While the US pursues fossil fuel dominance, China is looking to lead the way on renewables. Which model of energy security will the rest of the world follow?
Aside from regime change, a central goal of President Donald Trump’s military actions in Venezuela and against Iran has been to reinforce the US as a dominant petroleum producer while curtailing federal support for alternative energy. The war in the Middle East has already injected new uncertainty into global energy markets — with strikes on Iranian infrastructure driving oil prices higher and disrupting flows through the Strait of Hormuz — and may prompt some countries to rethink their dependence on fossil fuels even as short-term demand spikes.
In sharp contrast, China is intent on advancing its lead in renewable technology, even as it meets massive domestic demand for coal and oil. These divergent national approaches set up a fundamental global contest: Will fossil fuel dominance or renewable leadership define the future of energy security?
As these two superpowers intensify their competition for economic and geopolitical dominance, the world’s climate future and investment flows will largely hinge on which energy model—oil or renewables—proves most viable. The global energy landscape risks a clear split: one path leading to enduring fossil-fuel dependence, the other to a renewable-powered world.
As a November report by the Washington, DC-based think tank the Center for Strategic and International Studies put it, “Nearly 10 years after the signing of the Paris Agreement, a new energy investment paradigm is taking shape” that is likely to influence, if not determine, government and industry policy decisions on energy security, affordability, and competitiveness.
At this point, the CSIS report notes, the paradigm shows fragmentation, volatility, and scarcity, even as state intervention rises. Its author, associate fellow Ray Cai, writes: “A widening bifurcation between hydrocarbon and low-emission value chains—in part accelerated by strategic competition between the US and China—is already reshaping global energy investment flows.”
This bifurcation, as Cai describes, is a world of “two tracks.” One track features economies with secure, affordable access to fossil fuels. Most countries are net importers, while exporters are few. As a result, the US has become a significant oil and LNG producer and exporter. According to Cai, this shift also reinforces the country’s retreat from its postwar role as “facilitator and guarantor of global trade.”
On the other track, he continues, economies are turning to electrification and renewables. Nearly 90% of energy generation capital expenditure in the Global South in 2024 was allocated to low-emission sources, about double the share from 10 years ago. “Driving this shift is China,” says Cai, noting that the nation has led global supply chain and manufacturing investment both at home and abroad.
Much of the globe, including China, is adopting what Martin Pasqualetti, an Arizona State University professor and author of several books on energy geography, calls “an all-of-the-above” approach to energy policy, pursuing all power sources, including oil, natural gas, nuclear, hydroelectric, solar, geothermal, and wind.
Meanwhile, the US under the Trump administration has ended subsidies for electric vehicles and other alternative-fuel applications as it seeks to boost fossil fuel production and exports. Yet this emphasis risks squandering its many competitive advantages across other energy sources, including alternatives, according to a September report by JPMorgan Chase.
“North America has a significant strategic advantage in energy because of the sheer number of energy resources it has a competitive advantage in—fossil fuels, solar, geothermal, and wind,” the authors noted, adding that if the US fully takes advantage of all those energy resources, it will be unrivaled in what they call “the New Energy Security Age.” But they point out, “recent policy shifts from Washington are creating uncertainty for America’s offshore wind ambitions—which can be a key strategic advantage for the US alongside fossil fuels, geothermal, and nuclear.”
Cai agrees that recent US policy shifts are creating uncertainty for investors in alternatives, telling Global Finance in an interview that “policy pullbacks and regulatory obstruction can raise financing costs, slow project timelines, and erode competitiveness for US firms.”
Navigating The Valley Of Death
Pasqualetti says moving from fossil fuels to renewables means passing through a “valley of death,” a period when returns must prove profitable before funding runs out. Sometimes these investments rely on government subsidies until they can become profitable at scale. He notes that the “valley” has narrowed sharply as the prices of renewables have dropped. “We’re not going to make conversion quickly,” he says, “but we’ve been making it faster than expected.”
