China is about to dominate the supply chain for non-energy alternatives to oil and gas

Electric vehicle purchases, solar panel installations, windmills going up...as the Third Persian Gulf War degenerates into a tit-for-tat blockade of the Strait of Hormuz, increased use of renewable energy seems to be a panacea. That is, until you dig a little deeper and realize that the oil and natural gas stuck behind the Strait are not just for energy use. Petroleum is the raw material for everything from the fertilizers to feed our crops to the helium that is indispensable to manufacturing semiconductors. Electricity can transport us, but cannot put food and information technology on our tables.

As the world anxiously waits for global hunger to spread and the modern tech-centric economy to collapse, some people have started recalling that oil and gas are not the only carbon-based fossil fuels out there. Environmentalists will grimace, but many, especially in Asia, are already turning back to coal, found in abundance beyond the Middle East, and used for centuries. Polluting as it may be, the infrastructure is already there for the dirtiest of fossil fuels to plug the power gap, before renewables can ramp up quickly to take coal's place for power generation.

But the need for fertilizers and helium showed that coal is not going away just because it is no longer needed for generating power. China seems not to be suffering from a fertilizer shortage, because more than 70% of the country's urea, the main ingredient of synthetic fertilizers, comes from coal. Sure, it can be more energy-intensive for this conversion as compared to the more commonly used natural gas-based process, but given that all fossil fuels essentially have the same chemical elements, being able to make urea out of coal proves that with time and investment, other products are possible.

Indeed, China seems already working on expanding coal's possibilities. Plastics are usually made from petroleum, but can be made from coal through an intermediate conversion to methanol. Many are worried about the shortage of jet fuel, as the electrification of commercial airlines remains at least a decade away. But coal can serve as the raw material for powering airlines, too, as long as there is an intermediate step of gasification. Those averse to electric vehicles would be happy to know that the same process can even make gasoline and diesel.

For years, the world has spoken of China as the first "electrostate" that leverages renewable energy to undergo a whole-of-the-economy electrification to bypass America's chokehold on the financial side of the world's oil supply. That national security concern is certainly still there. But its coal-based infrastructure could mean that it has the technological scale necessary to also dominate the non-energy aspect of the oil economy, something that has been largely overlooked in the race toward decarbonization. 

The world would be wise to consider this reality as another supply chain chokepoint that China will be willing to use in geopolitical conflicts, just like it has done for years with rare earths. China has patiently invested decades in processing rare earths, which, despite their name, are not particularly rare, but just expensive, polluting, and energy-intensive to dig up and process. The same focus will enable China to process coal for non-energy use, turning its massive industrial capabilities and financial resources into a global supplier for plastics, fertilizers, and non-electrifiable fuels. 

At the same time, the Chinese economy may see further growth by eradicating, once and for all, the need for oil and gas imports, while rapidly scaling coal-based industrial production for global exports. Other major producers of coal, such as India, Indonesia, and Australia, simply do not have the same industrial supply chain to compete. Industrialized nations without their own deposits could develop coal-processing facilities, but in the face of public opinion that sees coal as the dirty fuel of the past to be phased out, it will be hard to convince the electorate. 

Perhaps, at some point, the world will come to see that there is no free lunch in the transition away from fossil fuels. Even if renewable energy use becomes the default, our economy is still powered by the many carbon-based products that underpin those very renewable energy-generating equipment, as well as all those technological products making our everyday lives convenient. As the world becomes ever more alarmed by the sheer industrial scale and power that China possesses, are they willing to swallow the pride of being green and combat this security risk?