – nearly 85% of hydrogen produced is consumed on-site, usually at a refinery[15]. But in the last few years more than 30 countries and regions have released or are preparing national hydrogen strategies which is setting the stage for a boom in the cross-border hydrogen trade. The demand for green hydrogen as an internationally traded commodity will spur new investment flows, trade relations, and interdependence between nations that have not traditionally traded energy.

As a result, the geopolitics of the global energy trade will change in four ways: (1) the introduction of new energy export champions, (2) geographic vulnerabilities along hydrogen trade routes, (3) new alliance configurations and the growth of hydrogen diplomacy, and (4) a technology race to secure the green hydrogen supply chain.

New Energy Export Champions

Unlike oil and gas, green hydrogen can theoretically be produced anywhere, but states will benefit from international trade by acquiring it from countries who have a comparative advantage in the availability of renewable energy, freshwater, and necessary export infrastructure. The countries with the biggest advantage in green hydrogen include some new players in the global energy scene, including:

  • Australia: In 2019, Australia released its national hydrogen strategy positioning itself to become one of the top green hydrogen exporters due to its abundance of renewable resources. It has invested more than $1 billion in its hydrogen industry and forged a series of bilateral export deals with Germany, Japan, and Singapore[16].
  • Chile: In 2020, Chile launched a green hydrogen strategy aiming to produce 25 GW of capacity and become the world’s cheapest source hydrogen by 2030 and a top three global exporter by 2040. It’s estimated that it will sell $30 billion in green hydrogen by the end of the decade, taking advantage of its solar and wind resources[17].  
  • Morocco: In 2021, Morocco released a green hydrogen roadmap and is estimating an export market of 10 terrawatt hours (TWh) by 2030[18] on the back of its strong solar industry[19]. IRENA acknowledged the importance of this market by recently signing a partnership to expand Morocco’s green hydrogen investment[20].  
Chile’s national hydrogen strategy aims to make it the world’s cheapest source of green hydrogen by 2030.

Where will this green hydrogen go? The primary nations who have staked their energy future on hydrogen include:

  • Japan: In 2017, Japan was the first to adopt a national hydrogen strategy declaring that it would become a “hydrogen society”[21] . Since then, the government has started building a massive infrastructure to import and distribute hydrogen, including a $670 million investment in 2020 to build nearly a million fuel cell vehicles and 900 hydrogen fueling stations[22].
  • South Korea: In 2019, South Korea instituted a national hydrogen roadmap pledging to use hydrogen to power 30% of cities and towns by 2040. It already has deployed the most fuel cell vehicles in the world at around 10,000 and aspires to reach 200,000 vehicles by 2025[23].
  • Germany: In 2020, Germany unveiled its own national hydrogen strategy, investing 7 billion euros in hydrogen business and infrastructure and pledging to produce 10 GW of power from hydrogen by 2040[24]

Geographic Vulnerabilities Along Hydrogen Trade Routes

Regional and global hydrogen trade is in its early stages. Figure S.2 provides an overview of the potential trade routes from green hydrogen exporting regions in Latin America, Asia Pacific, and Northern Africa crisscrossing around the world to major importers.

Hydrogen can be transported in two ways, via pipeline or shipping. The overseas hydrogen trade will give rise to new important shipping lanes, which will also present themselves as vulnerable maritime choke points, much like the Strait of Hormuz in the Persian Gulf for oil. One prominent green hydrogen shipping route from Australia to Japan would run through the East China Sea which has been prone to territorial disputes between China and Japan[25].

Similarly, transporting green hydrogen via pipeline from northern Africa into Europe will place transiting countries in vulnerable positions much like Ukraine and other critical transit countries in the natural gas market.

These vulnerabilities will inform strategic planning and defense considerations and ultimately could result in new alliances on a bilateral basis centered around hydrogen access and security.

New Alliances and Growth of Hydrogen Diplomacy

As importer nations look to secure access from emerging export champions, hydrogen diplomacy will become a standard fixture of economic and energy diplomacy. Indeed, the Netherlands was the first to appoint a dedicated “hydrogen envoy” in 2019 as part of efforts to ink deals with Chile, Namibia, Portugal and Uruguay as potential suppliers.

