The Energy Consequences of a China-Taiwan Conflict

Taipei Tales: From Fond Memories to Global Energy Crossroads - Reflecting on my time in Taipei, this article explores the potential energy consequences of a China-Taiwan conflict and urges immediate measures for a secure future

Credits to Rebel Pepper

Picture this: I once spent six unforgettable months in the bustling city of Taipei, Taiwan, during my university days. The lively atmosphere, the vibrant culture, and the delicious street food made me fall in love with this island nation. But amidst all the excitement, little did I know that my time in Taipei would lead me to contemplate the potential energy consequences of a China-Taiwan conflict.

In a world marked by rising geopolitical tensions, the invasion of Taiwan by China looms as a significant possibility. The implications of such an event reach far beyond political and military spheres and were accurately described by one of my climate gurus: Professor Dieter Helm.

As China seeks to assert its dominance and the US and Europe attempt to reduce dependency on Chinese supply chains, the energy sector finds itself at a critical crossroads. In this piece, I try to examine the potential energy ramifications of a Taiwan invasion and urge governments to take proactive measures to secure their energy future.

The Similarities Between China and Russia.

China and Russia share similarities that could rival any mirror image. Both authoritarian states, they have lost territory in the past century and are keen to reclaim what they perceive as rightfully theirs. As key players in the global energy markets, their actions reverberate worldwide. Additionally, both countries view the US as their primary adversary and invest heavily in their military capabilities.

The Inevitability of Taiwan's Invasion. 

Drawing parallels with Russia's actions in Ukraine, it becomes evident that China's eyes are set on the annexation of Taiwan. Unlike Russia's occupation claims with historical justification, China seeks to reassert control over Taiwan without considering the democratic will of its people. The invasion is a matter of "when" rather than "if."

A Looming Energy Fallout.

Amidst this geopolitical drama, I was surprised to find that little attention has been given to preparing for the energy fallout. The EU and the US appear to be increasing their reliance on China for critical minerals and renewable energy components, reminiscent of the ill-fated German dependency on Russian gas pipelines. As China's grip on global energy supply chains tightens, the world moves towards a precarious energy future.

The Scale of the Shock.

 Imagining a full-scale invasion and resistance by my Taiwanese friends, the global economy would suffer significant shocks. Financial markets would plummet, investors would scramble for safety, and a severe recession could ensue. Moreover, if the US and its allies retaliate militarily, geopolitical tensions would escalate further, affecting nations and industries worldwide. The impact would be profound.

Learning from Ukraine's Mistakes. 

Ukraine's gas crisis should have been a wake-up call, but it seems we're slow learners. Governments must prioritize energy security and resilience to prevent history from repeating itself. This entails building independent supply chains, stockpiling strategic resources, and developing integrated electricity systems to withstand potential shocks.

The Dangers of Gradualism. 

The more the US and Europe strive to reduce dependence on China, the more incentivized China becomes to expedite its invasion plans. As history has shown, complacency and gradualism can lead to disastrous outcomes. For the US and Europe to gain true independence, they must focus on the entire supply chain, from mining to manufacturing, rather than merely targeting net-zero outcomes.

De-coupling the Supply Chain. 

Governments should learn from Ukraine's crisis and implement measures to decouple from China. A comprehensive approach starting with mineral supply chains and refining capacity and gradually transitioning to electricity generation and renewables is crucial. However, this requires significant investments that may come as a shock to the public, making it a politically challenging task.

So what?

As I recall my time in Taipei, I can't ignore the gravity of the situation in the region. The stakes are high, and energy security is a matter of utmost importance. Governments must act proactively, acknowledging the importance of supply chain independence and developing robust strategies to navigate potential crises. By learning from past mistakes and prioritizing resilience over gradualism, the world can strive for an energy future free from geopolitical vulnerabilities.