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House China select committee has energy hang-ups

By Andres Picon | 11/07/2023 06:08 AM EST

Reps. Mike Gallagher (R-Wis.) and Raja Krishnamoorthi (D-Ill.).

Chair Mike Gallagher (R-Wis.) and ranking member Raja Krishnamoorthi (D-Ill.) of the House Select Committee on the Chinese Communist Party during the panel's first hearing in February. Kevin Dietsch/Getty Images

A new House committee focused on the growing hostility between the United States and China has been a beacon of bipartisanship in an increasingly polarized Congress.

Except when it comes to energy.

Members of the Select Committee on the Chinese Communist Party are united in their concern over the economic, technological and security threats that China poses but have found little consensus on how they can best counter China on energy issues.

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In discussions over ways to “de-risk” electric vehicle supply chains, conversations around domestic battery production and investigations into Wall Street’s investments in Chinese energy companies, members are at times butting heads, underscoring the challenge Congress is up against in trying to leverage energy policy for national security purposes.

The committee’s scrutiny of a business deal between Ford and a major Chinese battery-maker, for example, has exposed a fault line among members who favor different approaches to the clean energy transition.

“Energy policy is actually probably where a bigger disagreement between the parties exists,” Chair Mike Gallagher (R-Wis.), a former Marine and one of Congress’ most outspoken China hawks, said recently.

“I tend to think we just never do a good job of integrating energy policy into a national security framework,” he said.

Still, the committee has succeeded in injecting some of its ideas, specifically around critical mineral supply chains, into major legislation.

Like Congress more broadly, the panel is debating the merits of industrial policy — the use of subsidies and incentives to grow particular industries — in helping to stand up a robust, domestic electric vehicle sector without increasing reliance on Chinese technology in the short term.

They are grilling the Biden administration for greenlighting Chinese battery-makers on U.S. soil, and they are discussing ways to crack down on American investments in Chinese energy companies. Gallagher is also eyeing China’s massive investments in advanced nuclear technology.

That work is angering China; the Global Times, a nationalist tabloid backed by the CCP, recently “barbaric” and “irrational.”

On Capitol Hill, however, committee members have managed to keep the debates over domestic energy issues from paralyzing their work, and they remain amiable toward one another, hopeful that they can be productive on energy policy despite their disagreements.

“This could have been a bomb-throwing committee, and that’s clearly not what the leaders wanted,” said member Dusty Johnson (R-S.D.), a former energy regulator in his home state and a vice chair of the bipartisan Problem Solvers Caucus.

The select committee has no lawmaking authority, but it can conduct investigations, issue subpoenas and make policy recommendations on a rolling basis.

Members on both sides of the aisle have praised moves that the full House and Senate are making to try to use energy issues against China and say they are eager to push that agenda forward.

Industrial policy divide

Among the policy recommendations the committee has made is a proposal to make the Pentagon “achieve critical mineral supply chain independence from foreign adversaries.”

The House ultimately adopted that recommendation as a provision in its fiscal 2024 National Defense Authorization Act, among other policies dedicated to competing against China.

Committee members say they want to build on that momentum, and they have expressed an openness to seeing the House pass some form of a legislative package focused on China specifically, akin to a successor to the 2022 CHIPS and Science Act. In the Senate, Democrats have said together.

But in the House, a lack of consensus among committee members on the best approach threatens to stifle the panel’s role in developing such a framework.

Industrial policy, most evident in the Biden administration’s attempts to jump-start renewable energy industries via billions in targeted subsidies, remains a major sticking point for some Democrats and Republicans on the committee, even if they agree on the need to quickly move clean energy supply chains to the U.S. and friendly countries.

“There are a lot of challenges in terms of execution,” ranking member Raja Krishnamoorthi (D-Ill.), a former deputy treasurer for the state of Illinois, said of using subsidies and regulations to onshore those supply chains.

“You have to do this right; you have to do it well; you have to do it fast,” he said, “and I think that’s going to require a kind of nimbleness and agility that the federal government hasn’t always demonstrated.”

The Senate’s ideal package, Majority Leader Chuck Schumer (D-N.Y.) has said, would build on the industrial policy of the CHIPS Act and the Inflation Reduction Act.

It would likely authorize billions of dollars in federal investments to boost American manufacturing and loosen China’s grip on supply chains for technologies such as semiconductors, EVs and solar panels.

According to the International Energy Agency, China refines 90 percent of the world’s rare earth elements and up to 70 percent of lithium and cobalt — key ingredients in batteries and photovoltaic cells.

Committee member Haley Stevens (D-Mich.), whose Detroit-area district is at the heart of the EV transition, said she is hopeful that the panel can help guide the House toward a China bill heavy on industrial policy.

“We can’t fail to invest and then finger point when we don’t have the manufacturing or production capabilities for electric vehicles here in the United States,” she said.

Rep. Haley Stevens (D-Mich.).
Rep. Haley Stevens (D-Mich.) during the Feb. 28 hearing of the China select committee. | Alex Brandon/AP

But her affinity for industrial policy has met resistance from some of her colleagues, including Johnson of South Dakota, who believes the government often splurges unnecessarily and that the private sector may be better positioned to ensure American competitiveness.

“It might well be that our committee will be more comfortable with a series of smaller, more targeted bills, as opposed to the very large, very complicated and very expensive Senate way of doing business,” he said.

