When combined with the war in Ukraine, the global green transition will face specific challenges since solar panels rely on raw materials found and extracted in China, while many critical European Union states (Hungary, Czech Republic, Latvia, Slovakia, Italy, Germany, Bulgaria, Poland, and the Netherlands) all score above a 30 on the Russian gas cut off vulnerability index. Hence, the West is increasingly reliant on Chinese raw earth minerals and Russian energy, which poses the question – will the West generally, and Europe specifically, be able to wean itself off?
Raw Materials, Food, and Energy
Geopolitical tensions between China and the U.S. preceded the Ukraine crisis, specifically in tech and manufacturing, as the supply chain crisis materialized and hit industries particularly vulnerable to semiconductor shortages, as well as the automotive industry. The most recent addition to this geopolitical challenge is the war in Ukraine, which will fundamentally change food supply chains and Europe's dependency on energy (coal, gas, and oil) from Russia. Combining inflation with shortages in semiconductors, wheat, corn, soy, oils, natural gas, oil, and coal, will remarkably transform the consumer market landscape as all goods, from televisions to chocolate bars, will significantly increase in price (as they already have).
The Ukraine crisis and Russia's ability to blackmail sanctions with additional restrictions on energy and food will significantly test the resilience of Europe's vision for the green transition. Increased gas prices and rampant inflation in the U.S. will also question the credibility of decisions to throttle America's 'dirty energy' potential. The war in Ukraine will undoubtedly transform supply chains and how corporations do business because the world will, in turn, become slightly less globalized.
Solar Panels and Chinese Polysilicon
Polysilicon is a material made using an energy-intensive, complex process required for solar panel production. China produces most of the world's polysilicon, precisely around 80 percent of the world market. Further, most producers moved to Xinjiang because of its cheaper coal-fired plants.
Forty-five percent of the world's solar panel polysilicon is produced in the Uyghur-populated region of China, according to a Sheffield Hallam University Report. That would mean that every company, according to the West, which is involved in the production of polysilicon or its inputs, is engaged in forced labor via sourcing. Such an allegation proliferated online after President Biden signed the "Uyghur Human Rights Policy Act of 2020," which prohibits goods that are "mined, produced, or manufactured wholly or in part" in the Xinjiang Uyghur Autonomous Region—or involving entities exporting labor from Xinjiang—were not made using forced labor. It will focus on many industries, including apparel, automotive, technology, food & beverage, and solar companies. This law will continue to present obstacles for many U.S. corporations intimately involved with the Chinese market.
Reactions to the Executive Order
Allegedly, President Biden's niece led the Coca-Cola government relations department to lobby against the executive order that would ban U.S. companies from importing Chinese goods made by forced labor conduct by Uyghurs.
Concerning the apparel industry, Hugo Boss and Zara were criticized for their implications in the cotton production supply chain that originated in East Turkestan with Uyghur labor. Zara is owned by Spain's Inditex and was denied permission to extend a French store after concerns of their supply chain concerning sourcing labor from Xinjiang.
Reuters reported that Walmart unit Sam's Club removed products linked to forced labor in Xinjiang, but a representative as a 'misunderstanding later denied this.'
China boycotted multinationals like Nike for stating they would not use Xinjiang cotton. Intel Corp. apologized to Chinese customers after the supplier did not use labor or products sourced from Xinjiang due to recent executive orders signed by President Biden. The hashtag #IntelToBanXinjiangProducts generated about 300 million views and 200 million comments by users regarding the Intel issue over one day. The U.S. government banned all cotton, tomato products, and solar panel materials from Xinjiang over forced labor concerns.
Freshippo Business Group-X Wholesale Store, part of the grocery retail chain of Chinese e-commerce player Alibaba Group Holding Ltd, launched a "Good Goods from Xinjiang Festival" to sell 30 kinds of products, including pears and apples, from the region.
Similarly, Metro Plus, the membership unit of Metro Commerce Group, an arm of Beijing-based Wumart Group, opened stores to sell organic beef, dates, dried grapes, and apples, among other produce from Xinjiang.
Even Korean companies were implicated after the U.N. Office of the High Commissioner for Human Rights (OHCHR) stated that Samsung, L.G. Electronics, L.G. Display, Hazzys, and Fila could be involved in human rights violations in their supply chains.
In response, L.G. stated its central electronics unit is not being supplied by any vendors in the Xinjiang Uyghur Autonomous Region, while Samsung refuted the allegations. The same U.N. letter was sent to 14 countries, requesting governments to look into corporations from their respective nations on the human rights issue connected to global supply chains.
The green transition will demand a strategic and slow growth to renewables from fossil fuels. However, the Ukraine crisis has significantly complicated the change and demands that much of Europe quickly abandon its dependence on Russian energy. Given that the White House and private-sector corporations maintain staunch opinions on human rights violations in China and elsewhere, it will be increasingly difficult for the U.S. to produce or source crucial equipment required for the green transition. In this case, we observe the complex supply chain lifecycle of solar panels and how their product could contradict positions held by Washington. Therefore, if it succeeds, the green transition will require cost-benefit severe analysis and a series of tradeoffs to determine how to transition to green energy as Russian energy becomes sanctioned, and Chinese labor becomes more problematic for the West.