On the other hand, oil is proving less profitable for producers at its recent price of around $60 a barrel. Experts estimate that the “heavy” oil that characterizes Venezuela’s hefty reserves may cost at least $80 a barrel to extract and process for sale. So Pasqualetti finds the Trump administration’s plans to take over its petroleum industry puzzling. “If you increase our domestic supply, increase production, capture Venezuelan ghost ships and sell the oil on the market,” he asks, “won’t that just drive the price down?”
Cai noted in the interview that while the Trump administration has signaled its clear intent to advance the US fossil fuel and mining industries, “industry stakeholders remain constrained by market fundamentals and capital discipline.” He continued, “Producers and investors alike have shown limited appetite for aggressive expansion due to soft demand expectations and oversupply conditions in global markets.”
Cai doubts the Trump administration will see its stated policy goal materialize quickly, if at all. “Heightened geopolitical risk resulting from further military action may increase volatility and suppress near-term investment,” he said in the interview.
In contrast, China is forging ahead on all fronts, as the JPMorgan report notes: “For the foreseeable future, Beijing will continue to deploy an energy strategy that seeks to dominate … global renewable energy innovation, exports, and markets while still relying on sources like coal at home to power China’s industrial and technological rise.”
If China is hedging its bets, much of the rest of the world is as well. JPMorgan notes that India and Brazil, along with China and others, are forming new energy alliances and setting their own standards based on competitive advantages in natural resources, shifts toward energy self-sufficiency away from fossil fuels, and technological exports. “Strategic energy independence actions are strengthening to reduce geopolitical exposure to former trade partners,” the authors note.
India, the world’s most populous nation, is especially active in pursuing alternatives to fossil fuels. Renewables account for 89% of India’s newly installed power capacity, with the majority being solar.
Despite holding the third-largest oil reserves after Venezuela and Saudi Arabia, Iran aims to get two-thirds of its power from natural gas over the next five to seven years. Pasqualetti says, “They want to move to renewables as fast as they can.” Of course, Tehran’s plans are in question now that it is under attack by the US and Israel. And the regime faced Western sanctions and popular unrest even before war broke out in the region.
Imports Versus Exports
To better understand global energy trends, Richard Bronze, co-founder of Energy Aspects, an energy consultancy based in London, says it’s helpful to distinguish between countries’ domestic and international policies. Bronze describes China’s “pragmatic” energy strategy, for example, as embracing both fossil fuels and alternatives for domestic purposes and exporting large quantities of green technology while resisting international climate agreements. He says this reflects China’s reliance on fossil fuels to power domestic consumption and on green technology to power exports.
Similarly, he says Saudi Arabia is successfully diversifying its economy. Reliance on oil for government revenues has fallen from almost 90% in 2014 to 60% in 2024. While the country aims to be less of a “petro state,” shifting power generation from oil to natural gas and solar, it still sees itself as “the last man standing” in oil exports before the global shift to renewables.
Bronze sees the world as three groups, not just two tracks: One group is pursuing alternatives, including Europe and India. A second “all-of-the-above” group includes China and Saudi Arabia. The third focuses on fossil fuels and nuclear power, as in the US and Russia.
While the third group may oppose transitioning to renewable energy, Bronze says this strategy has short-term geostrategic logic for the Trump administration.
In effect, Trump’s policy aims to counter Chinese influence everywhere. This includes discouraging imports of Chinese technology and products, affecting alternative energy and high-tech exports such as rare-earth minerals. This may explain the recent, though apparently abandoned, interest in acquiring Greenland, which has significant reserves.
And of course, the Trump administration is “championing a domestic oil industry,” as Bronze puts it. In sum, by using petroleum to counter China’s exports of alternatives, US policy reflects what he calls “a somewhat coherent political thesis.”