Germany has not only established bilateral hydrogen deals with Australia, Chile, Morocco, Namibia, Tunisia, and Ukraine, but set up dedicated hydrogen diplomacy offices in those countries[26]. Japan is engaged in similar diplomacy to establish hydrogen value chains with Australia, Brunei, Norway, and Saudi Arabia. Chile declared that it would use “green hydrogen diplomacy” to attract foreign investment and unleash its export potential.

Profound geopolitical shifts could occur under these new alliances. For example, Germany’s bilateral hydrogen deals could wean its dependence off Russian natural gas. OPEC might find its influence dimming in Japan, which imports nearly 90% of its oil from the Middle East[27], as it opts to substitute oil for hydrogen fuel cells to power cars and buildings.

Technology Race for the Hydrogen Supply Chain

Underlying these shifts will be an intense competition for the green hydrogen supply chain, especially electrolyzers and fuel cells. Europe is currently the largest manufacturer of electrolyzers, but China is vastly beating them on cost with standard alkaline electrolyzers (the most common type) that are 83% cheaper[28]. Moreso, China dominates the access to, and ability to process, raw materials like nickel and zirconium needed to produce electrolyzers and platinum-group metals for fuel cells[29].

China is the world’s largest producer and consumer of hydrogen (almost entirely grey), leads the world in deploying fuel cell trucks and buses, and has placed hydrogen as one of its six industries of the future. This presents a risk that large parts of the green hydrogen supply chain will ultimately be controlled by China, subjecting it to the political volatility seen in other goods caught in global trade disputes and protectionist actions.

Liquified hydrogen storage tank

Although it may be too late to compete with China on cost, Western nations could innovate by maturing solid oxide and proton exchange membrane technologies which are superior to China’s alkaline electrolyzers in utilizing variable renewable energy resources[30]. The market for hydrogen technologies is still relatively small, with upcoming gigafactories for large-scale production of electrolyzers in Australia, France, India, Italy, Norway, Spain and the United Kingdom holding the possibility to drastically change the current manufacturing landscape[31].

Some estimates indicate that by 2050 there will be a $50-60 billion market for electrolyzers and $21-25 billion for fuel cells[32]. Thus, the hydrogen trade will add another dimension to existing geo-economic rivalries and will become a new battleground between major powers and emerging economies for supply chain security and technological superiority.

Conclusion

Green hydrogen has the potential to be a true game-changer in the fight for net-zero. It can power fuel cell electric vehicles, store renewable energy at utility scale, and be burned as a substitute fuel in carbon intensive industrial processes without releasing CO2. As interest in hydrogen grows, new players, alliances, vulnerabilities, and supply chain competition will arise.

While countries like Japan, South Korea and Germany prepare to become significant importers, countries like Australia, Chile, and Morocco stand to gain geopolitical weight as new export champions. But in order to make this vision real, these countries will depend on critical production and distribution technologies that are controlled by China, for now. Hydrogen diplomacy, technology innovation, and new security alliances will be pivotal to ensure that green hydrogen is able live up to its promise of solving a key part of the clean energy puzzle.

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

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[1] Noé van Hulst, “Hydrogen, the missing link in the energy transition,” International Energy Agency, October 17th, 2018, https://www.iea.org/commentaries/hydrogen-the-missing-link-in-the-energy-transition.

[2] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, pg.39, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf.

[3] Cato Koole and Thomas Koch Blank, “COP26 Made Clear That the World Is Ready for Green Hydrogen,” Rocky Mountain Institute, November 23rd, 2021, https://rmi.org/cop26-made-clear-that-the-world-is-ready-for-green-hydrogen/.

[4] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, pg. 24, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf.

[5] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, pg. 24, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf.

[6] Toyota, “2022 Mirai,” https://www.toyota.com/mirai/.

[7] Fuel Cell & Hydrogen Energy Association, “Stationary Power,” https://www.fchea.org/stationary.

[8] Gabriel Castellanos, Roland Roesch and Aidan Sloan, “A Pathway to Decarbonise the Shipping Sector by 2050,” International Renewable Energy Agency, October 2021, https://www.irena.org/publications/2021/Oct/A-Pathway-to-Decarbonise-the-Shipping-Sector-by-2050

[9] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, pg. 24, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf.