Still, the panel’s internal policy disagreements have remained civil. Committee members have refrained from personal attacks and bitter partisan fighting, helping to keep alive members’ hopes of contributing to energy policy in a meaningful way further down the line.

“I think any of the disagreements we have are detailed and technical disagreements that smart people should always have when talking about complicated subjects, as opposed to the kind of reflexive food fights that this town is unfortunately better known for,” Johnson said.

The shared concern over China’s control of clean energy supply chains, he added, “is highly likely to be an area where we can build a bipartisan coalition.”

Finding the ‘sweet spot’

Gallagher and Krishnamoorthi, however, know that they don’t need to wait around for new coalitions to form to move the committee forward, including on energy-related issues.

The committee leaders, both Princeton University alumni who previously co-founded the bipartisan in 2017, are eager to move on the more obvious policy objectives they feel they can rally members around with less friction.

“We’re trying to figure out: What’s that center of gravity?” Gallagher said in a recent interview. “What is the sweet spot where, OK, well, we don’t agree on everything, but we can agree on this.”

One of those areas has been the desire to go after American investments in Chinese companies — both in China and within the United States.

In August, days before President Joe Biden issued an cracking down on certain American investments in countries of concern, Gallagher and Krishnamoorthi launched the committee’s biggest investigation yet, — the world’s largest asset management firm — and of investing or enabling investment of Americans’ savings “into dozens of blacklisted Chinese companies that threaten US national security or support the Chinese Communist Party’s human rights abuses,” according to letters they sent to the two firms.

Among the companies in question were at least 10 Chinese energy companies, including CGN Power — the largest subsidiary of China General Nuclear Power Group — and a number of other nuclear, offshore oil and chemical corporations.

Gallagher went on a public relations blitz following the announcement of the investigation, organizing a field hearing on Wall Street, telling Semafor that he wanted to , and in The Washington Post with a stark warning: “We are quite literally funding our own potential destruction.”

“I think we really are going to continue to be aggressive in identifying policy areas where we can do better with regard to investment controls,” Johnson said. “And then … through our oversight role, call to attention where the administration has not done a perfect job.”

Dusty Johnson speaks with a reporter outside the U.S. Capitol.
Rep. Dusty Johnson (R-S.D.) speaking with a reporter outside the Capitol. | Francis Chung/POLITICO

The push to divest in those Chinese companies followed a similar effort in June that focused specifically on with Chinese-owned Contemporary Amperex Technology Co. Ltd., or CATL, the world’s largest producer of lithium iron phosphate batteries.

House and Senate Republicans have called the business collaboration into question, accusing Ford of effectively funneling funds collected from the Inflation Reduction Act’s EV tax credits into China.

Melissa Miller, a Ford spokesperson, said in an email that Ford is only licensing use of CATL’s battery cell technology and “will contract for specific services, nothing more.” CATL will not receive any U.S. tax dollars, she said.

The committee traveled to Stevens’ district near Detroit to hold “listening sessions” with the CEOs of Ford and General Motors on the importance of reducing risks from relying on supply chains that China dominates. A month later, Gallagher and Ways and Means Chair Jason Smith (R-Mo.), into Ford’s deal with CATL.

Ford has since paused its plan to build a $3.5 billion EV battery plant that would use CATL technology, about its “ability to competitively operate the plant.”

Stevens, the ranking member on the House Science, Space and Technology Subcommittee on Research and Technology, has been wary of questioning the work Ford is doing in her district, hesitant to bash a major company with local ties working to accelerate the EV transition.

When Republicans announced their investigation, Stevens , the platform formerly known as Twitter, that “Ford has a plan to own the tech and be independent from China, and I support that.”

Still, showcasing the compromise that members are at times willing to make on issues they disagree on, Stevens said she doesn’t want to stand in her colleagues’ way.

“I’m not looking to get in the middle of this food fight,” she said in an interview, “but I know the race we’re in and feel very confident that we have got to win it and we’ve got to be strategic.”

What’s next?

The committee’s leaders are fixated on the urgency of the China threat. They say they want to produce more policy recommendations and see more of their suggestions make it into legislation this session.

On energy policy, Gallagher is particularly concerned with how China is making significant investments in advanced nuclear technology while the U.S. nuclear sector remains bogged down by a slow, complex regulatory structure.

He said he also wants to address how China “distorts” the global EV market through industrial policy and barriers to entry for foreign companies.

“Understanding that and how they’re behaving and how we’re not competing on a level playing field I think is critical to figuring out the right mix of energy policies going forward,” he said.

Stevens said she sees an opportunity for the U.S. to outcompete China in the production and use of hydrogen fuel. The technology is nascent, but the U.S. — through incentives in the IRA and the Infrastructure Investment and Jobs Act — is already taking steps to lead in the hydrogen space.

“We have that blank-slate opportunity,” she said.

There’s also recognition among members that legislative results are difficult to achieve for a select committee with no lawmaking authority.

Even if most of their recommendations don’t become law, Krishnamoorthi said, there is still value in “just elevating the issues and getting people to pay attention.”

He called the strategic competition with China a “Sputnik moment.”

“This is where we can get some things kind of in order that are just languishing,” he said. “This is the moment to do it, and I’m hopeful that people can kind of unite on this.”