Still, he notes that the transition to renewables is inevitable if you accept the premise that a sustainable environment requires moving away from fossil fuels. “All the science says it’s necessary if we’re going to keep a livable world,” he asserts.
Cai sees energy geopolitics differently. Rather than countering China’s advantage in alternatives, he contends that the central motivation of recent US moves is to reinforce US comparative strengths, particularly in fossil energy, in service of what he terms the administration’s “hemispheric security ambitions,” as outlined in its recent National Security Strategy.
Regardless, Bronze notes that a change in US administrations may be accompanied by a shift in energy policy. “We saw a handbrake turn” away from the Biden administration’s policy by his successor, Bronze observes, suggesting a similar turn is possible, if not likely, in the future.
Other observers are skeptical that a U-turn by the US is likely anytime soon. As Alice C. Hill, a senior fellow for energy and the environment at the Council on Foreign Relations, told a roundtable discussion last March, “The US is not going to be a player in the international arena on climate. We’ve got this pendulum that swings back and forth, and so it’s very hard to maintain that sort of true north right down the middle.” In an interview with Global Finance, Hill added that given the Trump administration’s policies, “it will be harder for a new administration to turn back, because there will be that much more to unravel.”
The Reign Of Uncertainty
As a result, the only certainty at this point may be uncertainty. The Trump administration’s actions in Iran and Venezuela could produce what Bronze calls “a spectrum of outcomes,” ranging from chaos to the reintegration of oil exports into the market. And while the latter outcome might indeed bring oil prices down further, he says it would also serve the administration’s goal of lowering inflation. At present, however, with oil prices soaring, that goal is in doubt.
If Trump seems isolated in insisting that global warming is a hoax, that view is increasingly shared, to some degree, among right-wing political parties in Europe, Bronze points out. There’s been a real politicization of the energy transition,” he says.
Cai of CSIS agrees, noting that recent electoral results have contributed to policy diversity. As he sees it, the European Union “is moderating from an aggressive decarbonization drive to rebalance for energy security and industrial competitiveness.” In contrast, he adds, “the US has retreated from climate leadership in favor of fossil fuel abundance and trade protectionism. China, on the other hand, has deepened its commitment to renewables manufacturing and exports while maintaining coal capacity.”
Still, most countries accept that renewable energy must eventually replace fossil fuels. Notwithstanding rising opposition in some European circles, the European Union and China recently pledged an expanded partnership, JPMorgan notes, “even as Brussels drives forward on a campaign to diversify its supply chains away from China.” One of the agreements between Beijing and the EU is to accelerate the deployment of global renewable energy.
Pasqualetti contends that US efforts to slow a similar renewable future are misguided. “We’re not going to get out of the oil age because we ran out of oil,” he says.
Cai puts it more even-handedly. “Ultimately, the policy challenge ahead is pragmatic rather than ideological,” he says, noting that it will likely shape global investment flows. “Investors are gravitating toward jurisdictions that can combine strategic clarity with consistent execution.”
By that standard, he argues, neither the US nor China fully qualifies. “Most countries will not replicate either model wholesale,” he tells Global Finance.
“The fracturing of the post-World War II global system is reinforcing divergence in energy pathways shaped by political economy and practical constraints.”
As a result, Cai adds, energy investors—and policymakers elsewhere—now face risks under both regimes. “Heightened policy uncertainty in the US has contributed to capital outflows that have, in some cases, even raised concerns about the dollar’s reserve-currency status,” he says.
China, by contrast, presents what he calls “a different trade-off.” Investors increasingly recognize its structural advantages in renewable manufacturing and supply chains, yet remain wary of geopolitical risk and the broader trajectory of decoupling. He points to Canada’s recent electric-vehicle trade deal with Beijing as an example of how widening rifts between the US and its traditional allies may create new opportunities for China.
How durable or profitable those openings prove remains to be seen. But on current trends, the Council on Foreign Relations’ Hill warns, “the US will isolate itself over the long haul.”