[10] Rebecca Dell, “Making the Concrete and Steel We Need Doesn’t Have to Bake the Planet,” The New York Times, March 4th, 2021, https://www.nytimes.com/2021/03/04/opinion/climate-change-infrastructure.html.

[11] Marc Rosen, “Natural and Additional Energy,” THEORY AND PRACTICES FOR ENERGY EDUCATION, TRAINING, REGULATION AND STANDARDS, 2004, http://www.eolss.net/sample-chapters/c08/E3-03-05-01.pdf.

[12] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf.

[13] International Energy Agency, “The Future of Hydrogen,” June 2019, https://iea.blob.core.windows.net/assets/9e3a3493-b9a6-4b7d-b499-7ca48e357561/The_Future_of_Hydrogen.pdf.

[14] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf.

[15] International Energy Agency, “The Future of Hydrogen,” June 2019, https://iea.blob.core.windows.net/assets/9e3a3493-b9a6-4b7d-b499-7ca48e357561/The_Future_of_Hydrogen.pdf.

[16] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, pg. 52, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf.

[17] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, pg. 48, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf.

[18] Ibid.

[19] Aida Alami, “How Morocco went big on solar energy,” BBC, November 18th, 2021, https://www.bbc.com/future/article/20211115-how-morocco-led-the-world-on-clean-solar-energy.

[20] IRENA, “Morocco and IRENA Partner to Boost Renewables and Green Hydrogen Development,” June 10th, 2021, https://www.irena.org/newsroom/pressreleases/2021/Jun/Morocco-and-IRENA-Partner-to-Boost-Renewables-and-Green-Hydrogen-Development.

[21] Monica Nagashima, “Japan’s Hydrogen Strategy and Its Economic and Geopolitical Implications,” French Institute of International Relations, October 8th, 2018, https://www.ifri.org/en/publications/etudes-de-lifri/japans-hydrogen-strategy-and-its-economic-and-geopolitical-implications

[22] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, pg.41, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf.

[23] Ibid.

[24] Rossana Scita, Pier Paolo Raimondi and Michel Noussan, “Green Hydrogen: The Holy Grail of Decarbonisation? An Analysis of the Technical and Geopolitical Implications of the Future Hydrogen Economy,” Fondazione Eni Enrico Mattei, October 2020, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3709789.

[25] Fridolin Pflugmann and Nicola De Blasio, “Geopolitical and Market Implications of Renewable Hydrogen,” Environment and Natural Resources Program – Belfer Center for Science and International Affairs, March 2020, https://www.belfercenter.org/sites/default/files/files/publication/Geopolitical%20and%20Market%20Implications%20of%20Renewable%20Hydrogen.pdf.

[26] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, pg. 79, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf.

[27] U.S. Energy Information Administration, “Country Analysis Executive Summary: Japan,” October 2020, https://www.eia.gov/international/content/analysis/countries_long/Japan/japan.pdf.

[28] Thijs Van de Graaf, Indra Overland, Daniel Scholten, Kirsten Westphal, “The new oil? The geopolitics and international governance of hydrogen,” Energy Research & Social Science, Volume 70, December 2020, https://www.sciencedirect.com/science/article/pii/S2214629620302425?via%3Dihub.

[29] Rajesh Chadha, “Skewed critical minerals global supply chains post COVID-19: Reforms for making India self-reliant,” Brookings India, June 10th, 2020, https://www.brookings.edu/wp-content/uploads/2020/06/Skewed-critical-minerals-global-supply-chains-post-COVID-19.pdf.

[30] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, pg. 62, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf.

[31] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, pg. 61, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf

[32] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, pg. 59, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf.

[33] International Renewable Energy Agency (IRENA), “Geopolitics of the Energy Transformation: The Hydrogen Factor”, pg. 12, 2022, https://irena.org/-/media/Files/IRENA/Agency/Publication/2022/Jan/IRENA_Geopolitics_Hydrogen_2022.pdf.

Categories
Climate Change Policy Memo Short Form

How Climate Finance Can Support International Carbon Pricing Systems

A version of this memo was published in the SAIS Perspectives here.

Executive Summary

Developing countries and cities account for more than 60% of global GHG emissions[1] but represent less than 25% of carbon pricing systems globally[2],[3]. The Green Climate Fund (GCF) can strategically leverage climate finance to incentivize carbon pricing in developing countries by conditioning mitigation and adaptation aid on instituting a minimum price for emissions.

The GCF should provide more aid and compensation for developing countries with higher carbon prices. There are two benefits to this approach. First, it provides an incentive for countries to pursue increasingly ambitious carbon prices – thus increasing trust and coordination in the global climate regime as developed countries know their donations are driving higher emission reductions. Second, the domestic revenues from carbon pricing schemes will help developing countries finance investments associated with the costs of mitigation and enable a just transition to a low-carbon economy.

By establishing carbon pricing systems in developing countries, GCF can help establish international carbon markets that open additional revenue streams. Getting involved in carbon pricing efforts gives GCF an opportunity to shape Article 6 negotiations for global carbon markets where a portion of the sale of carbon credits and emission reductions are required to go to developing countries, thus channeling additional revenue for global mitigation and adaptation efforts.

Why Focus on Carbon Pricing?

Carbon pricing is a uniquely powerful mitigation solution due to its ability to influence energy use and investment decisions across all sectors of the economy as well as being tied to emission targets which guarantee that they are met. A well-designed carbon tax or cap-and-trade system will create incentives for cost effective emission reductions in the short run and cost reducing innovation in the long run[4]. One analysis found that on its own carbon pricing could deliver almost a third of the emission reductions necessary to avoid a rise of 2°C[5]. Unfortunately, GCF has no official policy or involvement in driving this vital policy mechanism while the developing countries it supports are on pace to account for ~70% of global energy demand in the next 20 years[6].

Carbon pricing has several advantages for developing nations:

  • Economy-wide Impacts: It’s a technology neutral way to incentivize economy-wide decarbonization by making it more expensive to pollute than to find lower carbon alternatives.
  • Revenue Generation: It generates revenue through tax collection or permit auctions that can be used by governments to support an equitable clean energy transition through R&D, job re-training, and investment in the poorest, most polluted areas. The revenue could also be used to support U.N. Sustainable Development Goals (SDGs) or directly compensate populations affected by the shuttering of energy intensive industries.
  • International Cooperation: It can serve as a focal point for international carbon pricing coordination resulting in additional revenues through the sale of carbon credits and emissions reduction that can go towards adaptation and mitigation costs.

How Climate Finance Can Spur Carbon Pricing In Developing Countries

International climate cooperation requires mutual commitments and stable incentive structures – coordinating national carbon prices is an efficient solution to achieve this. A major gap in the current Paris regime is that nations are only held to voluntary commitments which are not legally binding. If one country perceives that their decarbonization efforts are not being complemented by similar efforts in other countries, then the ambition and political will to ratchet up mitigation efforts will weaken. This dynamic has the potential to play out between developed and developing countries as the global share of emissions from developed nations continues to decrease[7]. National carbon prices are transparent and easily comparable, thus setting a floor for international cooperation and negotiations.

Conditioning climate finance aid to developing countries based on establishing a carbon price would incentivize adoption of carbon pricing systems globally. Developing countries lack the capacity and expertise to introduce carbon pricing systems and are disincentivized due to the high costs of mitigation. Indeed, even small changes to the prices of basic commodities because of a carbon price can have a significant impact on underprivileged groups. However, if they are compensated by richer countries then developing nations would be more willing to set carbon prices. The GCF should leverage its transfer payments for adaptation and mitigation on the condition that countries set a minimum carbon price. GCF can use existing funds to help establish tax collection or permit auctioning and allocation infrastructure.

Climate aid should be allocated to go more to countries who increase their carbon price over time, thus increasing ambition and trust in the climate regime. As countries start with different minimum carbon prices the hope is that they will rise and converge over time. However, GCF can accelerate this process by allocating increasing amounts of aid to those countries who increase their carbon price. In this way, developing nations continually pursue more ambitious carbon prices and developed nations will have increased trust and confidence that their transfer payments are achieving higher emission reductions.

Supporting Global Carbon Markets Offers New Revenue Streams for Mitigation and Adaptation

Establishing carbon pricing systems globally can facilitate the rules for international carbon markets under Article 6 of the Paris Agreement. Nearly half of the initial Nationally Determined Contributions (NDCS) include the use of international cooperation through carbon markets[8]. Enabling countries to effectively trade emission reductions and carbon credits across borders will be critical to the overall effort of global decarbonization. By helping establish carbon pricing systems, GCF will earn a seat at the table to ensure that carbon market rules are structured appropriately to benefit developing countries and to mitigate against the risks of double counting.

Successful international carbon markets will catalyze additional revenue streams for GCF to funnel to global mitigation and adaptation efforts. Under the Kyoto protocol a fee was levied on international emission trading and carbon credit purchases through the Clean Development Mechanism which funded nearly 30% of the U.N. Adaptation Fund[9]. Article 6.4 of the Paris Agreement would effectively replace the Kyoto Standard by ensuring that this “share of the proceeds” shall “assist developing country parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation” in addition to “covering administration expenses”[10]. By involving itself in Article 6 negotiations, GCF has an opportunity to open a large pool of public and private climate finance contributions to further scale its mission.


[1] Center for Global Development, “Developing Countries Are Responsible for 63 Percent of Current Carbon Emissions,” August 18th, 2015, https://www.cgdev.org/media/developing-countries-are-responsible-63-percent-current-carbon-emissions.

[2] United Nations Development Programme, “Human Development Reports – Developing Regions,” 2020, http://hdr.undp.org/en/content/developing-regions.

[3] World Bank Group, “State and Trends of Carbon Pricing 2021,” May 2021, https://openknowledge.worldbank.org/handle/10986/35620

[4] James Boyce, “Carbon Pricing: Effectiveness and Equity,” 2018, https://www.sciencedirect.com/science/article/abs/pii/S092180091731580X.

[5] Harvey, et. al, “Designing Climate Solutions,” 2018, pg. 253, https://islandpress.org/books/designing-climate-solutions.

[6] Stephen Eule, “A Look at IEA’s New Global Energy Forecast,” Global Energy Institute, November 29th, 2018, https://www.globalenergyinstitute.org/look-ieas-new-global-energy-forecast.

[7] UNFCC, “Most Developed Countries on Track to Meet their 2020 Emission Reduction Targets, but More Ambition Needed by Some,” November 23rd, 2020, https://unfccc.int/news/most-developed-countries-on-track-to-meet-their-2020-emission-reduction-targets-but-more-ambition.

[8] Kelley Kizzier, Kelly Levin and Mandy Rambharos, “What You Need to Know About Article 6 of the Paris Agreement,” December 2nd, 2019, https://www.wri.org/insights/what-you-need-know-about-article-6-paris-agreement.

[9] Carbon Brief, “In-depth Q&A: How ‘Article 6’ carbon markets could ‘make or break’ the Paris Agreement,” November 29th, 2019, https://www.carbonbrief.org/in-depth-q-and-a-how-article-6-carbon-markets-could-make-or-break-the-paris-agreement.

[10] Carbon Brief, “In-depth Q&A: How ‘Article 6’ carbon markets could ‘make or break’ the Paris Agreement,” November 29th, 2019, https://www.carbonbrief.org/in-depth-q-and-a-how-article-6-carbon-markets-could-make-or-break-the-paris-agreement.

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

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Categories
Health

Food Revolution: The History of GMOs and Transgenic Corn

Humans have manipulated their environment since Homo sapien began to roam the Earth over 100,000 years ago. Over time, we have learned to optimize our existence on the planet through altering different natural surroundings – be it discovering fire, domesticating wild animals, and utilizing wood, stones, and metals as building materials to name a few. However, food remains nature’s most valuable commodity for humans, and like other aspects of nature we have been able to harness its power for maximum utility.

While humans have been modifying food crops for thousands of years, in the past 100 years advances in biotechnology have allowed us to manipulate nature’s bounty more than ever before through the rise of genetically modified organisms (GMOs). However, the rise of GMOs has fueled speculation and fear, raising ethical and health concerns for how we may be manipulating the food we all eat in ways we don’t understand.

One such controversial genetically modified crop is corn. Corn’s ability to grow easily and inexpensively along with an abundance of calories has placed it amongst the world’s most versatile and important crops. With the advent of this new technology, corn, amongst other crops, has undergone radical transformations yielding both tremendous benefits and serious risks. This paper will outline the history of human modification of food, the birth of genetic modification of crops through recombinant DNA, the specific biotechnology processes in altering crops, and finally a discussion of the promises and risks of genetically modified corn.

Human’s began actively manipulating nature for food production 10,000 years ago

The History of GMOs

Humans began to transition out of a hunter-gatherer lifestyle into an agricultural based one around 10,000 years ago, and this agricultural lifestyle was the driving force of society up till only around 100-120 years ago. Till the advent of the industrial revolution, humans have spent millennia learning how to enhance the plants and animals around them to maximize their food yield. Those who raise concern over the recent genetic alteration of food ignore how all early domestication of crops was also genetic modification by breeding desirable traits in plants from the random mutations that would occur in each crop generation.

The selective crop breeding to produce yield of a certain size, color, shape etc. has been so drastic that most of our staple crops (including strawberries, wheat, cabbage and corn) aren’t even remotely similar to any of their ancestors in the wild and could in fact no longer survive now without human intervention and care (Parrott 2006).

The industrial revolution of the last century started to shape what today’s system of modern agriculture looks like. As more advanced machinery and technology was introduced into the field, we began to see improved seed distribution, mineral and synthetic fertilizers, and improved farming techniques. However, the industrial revolution was also occurring alongside another revolution – the beginning of molecular biology.

For years scientists had been sure a class of cellular molecules had to be coding all the individual traits they were seeing in organisms. It wasn’t until Oswald’s Avery’s hallmark experiments with Pneumococcus in the 1940s that identified those molecules as DNA (Hauserman 2013). As DNA continued to be characterized throughout the later half of the 20th century, the most important discovery for GMOs was that of recombinant DNA.

Recombinant DNA means the ability to extract genetic material from one organism, artificially introduce it into another organism, and replicate that organism and have it express the foreign genetic material. In 1971, Paul Berg was working at Stanford University during his landmark gene splicing experiment where he was able to slice a piece of Lambda virus DNA using restriction enzyme EcoRI and insert it into Simian Virus 40 which had been cut with the same restriction enzyme.

The two types of DNA were rejoined into a single circular loop and the first recombinant DNA (rDNA) was created (Chemical Heritage Foundation). Scientists Herbert Boyer and Stanley Cohen were able to build on this work by inserting this rDNA into another organism to see if the genetic contents were able to be expressed in a new host.

In 1973, the two created a recombinant DNA plasmid by inserting the genes for resistance to bacterial antibiotic tetracycline into a plasmid. The plasmid was then transformed into a bacterial culture of E.coli and the only colonies that survived when exposed to tetracycline were those that contained the plasmid (Chemical Heritage Foundation). 

These experiments showed that genetic material could indeed be transferred between species. The result of Berger, Boyer and Cohen’s work has been nothing short of a scientific revolution in the last 40 years – we now can select traits we prefer from different organisms from different species and express them in something entirely different. The agriculture industry was one of the primary beneficiaries of this breakthrough.

In 1988, the world’s first genetically modified crop was created. Recombinant genes resistant to the herbicide had successfully been inserted into soybean. The insertion of a single gene which produced an alternate enzyme involved in aromatic amino acid biosynthesis made soybean tolerant to the herbicide glyphosphate (Chassy 2007).

Herbicide tolerant soybeans transformed the market for soybean production, farmers now had a labor efficient, environmentally safe and inexpensive way to control weeds. Genetically engineered soybean was such a success that 93% of the world’s soybeans are now grown this way (Shetterly 2013). The success with soybean launched a cascading snowfall as scientists around the world rushed to patent dozens of genetically modified seeds for different crops through the mid to late 90s.

Over this last decade, genetically modified crops have been planted on more than a billionacres across the world (Chassy 2007). It’s estimated that these new techniques have brought farmers around the world an additional $27 billion in revenue and reduced pesticide use by 224 million kg (Chassy 2007). As the boom set off for GMO’s after the success of soybean, one company emerged as a clear leader in the industry of transgenic crops – Monsanto Company.

By and far the largest producer of GMOs, the Monsanto Company pioneered the core technologies in the field of transgenic crops.

Five Steps to Monsanto’s Secret Sauce

The Monsanto Company was founded back in 1901 as a chemical company in St. Louis, Missouri and produced a variety of different products used through World War I, World War II and the post-War era. Monsanto became a player in the agricultural biotech industry in 1985 when it acquired G.D. Searle & Company and put its foot in the door with agriculture and animal/plant health.

Eleven years later, Monsanto purchased Agracetus to begin producing transgenic cotton, soybean and peanuts and proceeded then to buy out DEKALB, Cargill and Seminis to become the world’s largest seed company it is today (Bravo 2014). Monsanto’s most famous product is Roundup herbicide. This became the most used herbicide in the United States till reports emerged of its potential toxicity and possibility of containing carcinogenic material (Bravo 2014).

While their herbicide remains controversial, their technical expertise in seed modification is tough to rival. Using these five steps, Monsanto has been able to pioneer the development of almost every major genetically modified crop on the planet.

First, find a new trait. You can’t produce a genetically modified organism without identifying the trait you want the plant to have, and then finding what other organism already possess it. This process involves hundreds of thousands of experiments to determine what specific gene is in involved in which process and how it can affect the overall trait you’re hoping to select for.

Second, extract the gene. Monsanto engineers have developed proprietary technology called a “chipper” that uses high powered cameras and object-recognition algorithms able to shave off just a tiny piece of a seed, analyze it with genome mapping technology and isolate the particular gene of interest (Boyle 2011).

Third is trait insertion. Monsanto has developed what’s known as a “gene gun” which is a .22 caliber charge that fires a metal particle coated with DNA into plant tissue and is able to insert foreign DNA into the host crop genome that way. Recently a new technique requires placing the seed under incredible amounts of stress (heat, pH, nutrient starvation) and exposes is to a bug Agrobacterium tumefaciens to insert new proteins into its chromosome (Boyle 2011).

Fourth is the growth chamber. In massive growth chambers, seedlings are tested drought tolerance, salt tolerance, pest and disease resistance, etc.

Finally, the newly prepared seeds are planted. Monsanto provides very specific instructions regarding plant spacing, water and fertilizer use and plant population. Once your seed is planted, your genetically modified organism is ready to grow.

The Corn Revolution

Though Monsanto has had success with many GMO crops, the story for genetically modified corn is more complex. Corn, more formally known as maize, was one of the first crops in history to be domesticated. Humans learned early on how to cross-pollinate a scraggly grass called teosinte which contains minute fruitcases into the juicy corn kernels we grow today (Gewin 2003). In fact, the bright yellow corn husks we think of have never existed in the wild; they are entirely a product of selective breeding over thousands of years.  

The origins of its domestication begin in Mexico 9,000 years ago where it spread through the Americas as a staple crop capable of being able to be produced quickly and inexpensively. These capabilities make corn one of the most widely grown products in world; in fact, the United States is the world’s largest producer and exporter of corn (Shetterly 2013).  Accounting for more than 95% of the US’s total field grain production, the US pumps out corn from over 90 million acres of corn fields, laying mostly in America’s heartland.

Corn remains one of our most productive crops in terms of how many different products are corn derivatives. From the husk to the kernel, there are over 100 different corn byproducts. The most common we see are products like corn starch, corn syrup and corn oil. There are a range of other dietary by products most notably in cereals and baking mixes but also in more obscure products such as ice cream, chewing gum and coffee (GSMC). In fact genetically modified corn is found in 70% of the processed food supply (Gewin 2003).

The U.S. is the world’s largest producer of corn – a crop which is found in more than 70% of the world’s processed food supply

Corn byproducts extend into non-dietary fields as well, turning up in adhesives, paper cups, toothpaste and medicines as well as the use of corn in ethanol production(GSMC). While dry-milling and wet-milling operations use fermentation to extract ethanol from corn, scientists have begun to genetically modify corn itself to produce ethanol. The biotech company Syngenta has produced a genetically engineered corn that contains a synthetic microbial amylase (extracted from microbes near ocean hot-water vents) which is able to break down corn starch into sugar more easily (Pollack 2011).

Given the broad use of corn and corn products, its understandable why producers were eager to experiment with genetic modification to massively scale up its production. One of Monsanto’s first modifications to corn was using Bt technology and the rise of Bt-corn.

Bt stands for Bacillus thuringienis which is a soil bacterium that produces several crystal proteins that destroy the gut of invading crop pests (Gewin 2003). Several of these crystal (cry) proteins were engineered into corn to provide innate herbicidal properties and have been planted widely. It is hard to argue with the benefits that Bt-corn, along with a range of other Bt-crops, has brought to farmers.  

Not only has pesticide use has dropped by 50%, but certain industries like Alabama’s cotton fields and Hawaii’s papaya groves have been single handedly saved by Bt-crops against cotton bollworm infestations and the papaya ringspot virus. Moreover, the International Council for Science (ISCSU) has found that Bt-crops have lower levels of carcinogenic mycotoxins produced by fungi because there are fewer insect holes in plant tissue now.

While corn seems like a relative success, several risks remain. The concern today is that this broad-scale planting of Bt-corn will render the toxin ineffective over time as pests will grow resistant to the secreted toxin.

The Environmental Protection Agency is so afraid of Bt resistant pests that they’ve required 20% of Bt-corn fields also be planted with non Bt-corn so to slow the rate of pest resistance. More alarmingly is the risk of gene flow to other species. When pollen and seeds move in the environment through air/animals, it can transmit these new genetic traits to close by crops or other relatives through horizontal gene transfer.

The fear is that if these new seeds spread into the wild, they will have a competitive advantage over the local organisms and will displace valuable genetic diversity (Gewin 2003). Instances of this have already occurred in western Europe, where genetically modified sunflowers completely took over the ecosystem near a farm and in Mexico where modified corn replaced all the local plants near a farm. Because of their ability to out compete the local flora and fauna in terms of nutrient utilization and insect protection, Mexico has tentatively banned transgenic corn being planted in its fields (Gewin 2003).

Despite the risks, it seems unlikely that the GMO boom will bust any time soon. The value added from genetically modifying our staple food crops have simply paid too large of dividends to curtail all planting and development of potentially problematic crops. While the risks posed by GMO’s are seemingly real, there is simply not enough long-term data to conclude they are riskier (Gewin 2003).

Humans are not unfamiliar with taking these kinds of risks with their food however. For millennia we have been selectively breeding and manipulating our staple food crops to produce the yield we desire. This is simply another chapter in our ongoing quest to conform nature’s products. The discovery of recombinant DNA methods along with the advent of new technology which is allowing companies like Monsanto to be able to identify novel traits, isolate them, insert them into crops and plant them around the world is allowing for one of the greatest agricultural booms in human history.

Never before have we produced as much food as we are now (Chassy 2007) despite growing populations, shrinking arable land and depleted resources, and all of this can be attributed to the brilliant scientists who’ve been able to maximize the power of a single seed.

Given that there is currently harsh reaction to some governments already to GMO’s, its inevitable that the wheels of innovation will continue to turn to enhance modified seeds more than they already are to solve these problems. As with any new revolutionary technology, government regulation should continue to stay in place to ensure the long-term sustainability of GMO’s. In the end they may have no choice, genetically modified organisms are here to stay.


Works Cited

1- Boyle , Rebeca. 2011. “HOW TO GENETICALLY MODIFY A SEED, STEP BY STEP”, http://www.popsci.com/science/article/2011-01/life-cycle-genetically-modified-seed.

2 – Bravo, Kristina. 2014. “Here’s How the World’s Largest Biotech Company Came to Be”, http://www.takepart.com/article/2014/03/27/monsanto-timeline.

3 – Chassy, Bruce. 2007. “The History and Future of GMOs in Food and Agriculture”, http://www.researchgate.net/publication/249300545_The_History_and_Future_of_GMOs_in_Food_and_Agriculture

4 – Chemical Heritage Foundation. No Date. “Paul Berg, Herbert W. Boyer, and Stanley N. Cohen”, http://www.chemheritage.org/discover/online-resources/chemistry-in-history/themes/pharmaceuticals/preserving-health-with-biotechnology/berg-boyer-cohen.aspx.

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10 – Shetterly, Caitlin. 2013. “The Bad Seed: The Health Risks of Genetically Modified Corn”, http://www.elle.com/beauty/health-fitness/advice/a12574/allergy-to-genetically-modified-corn/

About The Author

Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.

Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.

He is a native of Atlanta, GA and attended the University of Georgia.

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